Management gurus have long advised business leaders to frequently reevaluate their core business assumptions, and business books are full of case studies of the bad things that happen when companies fail to heed that advice. As noted by scenario planning expert van der Heijden, for example:
“ . . . in times of rapid change the large well-run companies are in particular danger of suffering from strategic failure, caused by a crisis of perception….[because of] the inability to see an emergent reality by being locked inside obsolete assumptions.”
Today, business leaders are being told to incorporate climate change risks and opportunities in their planning and decision-making. But these are relatively new topics for many business decision-makers, and all kinds of underlying assumptions are in play when it comes to:
- Climate change itself
- The business materiality of climate risks and opportunities
- The economics of climate change and climate change mitigation
- The changing probabilities of extreme events and business disruptions
- The timing of potential climate change and climate policy tipping points
- The likely evolution of climate policies and measures
- How climate risks will play out at the sectoral level
These are complicated and rapidly changing topics, and it should not surprise anyone that many decision-making assumptions about climate risks and opportunities don’t reflect the best available information. An Assumptions Audit can help company decision-makers make sure they are taking advantage of the best available information when it comes to climate risk assessment, climate strategy development, or climate scenario planning. Here are a couple of specific examples:
A Japanese electric utility had done its own internal analysis of climate risk and arrived at a "worst case" estimate of risk to the financial bottom-line of the company. The Assumption Audit suggested different ways to look at several of the key assumptions they were making. The company ended up revising several key assumptions and increasing estimated bottom-line risk 7-fold.
A Texas-based U.S. company in the oil and gas industry was being required by its new European parent to carry out a climate risk assessment, starting with a Climate Assumptions Audit. In the first meeting of the group it became clear that most of the people on the internal team assigned to the project didn't see climate change as real, and hence saw no business risk implications from climate change or climate policy. Over the course of just three meetings with the team, and revisiting their scientific, policy, public opinion, and other assumptions, the team ended up recommending an aggressive climate risk action plan to management. We don’t know whether participants’ personal views of climate change changed, but what had clearly changed was their thinking about prudent business decision-making in light of potential climate risks.
This Climate Assumptions Audit Climate Site contains materials extracted from the Climate Web, a collective business intelligence for understanding and responding to climate change. Extracting the information into a simple website format makes the information more accessible. With a minimal learning curve, however, you can do a lot of research into potential climate change assumptions in the Climate Web (particularly by taking advantage of Premium Access), or you can leverage the topical and advisory expertise of The Climatographers with a customized webinar, brainstorming session, or Climate Web dashboard. The Climatographers can help you make the best use of the Climate Web as a climate knowledgebase.
When it comes to revisiting or challenging your climate assumptions, the Climate Web explicitly identifies well over 100 assumptions commonly encountered in business climate change decision-making. Its goal is not to convince you of a particular point of view, it is to help you be sure your decision-making is based on the best available thinking and information. Assumptions are accompanied by arguments that tend to support (+) or counter (-) the assumption, and linked to supporting materials drawn from around the Climate Web.
Organized to the top right of this page are several other pages that are part of this Climate Site, including:
Why Challenge Your Assumptions? This page reviews the importance decision-makers should assign to frequently revisiting core business assumptions.
Auditing Critical Climate Assumptions This page provides a short audit of some of the most prevalent business climate assumptions.
How Deep Can You Dig with the Climate Web? This page illustrates how deep you can dig into climate topics with the Climate Web, using the Under-Estimating Climate Risk Roadmap as an example. Other Roadmaps help you dig into other topics.
Scenario Planning Related Assumptions The Climate Web is structured to support climate change scenario planning which can involve making a large number of decisions across scientific, policy, socioeconomic, and other variables. This page lists some of the relevant assumptions you can explore in the Climate Web, although it does not dig more deeply into them.
Business advisors including law and consulting firms can partner with the Climatographers to utilize the Climate Web for their own client-facing Assumptions Audit services. Contact the Climatographers for more information.