The climate resilience cycle: Using scenario analysis to inform climate-resilient business strategies

Udeke Huiskamp, Gert Jan Kramer, Bauke ten Brinke

Research output: Contribution to journalArticleAcademicpeer-review

Abstract

Climate change affects the business environment, and companies need future-oriented information to build climate resilience. To this end, companies are encouraged to conduct climate change scenario analysis, as recommended by the Task Force on Climate-Related Financial Disclosures (TCFD). However, companies' actual adoption of this practice is limited as they lack a straightforward scenario analysis implementation process and relevant climate change knowledge. This research develops an implementation process by clarifying the concept of resilience into a stability and a change domain and by specifying the type of focal questions for these two domains. Next, a scenario typology guides the selection of reference scenarios, and two standard scenario methods guide the tailoring of these reference scenarios to company-specific scenarios. By structuring this process in five steps and specifying input and process requirements, we provide an implementation process called the climate resilience cycle. By applying the cycle in transdisciplinary teams of climate change experts and company staff with knowledge about the company value chain, we bring in the required knowledge. To become climate resilient, the outcomes of the climate resilience cycle need to be integrated in the business planning and the overall company strategy. We argue that implementing the cycle as a new company routine contributes to the development of dynamic capabilities like sensing, seizing and transforming, which have been proven to be essential for integrating sustainability in company strategies. Once begun, we show how the cycle can become part of a company strategy process.
Original languageEnglish
Pages (from-to)1763-1775
JournalBusiness Strategy and the Environment
Volume31
Issue number4
DOIs
Publication statusPublished - May 2022

Keywords

  • business strategy
  • climate change
  • resilience
  • risks and opportunities
  • scenario analysis
  • sustainable development
  • TCFD

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