What the latest IPCC report changes to your strategic process
Findings in the International Panel on Climate Change (IPCC) report published at the end of February 2022 show that climate breakdown is happening faster than expected. The report insists on the potential dire consequences of inaction for human beings and businesses.
In this article I want to highlight how this impacts strategic planning as “climate change” could quickly become the main threat to deal with for any organisation, and its biggest opportunity at the same time.
Business Model Environment Scan
With market conditions changing so rapidly it is risky for leaders to get disconnected from the environment. Still, that’s what often happens. Leaders’ time and energy can be entirely focused inside the company. All due to incessant meeting requests from staff, project updates, crises to manage, or a laser-sharp focus on delivering the next quarter objectives. Days are made of 24h for leaders as well. So how could they scan the outside world for emerging threats and opportunities in the most efficient way?
The business model environment tool introduced in Business Model Generation by Alex Osterwalder & Yves Pigneur in 2010 and the corresponding workshop on How To Scan Your Business Model Environment For Disruptive Threats And Opportunities provided a simple framework for leadership teams to look outside of their business and tap into their collective awareness to assess the main opportunities and threats their business model is facing.
Source: Strategyzer
I have been using the Business Model Environment Scan in my strategy work with client since 2015. It helps leaders go beyond consumer trends and look at threats and opportunities in a more holistic way. It creates common ground on the main threats and opportunities an organisation is facing today.
Thinking 5+ years into the future
Unfortunately, most companies are still too focused on the short-term. 2019 research by Innosight shows that only 25% of companies think of what could happen beyond the next 5 years.
A short-term focus makes a company oblivious to important future threats, such as a climate change, or brush over it with a statement such as “we will see even more focus on ESG in the future”, as if they were not directly concerned.
“It’s irrational to think business could stay on the sidelines and watch environmental systems degrade and society sink. Business cannot be a bystander in a system that gives it life.” Paul Polman, Andrew Winston, in Net Positive book
To counter that tendency for short-term thinking, it’s important to frame the business model environment scan around what could happen 5 years or more into the future. This is how you get even more value from it, allowing weak signals of future threats and opportunities to emerge. When done well, the picture changes dramatically, with new threats and opportunities appearing, which triggers a richer conversation on innovation and strategic shifts required in the mid to long-term.
Increased Environment Focus
What the latest IPCC report means is that every company that wants to build long-term resilience should really double down on the environment scan in their strategic process.
They should scan all key trends, market forces, macro-economic forces and industry forces for threats and opportunities. And they should also purposefully scan climate change as a potential source of new threats, making time to pause and answer the question:
What new threats is climate change creating for our business in the mid to long term?
In the US for instance, AT&T has spent about $1 billion recovering from climate-related severe weather events since 2016.
And most companies should get ready for similar impacts.
The World Economic Forum has summarised what the IPCC Report tells us about the need for radical climate action.
According to the report, climate breakdown is happening faster than expected. The article insists on the potential dire consequences of inaction for human beings and businesses.
In his 2022 letter to CEOs, Larry Fink, Chairman and CEO of BlackRock also points out that “the decarbonizing of the global economy is going to create the greatest investment opportunity of our lifetime.”
This confirms something I have seen time and time again in strategic work with clients: threats can also lead you towards your greatest opportunities.
So, leaders should also scan climate change as a source of potential business opportunities.
What new opportunities are going to emerge because of climate change in the mid to long term?
Pondering that question can trigger so many new ideas for a company. Of course, there’s a long way from an idea to creating a sustainable business. But asking those two simple questions is the first step on this journey.
In her book Better Business Better World, Elisabet Lagersted tells the story of how the company Interface started their journey towards becoming a sustainable company.
In 1994, one of Interface’s more important customers asked Ray Anderson (the founder, who was by then in his 60s but still their CEO):
“What is your company doing for the environment?”
One question by a customer. That’s all it took to trigger their big strategic shift.
2 questions to add now to your strategic process
So, it might not seem much, but I urge you to add those 2 simple questions to the environment scan within your strategic process. They’ll deepen your overall awareness of mid to long-term threats and opportunities. And who knows where this new awareness could lead you.
Reach out if you need help along the way.
