The VUCA framework is one that leaders have found useful in understanding how to formulate a response to an organizational challenge that is generally of an external nature. The acronym suggests that:
- change across the world is occurring at an accelerated rate;
- it is difficult to predict just how issues may play out and therefore, difficult to identify the best way forward;
- in an increasingly networked world, there is significant interconnectivity between the issues faced. A “wicked problem” like climate change or COVID-19 may have an array of root causes, and in turn, COVID-19 for example, may be a root cause of another wicked problem (e.g. a global recession), highlighting the difficulty in resolving or even taming these; and
- there can be very polarized views on just what the problem is and therefore, how to resolve it.
Addressing our climate crisis will be costly for business, but the costs of not addressing it are higher. The financial and reputational risks associated with climate change are on the rise. Companies that fail to account for climate-related risk are not only a threat to the environment, they are a threat to themselves.
Once we move beyond COVID-19, “normal” isn’t returning. What companies have experienced throughout the COVID-19 crisis reflects what a VUCA world is like. The speed with which society had to change will become standard. Finding solutions to opportunities and challenges that we can deploy confidently won’t happen every time. We will need to get comfortable in committing to “least-worse” options. Key stakeholders will convey very clear expectations of companies. Those that do not proactively address our climate crisis will pay a price.
Yet, by demonstrating a genuine commitment to sustainability, accountability, resilience and transparency, and implementing adequate governance, risk and communications strategies, businesses can guard their reputations and their bottom lines.
First, seize this moment to decarbonize, in particular by prioritizing the retirement of economically marginal, carbon-intensive assets. Second, take a comprehensive approach to building resilience. Companies have fresh opportunities to make their operations more resilient, reliable and sustainable as they experiment with shorter supply chains, more energy efficient manufacturing, videoconferencing instead of business travel, and increased digitization of sales and marketing.
This is the first in a series of three or four posts on this topic. Future posts will take a dive deep into how businesses can leverage this unique situation to reinvent themselves to meet the challenges and opportunities ahead in a VUCA world.