IRIS Initiative: Aligning Corporate Strategy with Climate and Resource Challenges

Press Release

To take control of their future in the face of energy and climate challenges, major European companies are joining forces with Carbone 4 and its partners to develop new strategic foresight tools.

Unprecedented and Hard-to-Predict Changes in the Business Environment

For all economic actors, climate and resource challenges will lead, in the short or medium term, to structural changes—sometimes abrupt and difficult to predict—in their business environment. The French Association of Private Companies (Afep)[1], as its president emphasized in November 2019, stated that “ Companies must build their future by incorporating a genuine forward-looking analysis of energy and climate issues into their strategy, in order to anticipate potential disruptions in their business environment ". This observation has since been widely cited.

Consider a variety of futures (that are physically feasible and compatible with planetary boundaries)

The IRIS initiative is aimed at companies and their stakeholders. Its purpose is to develop a new generation of tools and methods that address the need to anticipate and adapt strategic thinking:

• "Framework" Scenarios[2]"systemic and sector-specific, tailored to the needs of businesses. They will explore different climate trajectories (<2°C and >2°C), as well as technological and sociological pathways. They will outline the range of possibilities for transforming value chains in line with the now well-documented physical constraints and planetary boundaries;
• Support for understanding and using scenarios for strategic thinking through a dedicated educational program: the “Scenarios Lab.”

Leveraging Scenario Analysis: Incorporating the Long Term to Make Robust Strategic Decisions

To seize opportunities, manage the risks associated with this unprecedented context, and ultimately build trust both internally and externally, traditional approaches are no longer adequate: they often prove to be short-sighted, overly siloed, and ultimately “out of touch.” Strategic thinking among economic actors will be effective and will help prevent investments in future “ stranded assets "if and only if it is based on scenario-based analyses that take the long term into account and are grounded in the physical realities as described by climate and resource science today."

"Physical" Feasibility and Systemic Consistency: A Foundation for Economic Scenarios

The main scenarios currently being discussed[3], which were designed to address other needs, have various shortcomings that limit their relevance[4], particularly for businesses. Transformation scenarios must include a description of the underlying business activities, ensure their overall consistency and “physical” feasibility, and respect planetary boundaries.

Regardless of the model, nearly all scenarios assume a rapid and significant decoupling of GDP from energy production, even though this has never been observed on such a scale. Relying on such scenarios leads companies to an incomplete understanding of the impacts of the low-carbon transition.

Pioneering companies ready to approach the transformations of our economy with courage and clarity

Several major companies have already joined the IRIS Initiative. The roundtable will be finalized in the coming weeks. This level of corporate engagement will help establish a shared and enforceable framework for discussion, enabling us to think boldly and clearly about the transformations of our society and our economy. At the level of each individual company, the stakes are sustainability and prosperity. The IRIS Initiative thus serves as an indispensable complement to normative approaches aimed at “alignment” with a climate trajectory (such as 2°C). Designed with transparency in mind, all of the IRIS Initiative’s deliverables will also be freely accessible. They will be the subject of a joint communication effort to ensure the widest possible dissemination and to encourage contributions from other economic and academic stakeholders. The objective is clear: to enable all organizations to adopt the tools and methods needed to catalyze major strategic decisions commensurate with the energy and climate challenges. Work on the project is scheduled to begin in early 2021. The first deliverables (a modeling tool and scenarios with associated datasets) will be available one year later.

[1] Afep brings together the 113 largest French companies across all economic sectors.

[2] General scenarios that are not specific to any particular economic actor.

[3] Published by organizations such as the International Energy Agency.

[4] This point was raised, in particular, in the AFEP report “ Energy and Climate Scenarios: Assessment and User Guide " (November 2019) and I4CE “ A Scenario-Based Analysis of the Challenges of the Low-Carbon Transition " (April 2020).

Leading international institutions, partners of Carbone 4, are working together to meet the challenge of academic excellence and ensure “practical” application by businesses.

Prestigious institutions have partnered with Carbone 4 to carry out the work and contribute their expertise in key areas (modeling; economics and society; business strategy and training; environmental systems: energy, resources, climate, land use, and biodiversity):

• A leading American university
• A European development bank
• One of Europe's leading business schools
• Several renowned laboratories at European universities

This group of partners rounds out the circle of committed companies and will help bridge the gap between academic excellence and the practical needs of the business world.

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