Executive summary

Deciding where to focus investment and development efforts for adaptation is difficult. The technologies to address adaptation needs are, for the most part, specific, numerous, and fragmented. Adaptation solutions are diverse across different industries and are often driven by local circumstances, making scalability hard to achieve. At the same time, funding for adaptation tech remains low — it is estimated that less than 10% of all climate technology funding went to adaptation in 2020–2021. Furthermore, the suitability and viability of adaptation solutions in the future will be greatly affected by a range of uncertainties, such as market dynamics, regulation, and consumer behavior. This complexity often leads to decision paralysis or, at least, an extended “wait and see” philosophy.

In this Report, we aim to provide a way through the complexity for executives, responding to the key question, “How can decision makers harness technology to help their businesses adapt to the diverse, multivariate, and ambiguous impacts of climate change?” The Report is based on a four-month study by Arthur D. Little’s (ADL’s) Blue Shift, incorporating the results of more than 40 interviews with corporate executives, climate adaptation experts, venture capitalists (VCs), and start-ups, along with two surveys covering 70 respondents. We were pleased to collaborate with the United Nations’s (UN’s) World Intellectual Property Organization (WIPO), which has established the “Green Technology Book” and a solutions database comprising some 140,000 entries, as well as design fiction agency Making Tomorrow on future projections.

Our approach was first to understand the adaptation challenges businesses face and then to set the scene by providing a clear summary of the relevant geophysical and biological impacts of a “+3°C by 2100” climate change, based on projections by the Intergovernmental Panel on Climate Change (IPCC). We took these impacts as a “given.” Next, we explored the implications of adaptation for a range of possible futures by considering specific combinations of critical economic and behavioral variables. This enabled us to develop a series of plausible future projections, which we fleshed out in terms of their impacts using design fiction approaches. We then analyzed how each future projection would give rise to a set of functional expectations and technology needs for adaptation. Finally, we identified a series of “no regret” adaptation solutions, as well as enabling technologies and capabilities that are relevant for businesses irrespective of future uncertainties, and developed guidance on how to embark on the adaptation journey.

The challenges ahead

In Chapter 2, we discuss the four generic business challenges that companies must address to adapt to climate change. These include:

1. Source — securing the availability and supply chain of critical raw materials and resources. Sub-challenges include water scarcity, declining crop production, access to critical materials, and disrupted supply routes.

2. Make — adapting manufacturing and other industrial processes to a changing climate. Sub-challenges include securing energy and water supplies, productivity improvements, and maintaining viable working conditions.

3. Protect — safeguarding industrial sites and assets from climate change impacts. Sub-challenges include detection and alerting (of unforeseen weather events), shielding of assets, resilient design, remediation after disruption, and relocation of sites.

4. Sell — marketing competitive and differentiated goods and services to meet the needs of consumers in a changing climate. Sub-challenges include developing new innovative products and services and adapting to new consumption patterns and changing sales channels.

Companies must consider how these four types of challenges could affect their business operations as they consider their options.

Modeling uncertain outcomes

Chapter 3 addresses some of the factors shaping the future environment for adaptation, split across geophysical, biological, behavioral/demographic, and economic categories. Modeling these critical factors suggests five future projections that companies should consider in developing their adaptation responses.

We identified a total of 11 shaping factors that affect climate change adaptation. In the Report, we describe five geophysical and biological factors and characterize their likely impacts, such as extreme climate events, freshwater availability, sea level rise, biodiversity loss, and increased pests. These results are based on an assumed “+3°C by 2100” trajectory, which falls within the confidence interval for the IPCC’s Representative Concentration Pathway (RCP) 6.0. The geophysical and biological impacts of this trajectory are widespread and large-scale.

In the behavioral/demographic and economic categories, which together we call “human shaping factors,” we identify six factors, of which four are the most critical because they have both high potential impact and high uncertainty. These critical factors are regulations, consumer behavior shift, competitive pressure, and availability of finance. By considering each “on/off” combination of these four factors, we generated 24 future projections, of which five are the most plausible, differentiating, and technologically relevant:

1. Green Communities — strong consumer behavior shifts but limited finance. This is a resource-scarce world in which grassroots adaptation initiatives flourish, without large-scale projects.

2. Lonely at the Top — no consumer behavior shift but high competitive pressure. Adaptation is driven by global market leaders targeting affluent customers in a highly unequal, two-speed society.

3. Wild Green West — strong finance but little regulation. This is characterized as creative chaos in which adaptation initiatives sprout everywhere, fueled by private capital but lacking any regulatory backbone.

4. Don’t Look Up — limited finance and no consumer behavior shift. This is a pessimistic future in which neither customers nor financial institutions have adjusted to the new climate reality.

5. Adaptation Surge — all variables favor adaptation. This is a relative utopia in which adaptation is the norm, resetting expectations and creating new markets and new needs.

These projections don’t seek to describe a full world but rather illustrate a range of futures that may partly coexist. To deliver a deeper understanding of their consequences, we used a design fiction approach, creating artifacts from each possible future. These help better identify the technological options that will flourish in particular projections.

Responding with technology

The most relevant technologies for each future projection can be mapped and ranked by maturity and impact, as well as across the four challenges discussed in Chapter 2. Overall, value lies more in adjusting already-existing technologies to specific and local problems rather than cutting-edge breakthroughs. In Chapter 4, we identify a short list of no-regret solutions, enabling technological bricks, and key capabilities that companies should consider.

Each future projection implies a partly different set of functional needs and priorities, for which particular technological solutions are relevant. In Chapter 4, we identify 89 of the most relevant technology families, mapped across the four challenges and ranked by maturity and impact. We also indicate specific technology examples and representative providers.

Overall, there is a wide range of technologies to consider due to the highly local, multivariate, and multidisciplinary nature of adaptation. The value that adaptation technologies bring lies less in cutting-edge performance or breakthroughs and more in applying existing technologies to solve very specific and local problems at an acceptable financial, environmental, and social cost for all stakeholders involved. This is the key area for innovation. Many technologies that were not developed for adaptation nevertheless play a key role in this space, from advanced consumer sentiment analysis to digital twinning. There is no single best approach to solving adaptation challenges. Instead, a nuanced consideration of a business’s ecosystem on its operations, and vice versa, is needed. Adaptation strategy is therefore best approached as an integral part of company strategy.

No-regret moves that will be relevant regardless of the projection, or the industry concerned, include:

• Solutions — early warning systems, thermal comfort systems, geographic information systems (GIS) for site location, aerial drones for imaging, robots for maintenance and automation of production, and water efficiency and recycling systems

• Key technological bricks — sensing technologies, including Internet of Things (IoT) and remote sensing (including light detection and ranging, or LiDAR); digital twins and generative AI (GenAI) for simulation; and neural networks (notably graph neural networks [GNNs]) for prediction

• Underlying capabilities — data science, complex systems modeling, design for scarcity, responsive risk assessment, and strong local partnerships

Ultimately, climate is a complex system, which means it exhibits hard-to-predict, emergent effects. While the likely scale of climate change impacts is well evidenced, generally the sequence and speed of development of individual events are hard to predict. The capability to model complex systems and their impacts at a local scale will be key to developing comprehensive and nuanced approaches to successful adaptation.

Taking action

A survey conducted as part of the study confirmed that a lack of knowledge of the best course of action is the biggest hurdle to business adaptation. As described in Chapter 5, to move forward, companies should focus on understanding their climate change issues and risks, putting suitable governance in place, establishing means of financing, and developing local partner ecosystems.

A lack of knowledge on the best course of action is followed by resistance to change, lack of funds, and technology limitations as the biggest hurdles to business adaptation. To move forward with adaptation strategies, companies must consider four key questions:

1. How to predict? Decision makers should begin by creating their own global warming trajectory assumptions and identifying the shaping factors most critical for their industry and global footprint. They need to conduct site-by-site assessments of potential risks, both acute and chronic, and pilot improved risk-monitoring and modeling approaches, leveraging digital technologies, such as digital twinning and AI.

2. How to decide? Businesses will need a suitable governance approach to oversee the adaptation agenda, which often stretches across several functions. New metrics are likely to be required. Approaches such as heat maps can help allocate priorities. Abilities to “think global, act local” and enhance customer listening are key.

3. How to finance? Mobilizing funding for adaptation requires updating financial metrics, including pricing climate-risk vulnerabilities in terms of damage to assets, production loss, and possible reputational effects. It may also involve the complex task of pricing positive externalities (productivity gains, employee retention) and potential market opportunities from adaptation (market share gains, or new product-market fit). It also requires working with longer timelines (>15 years) than is customary for most corporate decision-making. Blended finance solutions, which combine concessional public funds with private capital, can be leveraged when corporate adaptation investments impact communities.

4. How to build? Because adaptation problems require local solutions, it will be essential for businesses to develop local ecosystems of partners. As with any collaborative innovation effort, it is important to set clear ground rules for intellectual property (IP). Finally, companies will have to accept longer timescales for adaptation investments.