What if extreme climate events change people’s attitudes towards climate action and pave the way for strict climate policy? What if disruptive green technologies turn my company’s market upside down by changing consumer preferences? What if everybody knew that my company’s contribution to global warming is disproportionally high?
“Humanity is facing an unprecedented challenge, for which it is time to make use of the greatest achievements that humans have developed so far, such as collaboration, digital and clean technologies, and self-reflection.”
By asking themselves such questions and conducting scenario analysis, companies from the real- and financial economy have started to understand the implications of global warming on the viability of their business models, especially in regards to their financial performance. The most difficult of these what-if questions is nonetheless a personal one: what if the decisions that I make today, lead to me ending up on the wrong side of history?
With global warming knocking on our doors and telling us it has come to stay, a lot is at stake–both socioeconomically and personally. The latest IPCC special report highlights that 12 years are left to lay down the tracks to actively build up an economy that ensures prosperity, freedom and stability.
Humanity is facing an unprecedented challenge, for which it is time to make use of the greatest achievements that humans have developed so far, such as collaboration, digital and clean technologies, and self-reflection. And those responsible for steering our real and financial economy out of an unstable situation and into a safe future are increasingly aware they can’t do this on their own. Therefore, they will most surely appreciate–and are starting to ask for–broad participation from experts all over the place. Especially the younger generation as experts for the world they would like to live in.
Fostering interconnected collaboration through right.open
This situation has given birth to some projects that are trying to harness the merits of multi-stakeholder approaches. For them, global warming is an opportunity to foster cross-cutting collaboration. Next to senses lead by the Potsdam Institute for Climate Impact Research (PIK) and INSPIRE lead by ClimateWorks. right.open stands out for demonstrating how innovation can lead to profitable and meaningful business in a world which is largely interconnected and technology-dependent. It will concretely do so by opening the source code behind the X-Degree Compatibility (XDC) Model, proving that transparency and collaboration can render more value and profitability when put to the service of the greater good.
right.open is a project carried out by the Frankfurt-based climate change startup right. based on science (right.). It will run from May 2019 until October 2020. Participants of right.open are researchers and students seeking climate-related and praxis-oriented topics for their theses. Besides getting access to the so-called XDC Model as a research method, participants will be supervised in using it for answering praxis-relevant research questions. What is deemed relevant for practitioners from the real and financial economy will be elaborated through an interactive program, consisting of events, podcasts and webinars. Results will be shared with the real- and financial economy. A significant reduction of barriers for designing effective climate strategies and responses to global warming is the expected outcome. Exemplary research questions for participants of right.open revolve around various aspects. A master student could, for example, determine in how far do energy efficiency measures designed within the framework of a circular economy, support a company in operating under the 2°C target. Or how do the challenges of reaching the 2°C target differ in a linear vs. a circular economy? A PhD candidate could determine a portfolio’s carbon yield and its specific contribution towards attaining 2°C compatibility.
In order to spread the word and give everybody the opportunity to get on board, right. has been building an online presence of right.open. In order to access interactive content, such as webinars or podcasts, or to read through the information on the XDC Model, interested parties can register for the so-called XDC Forum. The public area of the XDC Forum will provide interested parties with everything they need in order to understand whether the XDC Model is relevant for their climate-related research and whether participating in right.open would be part of their interest. If both are the case — and right. agrees — interested parties will receive access to the non-public area of the XDC Forum, where they will have access to the code behind the XDC Model and where right. will supervise in making the most of the XDC Model for their individual research activities.
Various professors welcome the opportunity to have access to the XDC Model for themselves or their students. Prof Dr Wayne Visser from Antwerp Management School, for example, supports right.open because “the XDC Model is a promising method for pursuing science-based questions regarding system-wide efficiencies of business sustainability strategies. Since the XDC Model enables decision-makers to acknowledge the need for breakthrough change and makes the economic value of individual systemic solutions graspable, it helps us to continuously progress on our research on Integrated Value and Values Dividend. Having access to the XDC Model through right.open would, therefore, be an added value for the students and researchers I supervise and for myself.”
One common denominator: XDC
Questions such as the one mentioned above can only be answered by understanding the contribution of a single economic entity to global warming under various scenarios. The XDC Model provides right.open’s participants with such information. When calculating the contribution of, for example, a company to global warming, which is referred to as the XDC, the model asks three major questions:
1. What amount of emissions does a company need between today and 2050 to generate one million euros of Gross Value Added?
2. What amount of emissions would reach the atmosphere if every company needed as many emissions between today and 2050 to generate one million euros of Gross Value Added as the company at hand?
3. What level of global warming would result from that amount of emissions reaching the atmosphere?
These three steps incorporate scenario analysis, in order to provide its users with space to input their own assumptions on how the future might look like depending on different developments. The role of scenario analysis in this context is to ease the process of responding to disruptions or what-ifs.
"With global warming knocking on our doors and telling us it has come to stay, a lot is at stake–both socioeconomically and personally. The latest IPCC special report highlights that 12 years are left to lay down the tracks to actively build up an economy that ensures prosperity, freedom and stability."
Going back to the “what-ifs” presented at the beginning, scenario analysis could for example allow companies to understand how a world in which specific emission caps are set–by means of stricter regulation–could jeopardise the existence of a specific company, if that company had no measures in place to operate within set limitations.
In the context of the XDC Model, scenario analysis can also allow users to incorporate the fact that certain technologies threaten the demand for a specific company’s products and would, therefore, force companies to reconsider their growth assumptions and consequently their businesses’ validity.
In calculating a company’s XDC and if demonstrating it contributed to the world heating up to more than 2 °C, which could turn out to be unacceptable to a range of consumers, scenario analysis could be used to shed light on how this could affect demand for a certain product. Putting pressure on the company in question to operate in a world that is 2°C compatible as its only chance of existence.
The XDC of a company or any other economic entity has up to date only been commercially available. By means of intensive customer projects, right. has however recently discovered that the XDC Model is attractive for decision-makers and fosters multidisciplinary teamwork. All of a sudden, the sustainability officer asks the risk department for support — leading to excitement within the risk department, which then approaches controlling for further support. This has led the team of right. to understand another kind of leverage that the XDC Model provides: people immediately speak one single language. The contribution to global warming is the common denominator for everyone’s long-term target: economic success in a world shaped by climate change. By this, right. has witnessed how the XDC Model is fostering unprecedented collaboration between powerful agents. Figuring that such exciting leverage should be maximised, led right. to decide to make the code, upon which the XDC Model operates, accessible for everyone. right.open is only the first step of this endeavour. After the project, the XDC Model will be accessible for everybody as open-source code.
What is your ‘what if’ question?
right.open is based on the understanding, that in a world shaped by climate change, the quest for apportioning responsibility will increase; and blame will most likely fall upon those economic entities which have contributed the most to exacerbating the problem. Most arguably, people will not just stand there and watch floods, storms and droughts damaging what they value. The affectation will very likely drive people’s responses to global warming and thus increase the value of the information: who is actually to blame for this? The contribution of a single economic entity to global warming could, therefore, evolve as a key driver for economic success, entailing the social legitimacy to operate. The team of right. regards this as a massive opportunity to create a sense of urgency where there is apathy today; to build flexible and dynamic networks in which the lethargy of power-driven hierarchies keeps people from moving and to enable reflection on our relationship to the Earth System to which there is an evident disconnection today.
What if, this all takes place tomorrow? There clearly is a lot of uncertainty about how exactly things will play out, but in asking ourselves strategic what-if questions, we will be preparing our mindsets to function in an unprecedented world. right.open targets everybody who is aware of the fact that there is nothing as secure as the fact that climate change will lead to significant value redistribution. The value of those economic entities that contribute to dangerous levels of global warming will likely decrease whereas the value of those economic entities contributing to limiting global warming to controllable levels, will increase. Whereas the redistribution process will impose some chaos and disruption on socioeconomic systems, the contribution to global warming is a stable and consistent denominator. right.open welcomes everybody eager to dig deeper.