What are the best practices and tools for conducting scenario planning for climate change?

2 Identify the key drivers and uncertainties

The next step is to identify the key drivers and uncertainties that will shape the future scenarios. Drivers are the factors that influence the focal question, such as economic, social, technological, environmental, and political trends. Uncertainties are the factors that are unpredictable or have high variability, such as the severity and frequency of extreme weather events, the pace and direction of policy responses, and the consumer and competitor behavior. A useful tool for identifying and organizing the drivers and uncertainties is the PESTEL analysis, which covers the political, economic, social, technological, environmental, and legal aspects of the external environment.

3 Generate and select the scenarios

The third step is to generate and select the scenarios that will be used for analysis and planning. Scenarios are plausible and consistent stories that describe how the future might unfold under different combinations of drivers and uncertainties. A common approach is to use a 2x2 matrix that plots two key uncertainties along two axes and creates four quadrants that represent four distinct scenarios. For example, one axis could be the level of global cooperation on climate action, and the other axis could be the rate of technological innovation on low-carbon solutions. The scenarios should be named and narrated in a way that captures their essence and implications.

4 Analyze and evaluate the scenarios

The fourth step is to analyze and evaluate the scenarios in terms of their impact and likelihood. This involves assessing how each scenario would affect the focal question and the key performance indicators of the organization and the client. For example, how would the demand and supply of the products and services change under each scenario? What are the opportunities and threats for the organization and the client? How likely is each scenario to occur, based on the evidence and assumptions? A useful tool for analyzing and evaluating the scenarios is the SWOT analysis, which identifies the strengths, weaknesses, opportunities, and threats of each scenario.

5 Develop and test the strategies

The final step is to develop and test the strategies that will enable the organization and the client to achieve their goals and objectives under the different scenarios. This involves identifying the common and specific actions that are required for each scenario, as well as the triggers and indicators that signal the need for adaptation or adjustment. For example, what are the core capabilities and resources that are essential for success in any scenario? What are the contingency plans and options that are available for each scenario? How will the organization and the client monitor and evaluate the progress and performance of the strategies? A useful tool for developing and testing the strategies is the scenario matrix, which maps the strategies against the scenarios and evaluates their robustness and flexibility.

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?