2°C Futures: A Report from Aditya Birla Group (PDF)

# <2°C Futures: How this baseline may happen ## Foreword: Welcome to our <2°C Futures At ABG, we have worked hard to create a Sustainable Business Framework that helps signpost us to the requirements and potential hazards and opportunities on the way to 2030 and 2050. It seeks to ensure that we fu...

# <2°C Futures: How this baseline may happen ## Foreword: Welcome to our <2°C Futures At ABG, we have worked hard to create a Sustainable Business Framework that helps signpost us to the requirements and potential hazards and opportunities on the way to 2030 and 2050. It seeks to ensure that we future-proof our businesses so that they continue to be successful in the longer term. We as nations, as society and as a business have achieved tremendous progress in the last 100 years. The Aditya Birla Group (ABG) has grown to a US $44.3 billion corporation, in the League of Fortune 500. Anchored by an extraordinary force of over 120,000 employees, belonging to 42 nationalities, our revenues flow from operations spanning 35 countries. We are competitive and lead in many of the sectors in which we do business. On average globally, in many ways we are living longer, healthier, better lives than ever before. We have a long way to go, but we see progress. This progress has in some ways benefitted the planet, but it has also challenged the very nature of the ecosystem that our very existence depends on. We are now in a precarious situation. 193 nations have signed up to the Paris Agreement commitment to keep the global temperature rise under 2°C above pre-industrial levels, yet our stated Intended Nationally Determined Contributions will only keep the temperature rise to 3-4°C. We know the ratchet mechanism has to increase these contributions if we are to keep under 2°C. This will not happen by itself. The 'business as usual' trajectory tells us this. We recognise that the dangers of continuing as normal and not adhering to this commitment are significant to say the least. At ABG, we acknowledge that many businesses will not contribute until they are legislated to do so. We have worked hard to create a Sustainable Business Framework that helps signpost us to the requirements and potential hazards and opportunities on the way to 2030 and 2050. It seeks to ensure that we future-proof our businesses so that they continue to be successful in the longer term. Climate change and the herculean task of moving from a business as usual 6°C to a transformational below 2°C trajectory is already shaping our operating environment and our value chains today. But understanding the multitude of effects of this transformation is challenging. Imagining the best case 2°C future, how will citizens and businesses have been affected? What will the businesses that have remained sustainable need to have done to adapt their operations, value chains and products so they thrive now, and on the road to this hotter world? Is adaption technically possible and affordable or are many businesses already doomed to be unsustainable dinosaurs? Will this happen sooner rather than later as emerging legislation, such as carbon pricing, bites? What other levers do the governments of the world have to enable this change? Will product labelling, traceability and transparency of operations, production caps and allocations, or technology uptake incentives figure in this picture? Critically important to the business manager, how will the government mandates driving this transformation affect our businesses in the short and medium term? Global warming has an impact on every part of the earth's ecosystem. For instance, rising water levels place the biggest cities along coasts at tremendous risk. Some of the biggest cities like New York, San Francisco, Miami, London, Barcelona, Mumbai, Kolkata, Hong Kong etc. will be impacted significantly. Many of these contain our customers and are major markets for our products. How and where may we meet the needs of future consumers? Global warming will impact agriculture through changing water availability and temperature extremes. In many developing economies, a large majority of the workforce is involved in agriculture. High temperatures will impact production of basic crops, leading to hunger and pose a challenge to society in continuing to uplift people from poverty. For the farming business and the farmers themselves, no water means no income, potentially forcing unplanned mass migrations. What does this do to our workers and our markets if more people are forced to migrate? ## The Aditya Birla Group Sustainable Business Framework Over the last five years, the Aditya Birla Group has developed and followed a logical Sustainable Business Framework. This framework recognises that the future will be - and indeed has to be - radically different to today. Importantly, it makes it clear that we must avoid acting too late on the knowledge we have if we are to remain successful. The ABG Sustainable Business Framework takes the form of a funnel, representing the increasingly constrained business operating context over time. As legislation is formed and implemented around megatrends such as climate change, management and protection of biodiversity, control of nitrogen and phosphorus use, prevention of soil and water degradation, control of non-degradable waste etc, we feel it will drive the massive behaviour change and adoption of new technologies and products needed for a sustainable future. Unsustainable businesses will fail because they are not be able to generate cash while performing at the levels required to manage these trends, such as keeping below 2°C of warming above pre-industrial levels. Only sustainable businesses able to operate within the tightening walls of the funnel will survive. It is ABG's belief that a smaller number of higher performing businesses together with their sustainable value chains - will exist by 2050 to deliver society's needs. Much of the focus of the Aditya Birla Group sustainability efforts has been on ensuring that we are legally compliant and that we build management systems that conform to international standards that signpost the requirements of 2050. Further, we are learning to test our business strategies against future scenarios to make sure they are resilient and capable of winning market share into the future. We summarise this in three steps: 1. ensuring Responsible Stewardship now, adhering to legal requirements and building management systems conforming to international standards across all our operations and, importantly mapping our supply chains 2. engaging in Strategic Stakeholder Engagement to understand from experts how the law, and other factors, is likely to increasingly constrain us 3. strategically Future-Proof our business strategies and our supply chains, really understanding what possible futures lie ahead, what risks and opportunities they present, and actioning now programmes to develop what it takes to fit within the sustainable world represented by the funnel tip in 2050. ABG believes that legislation required to prevent more than 2°C of warming is the ultimate influence on the walls of the funnel. Throughout the Group, we understand this, are acting now in response and are committed to building sustainable businesses capable of operating profitably within these walls. We believe that pioneering businesses will pull global society down the funnel by setting new standards for their products and operations and gaining competitive advantage by doing so. Leading practices over time will be codified into international standards and, eventually, into local legislation that will force business down the funnel. Those not capable of adaption will, like dinosaurs, go extinct. <2°C Futures sets out to explain what the end of that funnel looks like by 2040: the space we'll have to operate within to be successful. Understanding different scenarios of how we as a society might get there and making them part of our business strategy is part of our effort to build sustainable businesses that afford for long term success, starting right now. ## Executive summary: Our possible futures in a nutshell Getting ourselves on a below 2°C trajectory will mean radical change. It will require levers to be pulled by business, government and society, all whilst adapting to the physical impacts guaranteed by our previous emissions. For instance, the electricity system must be almost totally decarbonised and mobility electrified; energy efficiency must increase dramatically and the way we produce and consume food will need to shift; flows of capital will need to change and carbon pricing and regulation will likely reshape the business landscape. Businesses that aim to continue to be successful, and those who wish to proactively find value in a below 2°C future need to understand the risks and opportunities posed by three things: * The likely physical impacts of climate change and their implications for the entire value chain * The levers that must be pulled soon to get us onto a below 2°C trajectory * The way that the socio-economic context could make these levers more or less severe over time By 2040 the physical impacts of climate change will be more obvious than today. For instance experts expect greater water shortages and more dramatic flood patterns to affect food security. Heatwaves will become more frequent and intense, making some areas unliveable if action is not taken. Much of our coral reefs are likely to have bleached, dramatically affecting the livelihoods and diets of millions of people. The implications of these physical impacts need to considered now as many of our decisions will determine what risks or opportunities we face in 2040. For instance acquiring a manufacturing plant in an area likely to be facing water scarcity or intense flooding will virtually guarantee a future loss of productivity. Investing R&D resource in value propositions that help people manage extreme heat or cold would likely be smart. In order to shift from our current emissions trajectory to one that keeps us below 2°C, there are some levers that simply have to be pulled soon. The electricity system globally will have to be decarbonised somewhere between 2040 and 2060. The internal combustion engine will have to be phased out totally somewhere between 2040 and 2050. By 2040 all new buildings will have to be zero carbon, and approximately 5% of existing stock will have to be retrofitted to the same standard every year from 2030. Heavy industries will have to have reduced their absolute emissions by 40% by 2040 from 2015 levels. And the overall economy will have to be 300% more energy efficient than it is in 2018. To meet many of the models negative emissions tech-nologies that today do not exist at scale will have to be invented and massively scaled by mid-century. To get us on these time-tables means taking some critical actions by 2020 including an end to all new coal fired power plant approvals, cities across the world upgrading 3% of existing buildings to zero carbon each year and a step change in renewable energy generation to 30% of the world's electricity supply.3 This is a radically different business landscape. Depending on the industry you are in, different actions will prepare you, but action will be required by all. How these levers are pulled, and how they are combined with others, will depend on the socio-economic context at that time. Many of the emissions trajectory models assume that the context in 2040, 2060 and 2100 will look similar to today. We know this is unlikely given the change we have seen over the previous 20, 40 and 80 years. For this reason, we need to understand how these levers could impact our businesses in different socioeconomic contexts: for instance, in a world of strict international governance what could we be forced to ## The scenarios are tough, and constraining, but they are scenarios for success. They are four different pathways we believe are viable from the standpoint of 2018 to limit warming to under 2°C. * **Efficiency First:** a precarious globalised house of cards where constant and often risky technological innovation, motivated by high carbon prices, is just keeping us on track * **Redefining Progress:** a digitally connected, yet highly localised world where priorities in many countries have shifted from rapid growth to healthier growth * **New Protectionism:** a splintered world of protectionist blocs, where tackling climate change is a matter of national security * **Service Transformation:** a world where the mainstreaming of access over ownership has happened quickly, and globally-applied, individual carbon budgets are traded and tracked The scenarios are tough, and constraining, but they are scenarios for success. They are four different pathways we believe are viable from the standpoint of 2018 to limit warming to under 2°C. Other futures are available, but most of these involve higher levels of warming and much greater unpredict-ability from a climate and indeed socio-economic and political point of view. Together, the baselines and scenarios suggest that businesses set to be successful in a <2°C future need to be ready for a complex picture of mutually reinforcing changes including: * A tough policy landscape and robust implementation * The end of coal * A huge transformation in the built environment * A step change in agriculture and food * A mobility revolution * New materials and minerals to the fore Detailed monitoring of corporate, and even individual, behaviour. The emergence of radically different governance and business models. A change in land use on a massive scale for protection, sequestration and / or energy. ## The case for action: There is no business case beyond 2°C The Paris Agreement on climate change commits us to keeping under two degrees centigrade of global warming beyond pre-industrial levels, and sets an aspiration to keep to 1.5 degrees. It was signed by 195 countries and ratified by the 179 that account for 88.75%5 of global emissions, including China and India - reflecting a universal acknowledgement of the pervasive threat of climate change to our continued survival. The 2°C limit is set based on science, simply because going beyond has potentially cataclysmic implications for society and economies everywhere. Rockstrom and his colleagues at the world-renowned Stockholm Resilience Institute point out that beyond 2°C there is a risk we become a "Hothouse Earth" which will stabilize at a global average of 4-5°C higher than pre-industrial temperatures. Amongst other effects, this means a sea level 10-60 metres higher than today. New York, Bangkok, Jakarta, Dhaka, Singapore, Tel Aviv, Washington DC, Manila and Rio de Janeiro are amongst the cities that would be wiped out even at the lower 10 metre projection, whilst entire island nations such as the Maldives, Micronesia and Tuvalu would cease to exist. It is hard to imagine any viable business case within a Hothouse Earth scenario. Not taking action means putting any business on a certain path to eventual collapse. For those looking to lead businesses that can be sustained in the long run, it is clear the business case exists only for action to stay below 2°C. Unfortunately, it is difficult to identify those responsible or accountable. The year 2040 (let alone 2050 and 2100), by which many of the most serious consequences of inaction will be felt, is far beyond the usual scope of business planning or political cycles. It is probably beyond the tenure of all but very few CEOs. It is up to us to decide if our legacy will be societal and economic collapse, and time for us to understand that taking no action is a conscious decision in itself. ## Using this Report: How <2°C Futures can help you The business case for action varies depending on the industry and the 'levers' that will be pulled to get us on a below 2°C trajectory. Some examples include carbon pricing and taxation, investment in innovation, as well as infrastructure change on a massive scale. This document synthesises the leading scientific thinking on climate change for business leaders, highlights the implications, and explores the levers that will push or pull us into a below two degree trajectory, and how applying them in different combinations could bring about very different '<2°C Futures'. It is a resource to help businesses and other organisations plan, strategise, and identify risks and opportunities. The planet has already warmed by at least 1°C7. The commitments made under the Paris Agreement take us to a hothouse inducing 2.7-3.7°C8. To get from our current trajectory to a below 2°C one will require massive change across the globe. To help explore this change, and the implications for business and society, in this resource we summarise: * **Baseline 2040:** What the science is telling us is likely to have happened by 2040 * **<2°C Futures:** Four scenarios outlining what the business operating context could look like in 2040 if different combinations of levers are pulled in an effort to stay below 2°C. ## Baseline 2040: What must have happened to stay below 2°C? * What will be the likely physical impacts of climate change in 2040? * What will or must have happened by 2040 to be on track to stay below 2°C of warming? ### Physical impacts Below we set out the 'physical baseline' that we have applied across our scenarios. It is based on projections from a number of sources, including the Fourth National Climate Assessment released by the U.S. Global Change Research Program in November 2017º and the January 2018 draft of the IPCC Special Report on 1.5°C¹º, as well as insights gained during expert interviews. We have deliberately embraced a baseline at the upper end of projections. This is not because we want to be dramatic, but because increasingly scientists are warning the models are behind reality on some aspects such as sea ice loss. In order for any organisation to ensure success on a below 2°C trajectory, it is important to prepare for what experts say is possible. These are high impact high likelihood risks. When we're investing in facilities, we have to make sure they can withstand these conditions. ## <2°C Futures: How this baseline may happen As experts agree that the baseline will or must have happened by 2040, we need to understand what this means for business in different socio-economic contexts. The implications vary greatly depending on how the further levers are pulled. For instance, a market in which global governance on climate change is coordinated and enforced will look very different to one with no global framework for action, but both may be capable of limiting warming to below 2°C. Here we provide four scenarios in which the baseline 2040 has happened through employing different combinations of the mutually reinforcing levers at different speed and scale to make the best attempt to stay on a below 2°C trajectory. It is important to note that these scenarios are not predictions, and are certainly not favoured futures. They are plausible scenarios given where we are today, designed to be possible and challenging. These scenarios are qualitative and based on world-archetypes that Forum for the Future first developed during the Climate Futures scenarios project in 200843. The archetypes have been extensively revised, tested and updated during the research process, and then built out into this new set of scenarios, drawing on expert interviews, desk research, and the intervening ten years of Futures horizon-scanning that we have conducted as an organisation. As an integral part of the process we have also 'sense-checked' our scenarios against a number of external published quantitative scenarios that remain within the 2°C budget, including IRENA's Roadmap to 205044; Ecofys' "Energy Transition within 1.5°C"45; the "Alternative pathways to 1.5°C" explored by van Vuuren et al46; the 'Low Energy Demand' scenario developed by Grubler et al47 and Shell's Sky scenario 48. None of our scenarios mirror these external scenarios exactly, but the carbon reduction pathways and the quantitative indicators proposed for each scenario fall within the ranges articulated by such quantified scenarios. We recommend reading them with your company or organisation in mind, considering the following questions: * If we continue as we are today, what risks would we be facing in this future and what do we need to do to mitigate them? * What would our value chain look like in this scenario? How can we move towards that now, in order to secure our future place in the market? * What opportunities for influence, new value propositions or innovation do we have in this scenario that would allow us to profit from the transition to a below 2°C trajectory? The actions you will take as a result go right to the core of your business strategy, putting you on course to be successful in a below 2°C future. The four scenarios are: * **Efficiency First** * **Redefining Progress** * **New Protectionism** * **Service Transformation** ## A note on implications: What does this mean? The role of these scenarios is not to paint a picture of future disaster. They are scenarios for success, in which the world has successfully limited warming to below 2°C. The space for manoeuvre on the road to 2040 is increasingly tight, the funnel of the ABG Sustainable Business Framework constricts quickly and each year of insufficient activity limits our options further by making adaption harder. It is hard to escape the fact that avoiding more than 2°C warming requires a fundamental transformation of the economy in a matter of decades, with many actions required even by 2020. The impact on business will be enormous. It will be challenging in the best of scenarios and near impossible where the mutually reinforcing critical levers are not identified and pulled together. The role of business is therefore not just ensuring that we are on course for net zero emissions within our value chains, and advocating for the conditions that will make that happen, such as: intergovernmental cooperation; effective regulation and implementation; enhanced flows of climate finance; and more accountability over how it is spent. We must also prepare and adapt to the conditions that a 2°C trajectory world will bring as we try to avoid even larger rises in temperature. Pioneering businesses need to pull society down the funnel, proving to international bodies that their best practices can be codified and giving confidence to legislators to provide that push. Staying below 2°C is our best and only hope for enduring sustainable planet for human survival. It requires most businesses to transform their products, power supply, raw material sources, logistics, and operations, internally and within their value chains. Our investment decisions and actions from now till 2040 will determine whether we can be successful in transforming ourselves to meet the constraints of a 2°C future; whether we can be resilient no matter the levers that are pulled determines if we will be sustainable and allowed to operate. The sooner we act, the more ahead of the field we will be. Together, the baselines and scenarios suggest that for businesses to be successful in a below 2°C future they need to be ready for a complex picture of mutually reinforcing changes that define the shrinking operating space between the walls of the funnel: * A tough policy landscape and robust implementation, including through the increased use of information technology. * The speed at which the change needs to happen suggests a need to be ready and ahead of tough government policy and fierce enforcement at a business and individual level. * The end of coal. * A huge transformation in the built environment. * A step change in agriculture and food. * A mobility revolution. * New materials and minerals to the fore. With climate change impacts already demonstrating how unprepared we are globally, and the timetable for action being sooner than most believe, the time for action is now if we want our businesses to continue to be successful and more importantly sustainable. ## Acknowledgements and further information: Where these insights came from This resource was produced by the Group Sustainability Cell and Strategy Team at the Aditya Birla Group, supported by Forum for the Future. We are grateful to the following individuals and organisations who have contributed through expert interviews and consultation: * Aniruddha Kulkarni: Senior Vice President, Corporate Strategy and Business Development, Aditya Birla Group * Ashish Kothari: Author, environmentalist and Founder of Kalpavriksh, Kalpavriksh * Bob Kopp: Director of the Institute of Earth, Ocean & Atmospheric Sciences, Professor in the Department of Earth & Planetary Sciences, Ritugers University. Director of the Climate Impact Lab, Rutgers University * Deeksha Vats: Joint President, Group Sustainability, Aditya Birla Group * Dr Ajay Mathur: Director General, TERI - The Earth and Resources Institute, TERI - The Earth and Resources Institute * Dr Mamta Mehra: Senior Fellow, Biosequestration Modelling Project Drawdown, Project Drawdown * Dr Tamaryn Napp: Research Fellow, Faculty of Natural Sciences, The Grantham Institute for Climate Change, Imperial College * Dr Vimal Mishra: Assistant Professor, IIT Gandhinagar, IIT Gandhinagar * Helena Norberg-Hodge: Founder Director, Local Futures, Local Futures * Ipsita Das: Group Sustainability, Aditya Birla Group, Aditya Birla Group * Jennifer Steeves: Risk Analyst, Acclimatise, Acclimatise * Kevin Anderson: Deputy Director, Tyndall Centre, and chair of energy and climate change at the School of Mechanical, Aerospace and Civil Engineering (MACE) at the University of Manchester, Tyndall Centre for Climate Change Research * Lesley Mitchell: Director, Nutrition, Forum for the Future, Forum for the Future * Mansi Agarwal: Group Corporate Strategy, Aditya Birla Group, Aditya Birla Group * Michael Kugelman: Deputy Director of the Asia Program and Senior Associate for South Asia, Woodrow Wilson International Center for Scholars in Washington, DC., Woodrow Wilson International Center for Scholars in Washington, DC. * Sahil Jain: General Manager, Corporate Strategy and Business Development, Aditya Birla Group, Aditya Birla Group * Selvakumar Ramasamy: Group Sustainability, Aditya Birla Group, Aditya Birla Group * Shiv Shivakumar: President, Corporate Strategy, Aditya Birla Group, Aditya Birla Group * Tim Flannery: Internationally acclaimed scientist, explorer, author and conservationist, Climate Council; Melbourne Sustainable Living Institute; The Graduate Institute, Geneva, Climate Council; Melbourne Sustainable Living Institute; The Graduate Institute, Geneva * Tony Henshaw: Chief Sustainability Officer, Aditya Birla Group, Aditya Birla Group We would also like to acknowledge the vast array of information and accessible science provided by governments, NGOs and businesses alike that have informed the baseline and scenarios. The Aditya Birla Group is a US $44.3 billion corporation in the League of Fortune 500. With over 120,000 employees belonging to 42 nationalities operating in 35 countries. The corporation includes businesses in cement, telecommunications, carbon black, aluminium, fashion and grocery retail, textiles, fertilisers and insulators. Find out more here: [http://www.adityabirla.com/home](http://www.adityabirla.com/home) Forum for the Future is an international not for profit that works with business, government and other organisations on accelerating our transition to a sustainable future. In India we are a registered company U93030MH2014FTC254981. You can find our website here: [https://www.forumforthefuture.org/](https://www.forumforthefuture.org/) Publication date: November 2018 Contributing authors: • Tony Henshaw: Chief Sustainability Officer, Aditya Birla Group • Shiv Shivakumar: Group Executive President, Aditya Birla Group • James Goodman: Director of Futures and Projects • Joy Green: Senior Futures Specialist • Saksham Nijhawan: Strategist, Climate Change and Energy • Anna Warrington: Director, Forum India • Iain Watt, Principal Climate Change Specialist • Pallavi Ahuja, Sustainability Strategist For further information please contact [[email protected]](mailto:[email protected]) <div align="center"> <img src="https://lh3.googleusercontent.com/proxy/389o-zD3R7Jrxg9u0E6MxvR2Q2gzkW_I2735H3gZ4WpqbI41H1K9qZ_w4iG5y-R0cZsC3d78e09G82r1M-uS5s85e-06fX6D8uW_mO8z-fV14G4=w1200-h630-p-k-no-nu" width="200" height="150" /> <img src="https://lh3.googleusercontent.com/proxy/X5D4c8wA8722-zH4Z2F6z4F6G5x9P28N8jZ1tYzH4Yj64y5N9r801D0iW0vzn1b4w1_q27P455Qwr13J_C29hWv72a-b4V2D_h3gC-d5P7vJ8s=w1200-h630-p-k-no-nu" width="200" height="150" /> </div> <div align="center"> ADITYA BIRLA GROUP </div> <div align="center"> FORUM FOR THE FUTURE </div> <div align="center"> Produced by Sustainability Cell of the Aditya Birla Group supported by Forum for the Future November 2018 </div> <div align="center"> For more information please contact [email protected] </div> <div align="center"> The Aditya Birla Group: https://sustainability.adityabirla.com/ Forum for the Future: [https://www.forumforthefuture.org/](https://www.forumforthefuture.org/) </div>