Corporate sustainability teams long have sought ways to more closely connect their objectives with the core missions of their companies — and to discuss them externally in those terms. 

Finding out precisely what to say — in the end, TCFD-shaped disclosures are optionally for the moment — would inspire a new approach to business-scenario analysis that forces far tighter collaboration between sustainability teams, risk managers, legal departments, business planners and other mission-critical operational functions than has been the norm. "The idea is not to overprescribe," Ravenel said. "This is just prudent planning."

1. Companies should use multiple scenarios and keep them updated

Here are some of the bigger questions: When will emissions really peak? When will demand for oil start declining? How much might governments pay to prop up sovereign investments? Will materials shortages limit the potential of emerging battery technologies? Will the United States really pull out of the Paris Agreement? How could a price on carbon change the economics of certain business units?

There are clearly also many technologies that will play a role, including solar and wind generating resources, electric vehicles and carbon capture and storage (CCS).

2. It's critical to engage diverse points of view

Scenario planners need to be both thoughtful and imaginative in the market forecasts they use to guide their thinking, said Nathaniel Bullard, global head of executive insights for Bloomberg New Energy Finance. "Be skeptical of futures that look like the past," he said. And be thoughtful about which forecasts are used as the guidepost.

"The biggest mistake in scenario planning is a lack of diversity, otherwise you’re just talking to yourself," he said. "The most important thing is to make sure you have a diverse team to challenge your mental map."

3. It's your mission to prepare for the future, not predict it

"The test of a good scenario is not whether you were right or wrong; it’s whether or not you are able to act in a timely way," Schwartz said. It’s about "better acts, better decisions, better understanding, not better predictions."

"Investors will be less forgiving if you don’t seem to have a plan."

4. The research used to set science-based targets could be useful 

"Thinking about science-based targets is a safe environment to really explore innovative approaches," he said. "It forces you to think about new innovations and think about different perspectives. … Scenario analysis is a way to think outside in."

5. Don't overemphasize the risks and downplay the opportunities

It didn’t take a huge leap to get there: Mendelsohn said the cross-disciplined team behind this effort started with work already being done by the company’s risk managers and added climate as another variable in the equations. For example, what might increasingly warm temperatures mean when it comes to extreme weather events or how much might the physics of consistently hotter air affect flight schedules on a permanent basis.

Source:Green Biz

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Picture credit to:Elena Prokofyeva