Adapting to an uncertain future

Industry Investment Rating - The report does not explicitly provide an industry investment rating [1][2][3] Core Viewpoints - Businesses must adapt to climate change alongside mitigation efforts, as adaptation is crucial for sustainability and resilience [3] - Adaptation strategies are complex due to fragmented technologies, industry-specific solutions, and low funding (less than 10% of climate tech funding in 2020-2021) [4] - Future uncertainties, such as regulations, consumer behavior, and competitive dynamics, significantly impact adaptation strategies [5] Key Business Functions for Adaptation 1. Source: Securing Raw Materials and Supply Chains - Climate change impacts raw material availability and supply chains, such as reduced agricultural yields and disruptions from severe weather events (e.g., drought affecting the Panama Canal in 2023) [7] - Companies must enhance supply chain resilience to mitigate disruptions [8] 2. Make: Adapting Manufacturing Processes - Energy and water shortages, grid instability, and extreme working conditions (e.g., heat) will affect manufacturing processes [9] - Solutions like water treatment, recycling, and desalination are critical for maintaining production quality and continuity [9] 3. Protect: Safeguarding Industrial Sites and Assets - Companies need better prediction capabilities, physical protection measures, and rapid response systems to guard against floods, storms, and sea level rise [10] - Relocation of assets from high-risk areas (e.g., parts of China, Vietnam, and Bangladesh) may be necessary [10] 4. Sell: Marketing Competitive Goods and Services - Climate change will alter consumer needs, creating opportunities for new products (e.g., Michelin's inflatable sun protection solutions) [11] - Companies must adapt to changing consumer behaviors and prioritize circularity and sustainable consumption [11] Future Projections and Uncertainties - The study identifies 11 shaping factors across geophysical, biological, behavioral, and economic categories that influence adaptation strategies [13][14] - Four critical uncertainties include regulations, consumer behavior, financial mechanisms, and competitive pressure [17] - Five plausible future projections include Green Communities, Lonely at the Top, Wild Green West, Don't Look Up, and Adaptation Surge [18][19][20] No-Regret Technologies and Solutions - No-regret solutions include advanced warning systems, thermal comfort systems, GIS, drones, robots, and water efficiency systems [26] - Key enabling technologies include IoT, deep neural networks, and simulation via generative AI [26][27] - Complex system modeling will become increasingly important for adaptation strategies [28] Strategic Recommendations - Companies should act now, as adaptation solutions require long lead times and early movers can gain competitive advantages [30][31] - Key steps include predicting risks, deciding on governance, mobilizing funding, and building local ecosystems of partners [31][32][33][34] - Adaptation strategy will become inseparable from business strategy by 2040 and beyond [34]