The formation of belief in climate change

in business organisations:
a dynamic simulation model

Mercedes Bleda and Simon Shackley

February 2005

Tyndall Centre for Climate Change Research Working Paper 68

 The formation of belief in climate
change in business organisations:
a dynamic simulation model

Dr Mercedes Bleda
Institute of Innovation Research
University of Manchester
Manchester M13 9PL UK
Mercedes.Bleda@mbs.ac.uk

Dr Simon Shackley
Tyndall Centre for Climate Change Research
Manchester M60 1QD
Simon.Shackley@mbs.ac.uk

1
Summary
This paper aims to develop a computer based simulation model of the dynamics of the belief in
climate change of business organisations using a systems dynamics approach, specifically the
STELLA software programme.1 The main assumption of the model is that the dynamics of the
belief in climate change that businesses entertain is going to be driven essentially by the perceived
actual and potential changes in competitiveness associated with the occurrence of climate change
related events. In other words, we suggest that the way belief in climate change is formed in
business organisations is more driven by economic interests rather than by the growth of an
ecological ‘business conscience’.

The model has been built based upon theoretical hypotheses drawn from behavioural studies of
organisations, organisational learning theories, and evolutionary theories of change. It is, however,
constructed such as to allow future empirical testing and validation through standard analytical
methods. Furthermore, the model simulates the formation of belief for a generic business type in a
specific sector and in relation to weather events to which the business organisation has a certain
level of sensitivity. On the other hand, it allows the adjustment of specified parameters to reflect
alternative cases for different types of businesses with corresponding sensitivity to various weather
events. It also allows the user to explore the dynamics of belief in climate change of the defined
organisation-type for a large range of climate change related scenarios.

The simulation results show that, in general, for a business organisation to believe in climate
change in the first instance (that is, starting from a situation of 'not believing' that climate change is
occurring at all), it is necessary for it to experience strong and frequent (direct and indirect) signals
of climate change over a prolonged period of time. The precise exposure duration necessary will
depend, among other factors, on the magnitude and the frequency of the signals. Once the
organisation has formed its belief in climate change (that is, once it believes that climate change
could be occurring), sustained experience of climate change signals is still required to maintain
and/or build up this belief. In addition, the simulations show that, in the absence of indirect signals
of climate change (such as stricter government regulations and policies, or an increase in the
number of scientific reports on the issue), more robust direct evidence of climate change, in the
form of highly frequent weather extremes and anomalies, is generally required to have a significant
influence on the formation and building up of the belief in climate change. Similarly, in the
absence of anomalous weather event and impacts, the indirect or mediated experience of climate
change signals will not have a significant effect on the formation of belief in climate change. In
general, the analysis shows that the presence of both direct and indirect signals of climate change is
required for the emergence and building up of belief in climate change in a business organisation.

1
Stella ® High Performance Systems, Inc.

2
1. Introduction
Achieving an understanding of the way business organisations form their belief in the issue of
climate change (climate change) is of paramount importance. Organisations in general are the main
social units within which adaptation processes take place, and the formation of beliefs and
perceptions at the decision-making level of an organisation constitutes a key element of adaptation
and change in general (Mezias et al., 2001). Beliefs and perceptions set the stage for changes in
strategy and organisational form (Bettis and Prahalad, 1995), as well as for changes in underlying
cognitive elements at the organisational level (Bate, Khan and Pye, 2000). Indeed, the beliefs that
organisations hold about climate change constitute a fundamental factor in triggering and shaping
climate adaptation processes, since beliefs are central to determining whether and how
organisational action in general takes place. Therefore, a good understanding of how decision-
makers change their perceptions and beliefs regarding climate change (and modify the form and
functioning of their organisations accordingly) is critical since it constitutes the base for the
analysis of the general and adaptive behaviour in organisations in relation to climate change.

In this paper we present a computer based simulation model aimed to explore the dynamics of the
belief in climate change of business organisations.2 The main assumption of the model is that the
dynamics of the belief in climate change that businesses hold is going to be driven essentially by
the perceived actual and potential changes in competitiveness as a result of climate change related
events rather than by the growth of an 'ecological conscience' on the part of the businesses. The
model has been built based upon theoretical hypotheses drawn from behavioural studies of
organisations, organisational learning theories, and evolutionary theories of change. It is however
constructed such as to allow future empirical testing and validation through standard analytical
methods.

2. Dynamics of business beliefs: conceptual framework

As we have already indicated, to build the model, we have drawn on behavioural studies of
organisations, organisational learning theories and evolutionary theories of change since analyses
of beliefs at the level of organisations in general are carried out in the framework of these
approaches. Within these perspectives, (in the evolutionary approach in particular), the beliefs that
a business organisation holds can be embedded in routines. The concept of routine from an
evolutionary perspective encompasses a wide variety of phenomena: rules, procedures, strategies,
technologies, but also conventions, cultures and beliefs around which organisations are built and
through which they operate (Cyert and March, 1963; Nelson and Winter, 1982; Winter, 1971). In
this context, changes in beliefs/routines (whatever their nature) come about in response to
organisational experience. Indeed, the notion that beliefs emerge from and change as a
consequence of experience is among the most influential concepts of cognition in both
organisational change and evolutionary studies (e.g., Bettis and Prahalad, 1995; Isabella, 1990;
Tripsas and Gavetti, 2000; Winter, 1971). Routines/beliefs are modified in general when the
organisation experiences new situations for which appropriate procedures have not yet been
developed, when existing routines prove to be unsuccessful, or when alternative routines involving
potential greater advantages are discovered internally or externally (Gavetti and Levinthal, 2000).

However, significant shifts in organisational cognition in general (and in beliefs in particular) as a

result of experience are generally difficult to achieve (Mezias et al., 2001; Tripsas and Gavetti,
2000). The ‘old’ beliefs need first to be disproved before new experiences are accepted and new

2
The model has been built using a systems dynamics approach, specifically the STELLA software programme (Stella ®
High Performance Systems, Inc.).

3
beliefs are built. In particular, before a change in belief can be initiated in a business organisation,
a ‘signal’ needs to be recognised or interpreted as evidence of a novel situation, in response to
which the existing corresponding firm’s routines/beliefs are considered inappropriate, inaccurate or
ineffective.

The recognition or interpretation of signals is not easy either. Reality is not experienced by
organisations in an ‘objective’ way, but it is interpreted or perceived according to certain frames of
reference. Organisations - or the decision makers in them3 ‘filter’ their experience to interpret
reality. So it is the perceptions of experienced reality (the way that reality is interpreted) that is
going to shape the beliefs of the organisation. It has to be noted that belief also has an influence on
the way reality is perceived since organisations tend to generalise or perceive reality to fit into the
beliefs they hold about the events taking place in their environment. The following table presents
the main characteristics of perceptions and beliefs

Perceptions Beliefs
- Directly reflects experience; based on - Determined by experience, building up over
current information environments; bound up time; based on past information
in time/place environments; crossing time/place
- Exist at a more superficial level –being - Exist at a deep level–being often implicit
more easily discussed among actors and taken-for-granted
- Trigger or hamper adaptation; spurring - Enable and constrain perceptions & actions
cognitive change or cognitive stability
Key features of perceptions and beliefs. Source: Intelligent Adaptation (Dijksterhuis, 2003)

Interpretations of experience depend on the frames of reference within which that experience is
understood (Daft and Weick, 1984), and there is generally a resistance to drawing conclusions that
challenge these frames of reference. Hence, organisational myths, beliefs and paradigms are
maintained, often in the face of considerable counter-evidence (Berkhout et al, 2004). 4 In general,
evidence derived from experience is more likely to be ‘recognised’ the more frequent,
unambiguous and salient it is to an organisation. Research has identified a range of reasons why
evidence from experience may fail to be recognised and interpreted as significant. These include
scarcity of evidence, blindness to evidence, and uncertainty in assessing the relevance of evidence
(Levitt and March, 1988).

These reasons acquire even more relevance for the case of climate change signals. As Berkhout et
al (2004) argue any of the characteristic signals and mechanisms that play a role in organisational
change are attenuated with regard to changes that may be made in response to climate change
stimuli. Direct signals of climate change can be perceived as specific/isolated ‘weather signals’
rather than being interpreted as indications of a wider phenomenon of climate change. In addition,
quite often little or no interpretation is done to better understand the causes of these signals or
impacts. For example, the authors, in their analysis for the housing and water sectors, claim that,
while most organisations were aware that the global climate is expected to change, direct signals of
climate change experienced in businesses activities and performance were rare and tended to be
hard to interpret. One of the water companies they interviewed reported some changes in their

3
We are considering that changes in the beliefs of the decision makers in the organisation are going to cause changes of
the same nature in the beliefs that the organisation holds as a whole.
4
The fact that beliefs need strong evidence to be changed is also related to the concept of organisational inertia
within the evolutionary approach (see for example, Metcalfe, 1997).

4
business due to ‘weather change’, but its technical director was unsure whether these could be
attributed to climate change. Another company had experienced severe flood damage to one of its
new developments in the winter 2000/2001. This was taken as a signal of higher risks of riverine
flooding in the future, but little thought was given to the causes of this trend.

Within this conceptual framework, organisational experience of indirect signals of climate change
(mediated experience of climate change related events) also plays a role in the formation of the
belief in climate change of an organisation. Indeed, even if an organisation is not receiving any
direct evidence of climate change (e.g. it is not experiencing weather related events), it can observe
or experience indirect signals/indicators that climate change could actually be occurring, such as
changes in government policies and regulations on climate change, increases in the number of
science reports on the issue, increased interest in the media, etc… These indirect signals tend to be
based on scientific assessments, which are translated into news, best practice guidance or new and
revised regulatory standards. In these cases, the interpretive work is generally done by a third party
with the signal translated into a more accessible form. These third parties can be trade bodies,
industrial research organisations, government departments... (Berkhout et al, 2004).

In our model we have incorporated both direct and indirect signals of climate change in an attempt
to explore their combined effect on the dynamics of the belief in climate change of a business
organisation. The specific characteristics of the incumbent organisation (such as specific
organisational structure, past trends in profits, management culture, etc.) and the particular socio-
economic and geographic environment in which it is embedded play a fundamental role in shaping
the process of belief formation. Therefore, the model has been built so as to represent the formation
of belief for a particular business type, in a specific sector and in relation to weather events to
which the organisation experiences a certain level of sensitivity. However, it is possible to adjust
the relevant parameters in order to reflect alternative cases for different types of businesses
(sectors, management culture …) with corresponding sensitivity to various weather events. The
following sections present a detailed description of the model.

5
 Direct Experience- Events
Direct Signals – Current Impacts
st
1 Order Impacts
Temperature Impacts on profits (3rd Order Perceived Experience
Precipitation Impacts)
Storms Direct Costs- Activities Disruption 'Climate Change
Indirect Costs – Insurance, Adaptation… Detection' – interpretation of
System level change costs – Regulatory, the direct experience as climate
2nd Order Impacts legislative … change related or not.
Flood
Droughts

Belief in Climate
Change
Perceptions of future
impacts
Indirect Experience Perceptions of gains
Potential Opportunities
Government regulations and policies,
Science, Media, Technical Interpretation
of Climate Change Scenarios
Perceptions of losses
Potential impacts on profits from
future events

Changes in Vulnerability Belief in

Anthropogenic
Negative feedback Climate
ACTION
Changes in Adaptive Capacity Change
Positive feedback Changes in belief in CC (when sufficiently significant) will trigger organisational
action aimed to increase adaptive capacity (i.e. to reduce vulnerability).

Figure 1- Conceptual outline of the model: Relationship between Direct and Indirect Experience and Belief Formation

6
3. Description of the model
As we have outlined in the preceding section, in building the model we have considered that the
dynamics of the belief in climate change (CC) of a business organisation is shaped by the
perceived experience of climate related events by the organisation. In particular, we have
hypothesised that the main factors driving the dynamics of belief in climate change of the business
are the (direct and indirect) perceived experience of weather related events that could lead to actual
and potential changes in its competitiveness level. We have operationalised this hypothesis in the
model as follows (see figure 2).

Direct Experience Effect

Belief in Climate Change

Actual impacts
effect Weather event
Weather event
effect
Effect of direct
Climate Change
experience on belief
~ Attribution convertor
Direct exp effect
CC attribution
weight

Belief in CC Belief in ACC Belief ACC

Total effect

belief in CC in Human attribution belief in acc out

Effect of indirect
experience on belief
~
Belief in
belief in CC out

Indirect exp effect

weight

Indirect Experience Effect

Figure 2 - Effect of direct and indirect experience on the dynamics of belief in climate change

Belief in climate change is represented in the model through the variable stock Belief in CC. In
particular, we have defined belief as an index/scaled variable that takes values between 0 and 100. 5
The value 0 represents the case in which the business does not believe that climate change is
occurring, and the value 100 represents the case in which the business believes 100 % that climate
change is occurring. Values between these two extremes, i.e. values of magnitude m, with 0< m
<100, represent the cases in which the organisation believes m % that climate change is occurring -
the magnitude of m indicating the 'strength' of the belief. For example, if Belief in CC = 50, this
means that the business believes 50% that climate change is occurring.

Effect of Direct Experience on the formation of belief

The effect that the direct experience of weather events has on the belief in CC of the organisation is
represented in the model by the variable Effect of direct experience on belief which is a scaled
variable that takes values between 1 and 15. Values close to 1 represent those cases in which the
direct experience of weather events has a small effect on the belief in CC of the organisation, and
values close to 15 indicate those cases in which this experience has a strong effect on belief. The

5
We consider that this is an adequate way of representing the notion of belief quantitatively, and that it is also a
convenient measure to carry out surveys in the future for model validation purposes.

7
variable is defined in the model as the combination of two different influences or effects
represented by the variables Actual impacts effect and Weather event effect.

The variable Actual impacts effect represents the effect on belief of actual reductions in the
competitiveness level of the business as a consequence of impacts from weather events. The
variable Weather event effect represents the effect that the direct experience of weather events has
on belief in CC irrespective of whether the impacts of the events lead to a reduction on the
competitiveness level of the business or not. To divide the direct experience of the organisation in
these two effects allows the model to represent the case in which the actual impacts of weather
events are not significant enough to affect the competitiveness level of the business, however the
events causing these impacts are frequent and significant enough to be noticed by the organisation,
and therefore to affect belief to a certain extent.

Effect of Indirect Experience on belief

The effect of mediated or indirect experience of weather events on belief in CC is represented in
the model by the variable Effect of indirect experience on belief. This variable represents the
influence on belief of expected or anticipated impacts on the competitiveness level of the business
as a consequence of potential future weather related events. As we have indicated in the
introduction, the perceptions of anticipated impacts, which ultimately will have an effect on belief,
are formed by the organisation through the experience of indirect indicators or signals of climate
change (such as changes in government policies and regulations, increases in the numbers of
science reports on the issue, increased interest in the media, etc). Effect of indirect experience on
belief is defined as a scaled variable that takes values between 1 and 10, with low values (close to
1) indicating a small effect of indirect experience on belief and high values (close to 10) indicating
a strong effect.

Total Experience Effect on belief

The variable Total effect (see figure 2) represents the combined effect of the two aforementioned
factors (direct and indirect experience) on belief for every time period. The relevance of each factor
in the calculation of the total effect on belief will depend on the kind of business organisation under
analysis. In the current version of the model, for the sake of simplicity, we are assuming that both
effects have the same relevance on the formation of the belief of the organisation (the value of the
variables Direct exp effect weight and Indirect exp effect weight equals to 1). However, the model
allows the possibility to assign different weights to each factor to show their different influence on
belief accordingly. We have also assumed that experiencing weather events with small or no
impacts on the competitiveness of the business (represented by the variable Weather event effect)
has a weaker influence in the shaping of its belief in CC. Thus, we have set its scale of values from
0 to 5 in order to make its contribution to the total effect less relevant in relative terms.

To define the total effect of experience on belief in this way, i.e. as the sum of two separate
effects as outlined above, allows us to represent a large range of climate change related
scenarios that an organisation can experience over time, and to explore the way in which the
interpretation that the organisation makes of this experience shapes its belief in CC. For
instance, the model allows us to represent the case in which an organisation is not
experiencing any weather events (Effect of direct experience on belief = 0) so that belief will
only be influenced by the perception of anticipated impacts from future weather events (Effect
of indirect experience on belief >0). The model also allows the user to explore the dynamics
of belief in those cases in which the organisation is experiencing weather events whose
impacts are not causing changes in its competitiveness level (Weather event effect = 0) so that
the direct experience of events will have a limited effect on belief, and the main driver will be

8
again the perception of anticipated impacts. It also allows us to represent the case in which
there are no indirect indicators giving rise to perceptions of anticipated impacts (Effect of
indirect experience on belief = 0) and /or direct ones (Effect of direct experience on belief = 0)
so the belief of the organisation is not affected at all. Finally, it is also possible to represent
the case in which both effects are combined to influence the belief’s dynamics (Effect of
indirect experience on belief >0 and Effect of direct experience on belief >0). A subsequent
section of the paper (section 4) includes selected simulations of the model that illustrate the
dynamics of belief in CC for all the aforementioned cases.

Dynamics of the belief in CC of the organisation

At every unit of time (a year in the model), the variable Belief in CC accumulates increases in the
value of belief in CC of the business organisation due to the effects of direct and indirect
experience of weather related events. The model calculates the combined influence of both the
direct and indirect experience of weather events (measured by the variable Total effect) for every
period so that the value of the variable Belief in CC will increase (i.e. the belief in CC will be
reinforced) with the magnitude of the effect of experience in a nonlinear fashion. In other words,
the value of the inflow belief in CC in increases in a nonlinear way with the value of the variable
Total effect (see figures 2 and 3).

Increase in Belief in Climate Change

50

40
Belief in CC in

30

20

10

0
0 10 20
Magnitude of Total Effect of Experience on Belief

Figure 3. Increase of belief in CC as result of the experience of weather related events

Decreases in belief in CC (i.e. decreases in the magnitude of the variable/stock Belief in CC)
are represented in the model by the variable belief in CC out, and they will be caused by a
lack of direct and indirect experience of weather related events by the organisation. That is,
the belief in CC of the organisation will lose strength in absence of weather related (direct and
indirect) experience. As already stated, organisational beliefs are in general difficult to
change, so if belief in CC, due to the accumulation of experience of climate change related
events reaches a certain/high level, a sustained lack of experience of weather related events
will be needed to make the belief lose strength (i.e. to make the value of the stock Belief in
CC decrease). At the moment, the outflow belief in CC out is defined so that the reinforcing
effect of experience on belief at a certain point in time disappears after four time steps. As the
simulations in section 4 show the length of the reinforcing effect of experience on belief can
be also modified to represent alternative cases, and to explore the effect that setting different
values of this parameter has on the dynamics of belief.

9
In order to incorporate the question of climate change attribution in the model, we have defined the
variable Belief in anthropogenic climate change (ACC) (see figures 1 and 2). This variable
represents the organisation’s belief that climate change is occurring and that it is caused by human
activity. We have hypothesised, as an approximation, that part of the belief in CC held by the
organisation can be thought of as the belief that climate change is happening due to natural causes,
and part can be thought of as the belief that climate change is happening as a result of human
activity.

If the organisation believes that climate change is happening, i.e. Belief in CC >0, it is possible that
it believes that climate change is happening as a consequence of natural variation, or as a result of
human activity, or that it is happening as a result of both nature and human activity (it is reasonable
to think that the latter is the most likely to happen). To represent this, we have 'broken down' the
variable Belief in CC into three categories, so that the variable Belief in ACC is defined as a part or
percentage of Belief in CC. Thus, for a positive value of Belief in CC = m (with 0<m<100), a value
of Belief in ACC = 0 represents the case in which the organisation believes that climate change is
exclusively caused by nature. Belief in ACC = m, indicates that the organisation believes that
climate change is exclusively caused by human activity. Finally, Belief in ACC= n with 0< n < m
indicates that the business believes (m-n) percent that climate change is caused by nature, and n
percent that it is due to human activity.

The value of this percentage is established in the model through the variable/convertor Climate
Change Attribution, which represents the perception that the organisation has regarding the causes
of climate change. Therefore, as before, it will vary depending on the particular characteristics of
the business considered and will have to be defined accordingly (and probably determined
empirically through appropriate surveys). For the time being, we have assumed that the
organisation will attribute climate change to human activity if it is experiencing both significant
and frequent weather events. Thus, we have assumed that the magnitude of the percentage or part
of the belief in CC that corresponds to belief in ACC will grow with the magnitude and frequency
of the weather events experienced by the organisation.

The subsequent sections of the paper provide a detailed explanation of the way in which the effects
outlined above have been operationalised in the model to represent the dynamics of the belief in
CC of a business organisation.

3.1 Effect of direct experience on belief in CC

As previously indicated, one of the factors that can trigger changes in the belief in CC of a business
organisation is the direct experience of weather events. However, for this experience to have an
influence on belief, the weather events must have to be first detected by the organisation, and then
perceived or interpreted as climate change related. In principle, it is reasonable to assume that a
business organisation as a whole will notice a weather event through its impacts, and that these
impacts can be measured in terms of the disruption that the event causes in the daily/normal
activities of the organisation (delays in production, in deliveries, etc…). We have also assumed
that, in general, these impacts will lead to an increase in the costs of the business organisation, and
ultimately to reductions in its profits, that is, in its competitiveness level. 6

6
We have quantified the impacts of weather events in terms of costs that are not recoverable through prices, so
that they have a detrimental effect on the profits of the organisation.

10
In order to include every possible weather related costs, we have distinguished in the model three
categories of costs: direct costs, indirect costs and system change costs (see figure 4). 7

Frequency of
Magnitude
the event
of the event

Weather event
coverage %
Adaptation costs
Vulnerability
convertor
Insurance coverage
Insurance costs

~
Indirect climate Vulnerability
Impact Costs Direct Costs
related costs

Total climate
related costs

~
System level
change costs

Figure 4. Weather related costs

Direct costs, represented in the model through the variable Direct Costs, are those costs that arise
as a consequence of the disruption in the normal business activities due to the occurrence of
weather events. These costs will vary depending on the characteristics of the event (frequency and
magnitude) and on the vulnerability of the business in relation to that particular event. In the model,
we have hypothesised that the direct costs due to weather events increase in a nonlinear fashion
with the frequency and magnitude of the events and with the vulnerability of the business to them.

The occurrence of weather events is operationalised in the model through the variable Weather
event. This variable represents any climate change related event (precipitation, storm, flood,
drought…) that can affect the business organisation at a certain point of time. Its value is defined
through a PULSE function. This function generates a pulse input of a specified size (magnitude),
allowing to set the time at which the pulse first fires as well as the interval between subsequent
pulses (frequency). Each time a pulse is triggered, the model inputs the specified size over a period
of one time unit (in our case one year).

The size of the PULSE function in the variable Weather event represents the magnitude/strength of
the weather event in terms of how significant its impacts are on the organisation. Its value can be
constant or change over time. For simulation purposes, we have set this value to vary between 1
and 10: values close to 1 represent very mild events, that is, events that do not cause too much

7
All the variables representing costs, as well as those representing profit margins, are defined in the model as net
percentages of turnover/sales.

11
disruption in the normal activities of the business, and values close to 10 represent very strong and
disruptive weather events. The second argument of the PULSE function corresponds to the
frequency with which the event takes place. It can also be defined as a constant or it can take a
value that changes over time.

The Vulnerability of the organisation to the weather event (i.e. the degree to which the business is
susceptible to, or unable to cope with, the adverse effects of the event) is measured in the model
through a scale (from 1- low vulnerability to 10- high vulnerability), and its value is determined by
the adaptive capacity and the sensitivity of the organisation to that particular event (we explain how
these variables are operationalised in a subsequent section).

We have assumed that the business has an insurance policy that will partially cover the direct costs
caused by the occurrence of weather events. Therefore, the net direct costs that the organisation
will experience as a result of the weather event (represented in the model by the variable Impact
Costs) will be the difference between the Direct costs (as defined before) and the coverage
provided by the insurance policy of the business (defined in the model through the variable
Insurance coverage).

The category Indirect costs, represented by the variable Indirect climate related costs, includes the
costs associated with the organisation’s insurance policy (Insurance costs), and the costs that
would arise as a result of increases in the adaptive capacity of the organisation (Adaptation costs).
Finally, the variable System level change costs represents the category we have termed System
level change costs, and includes the costs that arise a consequence of changes in climate change
related regulations, fees, charges, etc.

As already indicated, not every impact experienced by the organisation as a result of weather
events will have an effect on its belief in CC. Put differently, not every reduction in the business’
profits as a consequence of costs derived from weather events will influence the belief in CC of the
organisation. Before a change in belief can be initiated, a ‘signal’ needs first to be detected, and
then recognised or perceived by the organisation as evidence of a novel situation, in response to
which the corresponding existing belief will be questioned and ultimately changed. That is, the
impacts of a weather event (the reduction in profits it causes) have first to be detected and then
recognised or perceived by the organisation as climate change related for the experience of the
event to have an influence on its belief in CC.

We have hypothesised that for an impact to be detected and considered as an indicator of climate
change by the organisation, it must have a significant magnitude. In particular, we have assumed
that only significant reductions (over a certain threshold) in profits as a consequence of weather
events will be perceived as climate change related by the organisation, and thus considered as
‘signals’ that climate change could be occurring. That is, only the experience of significant
reductions of the organisation’s profits will be interpreted as climate change related, and hence will
have an influence on its belief in CC.

To formulate this hypothesis we have drawn on one the core ideas regarding organisational
adaptation and change within the evolutionary approach. In particular, the hypothesis is based on
the idea that the routines/beliefs of a business organisation, despite having a relative durable quality
through time, can be changed through managerial or other action according to the 'satisfying
principle', i.e., when the business' profits are below a satisfactory or a certain aspiration level
(Winter, 1971). The satisfying principle refers to Herbert Simon's idea that business organisations

12
attempt to obtain satisfactory minima, rather than optimising, in their behaviour (Hodgson 1998, p.
43).

In the current version of the model (see figure 5), we have considered that the belief in CC of the
organisation will be influenced by two types of signals -defined in relation to two kinds of profit's
aspiration levels:

1. significant (over a threshold) decreases in the profit margin of the organisation in relation to the
previous year’s profit as a consequence of climate events, and
2. significant (over a threshold) decreases in the profit margin of the organisation in relation to the
average profit of the industry to which the organisation belongs, due to climate events.

Previous year
~ net profit margin after
impacts
Net profit margin
before impacts

Net profit margin

after impacts
Impacts on
profits
Impacts on profit
Industry average threshold
profit
Profit decreases
from industry average Profits decreases from
detection previous year detection

ind in
ind out

profit dec in profit dec out

Decreases under industry Decreases under previous
average threshold acc year's profit threshold acc

Decreases industry
average Decreases
previous year's profit

Effect of cc related
~ impacts
Industry average ~
weight Previous year's profit
weight

Belief CC Actual impacts

delayed effect

Figure 5. Effect on direct experience on belief in CC

We consider that the reductions in profits over certain thresholds as a consequence of impacts from
weather events8 as defined above constitute good indicators/warning signs for the organisation that
‘something is going on’ and that climate change could actually be occurring. In addition, they
provide respectively external and internal points of reference for the organisation to detect the
occurrence of a novel situation. The value of the net profit margin from the previous years

8
Reductions in profits due to causes not related to weather events, such as those arising from general economic
conditions (market conditions, cyclical fluctuations…), and from particular conditions related to the business
organisation (bad performance, bad luck… ) are already included in the value of the variable Net profit margin
before impacts (see figure 5).

13
represents the level of profit that has been ‘historically’ considered as good or normal for the
continued existence/survival of the organisation in the long term. Significant deviations from this
target due to the occurrence of climate events will alert the organisation that something has
changed in relation to the climate and it is necessary to ‘review’ its belief about the issue. The
industry average profits, representing to some extent the organisation’s immediate environment,
gives an approximate indication of how other businesses in the same sector or industry are
performing. Thus, it allows the organisation to asses its competitiveness level or market position in
relation to its competitors. Significant reductions in profits due to climate events that make the
market position of the organisation deviate from what is ‘normal’ will also alert the organisation
and make it question its belief in CC.

Profit Decreases from Previous Year due to Weather Events

Profit Margin

Decreases due to weather events Company Company

not perceived as climate change Profit Margin Profit Margin

Company Profit
Margin(t-1)–10%

Decreases due to weather events

perceived as climate change related

Time
Figure 6. Profit Decreases from Previous Year due to Weather Events

Profit Decreases from Industry Average due to Weather Events

Profit Margin

Decreases due to weather events not Company

perceived as climate change related Profit Margin

Industry
Average Profit

Industry Average
Profit Margin (–10%)
Decreases due to weather events
perceived as climate change related

Time
Figure 7. Profit Decreases from Industry Average due to Weather Events

14
The values of these thresholds (represented in the model by the variables Impacts on profits
threshold and Industry average profit respectively) will vary depending on the type of business and
the historical trend/evolution of its profits over time. For the time being, we have considered as
significant those reductions in profits that are over a 10 % of the value of previous year’s profit
margin, and over a 10% of the industry average profit margin (see figures 6 and 7). It should be
noted, however, that these values can be easily modified to adapt to different types of business
characteristics accordingly.

Considering the effect of these two types of signals on the belief in CC of the organisation
allows the model to represent a larger range of cases. As the selected simulations in section 4
show the model allows us to explore the dynamics of belief in CC for the case in which
reductions in profits due to weather events make the level of profit decrease below the
industry average threshold, but are not significant enough to reduce its value below the
previous year’s profit threshold. These reductions will still be noticed and considered climate
change related by the organisation, and hence will have an effect on belief. Like wise, the
model also allows to explore the case in which the reductions in profits due to weather events
do not affect the market/competitive position of the organisation, but make its profit decrease
significantly from one year to the next. Again these reductions will be considered as climate
change signals by the organisation and will have an effect on its belief. Finally, it is also
possible to represent those cases in which both types of signals take place, i.e. the level of
profit of the organisation decreases below both thresholds as a consequence of weather
events, so that the effect on belief will be even more significant (see figure 8).

Combined Profit Decreases due to Weather Events

Profit Margin (%)

Company Profit
Margin

Company Profit
Margin (t-1) –10%

Industry Average
Profit Margin (–10%)
Combined profit decreases due to weather
events perceived as climate change related

Time

Figure 8. Combined Profit Decreases due to Weather Events

In principle, we have assumed that both types of signals have the same relevance in
determining the effect of their experience on the organisation’s belief. As before, it is possible
to assign a different weight/significance to each signal in the formation of the belief to
represent the case in which the business places different attention or has a different level of
concern in relation to the two climate change related signals.

15
The reductions in profits due to weather events not only have to be significant in magnitude as
described above, but have also to occur with certain frequency to have an influence on belief.
Sporadic reductions in profits will be in general more susceptible of being counteracted, and will
be more easily ‘forgotten’ by the organisation, hence their effect on its belief in CC will be quite
limited. It will be the accumulation of significant climate ‘signals’ (profit reductions over the
defined thresholds) that will cause the organisation to question and ultimately change its belief in
CC. This cumulative effect is operationalised in the model through the variables Decreases under
industry average acc and Decreases under previous year profit threshold acc. Both variables are
defined so that the reinforcing effect of a signal on belief at a certain point in time disappears or is
‘forgotten’ by the organisation after four time steps. Thus, the more frequent the occurrence of
climate signals, the higher the magnitude of both variables and hence the more significant the
influence of the signals on belief.

In addition, the higher the magnitude of the accumulated decreases in profits due to weather events,
that is, the ‘more salient’ the signals are for the organisation, the more significant their effect on its
belief in CC. This effect is represented in the model through the variables Industry average weight
and Previous year’s profit weight. We have assumed that the effect of the occurrence of both
signals (accumulated profit reductions) on the belief in CC of the organisation increases with the
magnitude of the signals in a non linear way as shown in figure 9.
Previous year's profit
Industry signal weight

0,5 0.5
signal weight

0,4 0.4

0,3 0.3

0,2 0.2

0,1 0.1

0 0
0 10 20 30 40 50 60 70 80 90 100 0 10 20 30 40 50 60 70 80 90 100

Accumulated profit decreases Accumulated profits decreases

Figure 9. Nonlinear effect of the magnitude of accumulated profit decreases on belief in CC

Finally, we have considered two additional influences in our operationalisation of the effect of the
direct experience on an organisation’s belief in CC. These are intrinsically related to the distinctive
features that characterise the dynamics of organisational beliefs. As we have indicated in the
introduction, the beliefs that a business organisation holds constitute the basis for organisational
action, and shape the way the organisation interprets or perceives the reality it experiences. These
two fundamental characteristics of beliefs have the following implications.

First, the fact that in general beliefs shape the perceptions of an organisation means that the
magnitude of its belief in CC will have an influence in the way it perceives the occurrence of
weather related events and their impacts. In particular, the effect that the detected climate related
signals has on the belief in CC of the organisation will be higher, the higher the value of the belief
in CC at the time at which these signals are perceived. In other words, increases in the magnitude
of the belief as a consequence of the direct experience of impacts from weather events will cause
further increases in the value of the belief in CC in the future. In the model, this ‘reinforcing’
influence of belief on itself is represented through a positive feedback in its dynamics as shown in
figure 10.

16
 E ffect of direct
E xperience experience on belief
eff ect

Bel ief in CC
delayed

Posi tive feedback

Bel ief in CC

Figure 10. Positive feedback in the dynamics of belief

Second, the fact that organisational beliefs constitute the basis for organisational action means that
significant increases in the belief in CC of a business organisation, as a consequence of the
experience of weather events, can trigger some kind of action on the part of the organisation9 that
results in an increase in its adaptive capacity, and a consequent reduction in its vulnerability to
these events. Reductions in vulnerability will in turn diminish the impacts of future weather related
events on the organisation, and thus the impetus for further increases in belief. In the model, this
‘weakening’ influence of belief on itself is defined through a negative feedback in its dynamics as
shown in figure 11.

Belie f in C C Belie f in AC C

Vulne rability

N egative feedback

AC inc rease

Belie f in AC C
delay ed

Figure 11. Negative feedback in the dynamics of belief

The extent to which this negative feedback affects the dynamics of the belief in CC will depend on
the vulnerability and adaptive capacity of the organisation. In the following section, we describe
the way in which these two concepts have been operationalised in the model.

9
In the current version of the model, we have assumed that the organisation will take action directed to increase its
adaptive capacity in relation to climate related events when its belief in anthropogenic climate change (Aclimate change)
reaches a significant value. That is, when it believes that climate change is occurring and it is caused mainly by human
activity. The reason behind this hypothesis is that we think that the organisation will consider that nothing can be done
to counteract the effects of climate change if it is exclusively caused by something as capricious as nature.

17
3.1.1 Vulnerability and Adaptive Capacity
As O’Brien et al (2004) point out, two main competing interpretations of vulnerability can be
found in the climate change literature. One interpretation, which they term the “starting point
approach”, views the vulnerability of a system (natural or social) as the determinant of the system’s
adaptive capacity. The second interpretation takes vulnerability of a system as an “end point” and
considers that the climate change vulnerability of a system is a function of the sensitivity and the
adaptive capacity of the system. For the sake of simplicity and for modelling purposes, in this
work, we have adopted the second interpretation10, that is, we have defined the vulnerability of an
organisation as a function of its sensitivity and adaptive capacity. Furthermore, this is also the view
taken by the IPCC Third Assessment Report (McCarthy et al, 2001). Within this view,
vulnerability is defined as the degree to which a system (a business organisation in our case) is
susceptible to, or unable to cope with, adverse effects of climate change. It is considered to be a
function of the character, magnitude, and rate of climate variation to which a system is exposed, its
sensitivity, and its adaptive capacity.

As we have indicated in a previous section, the vulnerability of the business organisation is

represented in the model through the variable Vulnerability. It takes values from 1 (low
vulnerability) to 10 (high vulnerability), and it is calculated as a function of the sensitivity and the
adaptive capacity of the organisation (see figure 12).

Vu ln erabilit y

~
AC con vertor

Se nsitivity
Ad aptive Ca pacity

AC ap in AC ap ou t

Ad apta tion re sult

AC in
con vertor Be lief in AC C
de la yed

AC increa se

Figure 12. Vulnerability, sensitivity and adaptive capacity

Sensitivity is the degree to which a system (a business organisation) is affected, either adversely or
beneficially, by climate-related stimuli. Climate-related stimuli encompass all the elements of
climate change, including mean climate characteristics, climate variability, and the frequency and
magnitude of extremes. Sensitivity is defined in the model through the variable Sensitivity, which is
again a scaled variable that takes values from 1 (indicating low sensitivity) to 5 (indicating high
sensitivity).
10
It is outside the scope of this paper to discus the appropriateness of these two definitions of the concept. For an
extensive discussion on the subject see O’Brien et al (2004).

18
Adaptive Capacity is the ability of the business organisation to adjust to climate change, to
moderate potential damages, to take advantage of opportunities, or to cope with the consequences.
As in the case of the concept of vulnerability, there are several conflicting definitions of the
concept of adaptive capacity in the climate change literature. As Berkhout et al (2004) indicate,
despite the fact that a substantial body of literature has been developed on adaptation and related
concepts such as adaptive capacity (see, for example, Easterling et al., 1993; Burton, 1996;
Downing et al., 1996; Yohe et al., 1996; Tol et al., 1998; McCarthy et al., 2001; Yohe and Tol,
2002) progress towards the achievement of a generally accepted theoretical understanding of
adaptation has been generally slow. It could be said that a coherent conceptual framework or a
clear research agenda has not yet been generated (Berkhout et al, 2004, p.3). We have drawn on
this literature in order to operationalise in our model the concept of adaptive capacity of a business
organisation in the context of climate change. In particular, we have based our analysis on the
works carried out by Berkhout et al (2004) and (Yohe and Tol, 2002).

Following the approach of Berkhout et al (2004), in our operationalisation of the concept of

adaptive capacity, we have taken an organisation-centred perspective of adaptation, and considered
climatic stimuli as one among many drivers for change that a business organisation will face.11 To
quantify the adaptive capacity of the business organisation, we have followed Yohe and Tol
(2002). As Metzger et al (2004) state, Yohe and Tol (2002) is the only work that so far has made
an attempt at quantifying the adaptive capacity of a system. Their analysis presents a quantification
of the adaptive capacity of a system based on observations of past hazard events. Their method is
designed to assess the potential contributions of various adaptation options to improving a system’s
coping ability by focusing attention directly on the underlying determinants of adaptive capacity. It
constitutes a flexible approach that permits to accommodate diverse applications, and it produces
unitless indicators that can be employed to judge the vulnerabilities of diverse systems to multiple
climate related stresses. Following the same approach, for the case in which the system is a
business organisation, we have represented the adaptive capacity to climate change of an
organisation and its dynamics in terms of the characteristics (feasibility and efficacy) of its set of
available adaptation options as follows.

The determinants of the adaptive capacity of an organisation include a variety of system, sector,
and location specific characteristics that are related to both its ‘resources’ and ‘competences’ and to
external contextual factors (cf. McCarthy et al, 2001 and Berkhout et al, 2004 ). These are:

1. The range of available options for adaptation (commercial, financial, organisational and
technological).
2. The availability of resources and their distribution.
3. The institutional framework in which the organisation operates.
4. The stock of human capital (knowledge- skills, capabilities…).
5. The stock of social capital (network interactions).
6. The ability of the decision-makers of the organisation to manage information, the processes
by which these decision-makers determine which information is credible, the management
culture…
7. The degree of uncertainty in the organisation’s environment.

11
As the authors state, this contrasts with much climate-related literature on adaptation that takes as its starting
point climate stimuli (cf. Burton, 1997; Reilly and Schimmelpfennig, 2000) to analyse adaptation processes in
the context of climate change.

19
Algebraically

AC = AC { D1; … ; D7 } (1)

where (D1,…,D7) represent the determinants of adaptive capacity listed above.

The range of available options for adaptation (D1) defines the ‘adaptation space’ of a given
organisation. The adaptation space includes well-established options, as well as options that are
novel and not yet fully explored. In addition, it is a dynamic space since it changes and grows as
new options are generated, and as existing ones are not used and/or replaced. In principle, the
higher the number of available adaptation options for the organisation to cope with the impacts of
climate change events, the higher its adaptive capacity.

For any adaptation option (j) identified in D1, it is possible to define a feasibility factor:

FFj = min{ffj(2), … ffj(7)} j=1, …m. (2)

where the ffj(i), with i= 2,…, 7, indicate judgements about the strength or weakness of the
adaptation option (j) in relation to the underlying determinants of adaptive capacity (i), and m
represents the number of available adaptation options of the organisation.

This feasibility factor represents the feasibility of each adaptation option in terms of how viable its
implementation is in general. It can be thought of as a measure of the ability of the organisation in
implementing a particular adaptation option. Each feasibility factor is defined as an index number
that is judged to reflect the strength or weakness of a specific adaptation option (j) in relation to
each of the determinants of its adaptive capacity (i) - see equations 1 and 2.

The values ffj (i) associated with the feasibility factor of an adaptation option (j) are subjective
values assigned from a range between 0 and 5 according to a systematic consideration (by
assessors or experts) of the degree to which each determinant of adaptive capacity would help or
impede the implementation of that particular option. A low value in ffj(i), i.e. in the feasibility
factor of an adaptation option (j) corresponding to the specific determinant of adaptive capacity (i),
would indicate the existence of a significant shortcoming in the necessary preconditions in relation
to that specific determinant (i) for implementing this particular option (j). A high feasibility factor
indicates the opposite situation: assessors in this case would be reasonably confident in their
judgement that the preconditions for the implementation of an adaptation option (j) in relation to a
specific determinant (i) could and would be satisfied.

For instance, a high value (close to 5) of the feasibility factor ffj (2), related to the availability of
resources and their distribution (D2), will indicate that the organisation possesses enough and well
distributed resources to facilitate the implementation of its adaptation option (j). A low value for
the factor ffj(2) (close to 0) will indicate the opposite situation. Similarly, a low value of the factor
ffj (3) corresponding to the determinant of adaptive capacity D3 (institutional framework - market
and regulatory context within which the organisation operates) will reflect the existence of strong
institutional constraints that limit the ability of the organisation to put into practice its adaptation
option (j). A high value for this factor will imply that the institutional framework of the
organisation offers more effective institutional arrangements and favours or enables the

20
implementation of that particular option. The same reasoning applies for every value of each
feasibility factor.

The set of values assigned to each individual feasibility factor will be different depending on the
business organisation under analysis. Those values that are assigned based on determinants of
adaptive capacity related to external or contextual factors (such as institutional framework and
uncertainty) are not so susceptible of being influenced by the organisation. They will change over
time depending on how dynamic or stationary the environment in which the organisation is
immersed in is. Those values that are assigned based on determinants of adaptive capacity
corresponding to the resources or competences of the organisation (such as the stock of human
capital and the distribution of available resources) will be more easily influenced or changed as a
result of organisational action.

For any adaptation option (j) identified in D1, it is also possible to define an efficacy factor {EFj}.
The efficacy factor of an adaptation option represents the ability of that particular option to actually
influence (when implemented) the organisation’s ability to respond to climate change related
stresses. This efficacy factor is also a subjective number assigned from a range between 0 and 1
that will reflect the likelihood that any adaptation option performs as expected. It will take a value
close to 0 when this probability is low and close to 1 if it is high. In this sense, the variable reflects
to a certain extent the level of uncertainty involved in the implementation of adaptation options.

The potential coping capacity of an adaptation option (j) can then be calculated as

PCCj = {{EFj }{FFj }} j=1, …m. (3)

so that an overall adaptive capacity index across all possible options can be defined as

AC = CCI = max {PCC1 , …, PCCm} (4)

The value of the adaptive capacity of the organisation (AC) is calculated in this way for every time
step (every year), and represented in the model by the variable stock Adaptive Capacity (see figure
12). This value together with the value of the variable Sensitivity (as defined earlier) will determine
the value of the Vulnerability of the business organisation for every time step. Any change in the
values of these two variables will cause consequent changes in the value of the vulnerability of the
organisation. For the time being, we have assumed that the value of the variable Sensitivity remains
constant over time so that different values, representing different degrees of sensitivity of the
organisation to a particular weather event, are introduced for different simulations of the model in
an exogenous way. It is possible, however, to make its value dependent on time. Changes in the
value of the variable Adaptive Capacity will be originated from several sources.

In the first place, Adaptive Capacity can be modified as a result of changes in the values of both the
feasibility and efficacy factors of the available adaptation options defined above. These changes
will take place as a consequence of variations in the determinants of adaptive capacity. As we have
pointed out previously, the values of the feasibility factors that correspond to determinants of
adaptive capacity related to the resources and competences of the organisation are in principle
susceptible of being modified by organisational action. That is, they can be modified as a result of
the actions taken by the organisation aimed to enhance its adaptive capacity. For example, the
business could decide to dedicate additional investment for the training of its staff in order to
improve its skills and capabilities in relation to climate related issues. This could result in an

21
increase of the feasibility factors ffj(4) and ffj(6), and thus in the value of its adaptive capacity. In
addition, the organisation can increase its ‘adaptation space’ (its range of available adaptation
options), and hence its adaptive capacity, through the creation of novel adaptation options. 12

The variable AC increase (see figure 12) represents any increase in the value of the adaptive
capacity of the business as a result of both 'favourable' changes in the external environment of the
organisation and successful organisational action. We have also included the variable Adaptation
result convertor to represent possible reductions in the value of the increases in adaptive capacity
due to ‘bad luck’.13 As we have already stated, in principle, the organisation will take action
directed to increase its adaptive capacity when its belief in ACC reaches a significant value. This
way, successful increases in the value of adaptive capacity (i.e. those involving subsequent
reductions in vulnerability) will reduce the negative impacts of future climate events, and thus the
impetus for further increases in belief (negative feedback - see figure 11). Possible decreases in the
adaptive capacity of the organisation (and the subsequent increases in its vulnerability) are also
considered in the model through the outflow adaptive capacity out. This outflow represents
reductions in the magnitude of the variable Adaptive Capacity due to obsolesce of the available
adaptation options as time goes by.

As indicated in the introductory sections, the experience of indirect climate change related signals
by the organisation constitutes another main factor driving the dynamics of its belief in CC. The
following section provides a more detailed explanation of this effect.

3.2 Effect of indirect experience on belief in CC

In this section, we describe the way in which the effect of the experience of indirect climate signals
on the belief in CC of the organisation is operationalised in the model. This effect represents the
influence of the perceptions of anticipated potential losses and/or gains in competitiveness of the
business organisation as a result of future climate change related events.

As we have already pointed out, another fundamental hypothesis of our model is that the dynamics
of the belief in CC of a business organisation is also determined or shaped by the perceptions of
anticipated changes on its competitiveness level due to potential impacts of future climate related
events. Indeed, we consider that even if the organisation is not experiencing the impacts of weather
events in a direct way, its belief in CC will be affected through the experience of indirect climate
change related signals from its environment that indicate that climate change could actually be
occurring, and therefore, impacts from weather events could affect its level of competitiveness at
some point in the future.

Indirect signals in our model are understood, in a wide sense, as any climate related event that takes
place in the organisation’s environment that the organisation can interpret as an indicator that
climate change could be actually occurring. In particular, we have assumed that the organisation

12
The Appendix includes several scenarios representing a variety of possible changes in adaptive capacity that have
been used in the simulations of the model.
13
The effect of unforeseen factors in the execution of actions by the organisation, in relation to both the
implementation of existing options and its attempts to increase its adaptive capacity, are already incorporated in
the model through the efficacy factors defined for the available adaptation options and through the determinant
of adaptive capacity that corresponds to the degree of uncertainty in the organisation’s environment.

22
will form its perceptions of potential gains/losses in competitiveness as a result of climate related
events ‘observing’ the following signals:14 (see figure 13)

1) Government regulations and policies in relation to climate change. These could indicate a
certain level of concern on the part of the government institutions on climate change related
issues. In the model, this indicator is represented by the variable Government ‘behaviour’,
which is defined as a scaled time-dependent variable that takes values from 1 to 5. Values
of the variable close to 1, at a given period, indicate the existence of few policies or
regulations aimed to deal with climate change issues for that period. Values close to 5 in a
given time period indicate the government is taking action in an active way to deal with
climate change issues (for example, through an increase in fines for non compliance,
implementing more extensive and stricter regulations and policies, etc …).

2) The potential behaviour of customers and potential customers (other organisations and
general public) which we assume will be observed by the organisation through the media,
publications of relevant surveys, climate change related market studies, etc… In the model,
this indicator is represented by the variable Public ‘behaviour’ which is again a scaled
variable that takes values from 1 to 5. Values close to 1 indicate that the public is not
showing a great deal of interest in climate change related issues, i.e. there is no pressure or
strong influence on the organisation in terms of a positive or negative public reaction.
Values close to 5 indicate the opposite, that is, they represent the case in which the public is
showing interest or concern on the issue so that their behaviour could have a positive or
negative effect on the future competitiveness level of the organisation.

3) Scientific reports directed to inform business organisations about climate change issues. In
the model, this indicator is represented by the variable Science reports, and it is also
defined as an index variable that takes values from 1 to 5 over time. Values close to 1, at a
certain point in time, indicate the existence of only a few scientific reports dealing with
issues related to climate change accessible for the organisation at that time, and values
close to 5 indicate the existence of a higher number of technical and scientific reports in
relation to climate change (or a high level of access to them for the organisation).

14
Since at the time of writing we do not have actual data that can be used to represent these indicators, we have
defined them through index/scaled variables that will vary over time as explained below.

23
 ~ Adaptive Capacity
Science reports
governlossweight
sciencegain governgain Vulnerability sciencelossweight
weight weight
~
Indirect indicators 2
Indirect indicators 1 Science reports
~ ~
publicgain Government perceptions
weight 'behaviour' ~
~ of loss weight
~ publiclossweight Government
Public 'behaviour' perceptions of ~
'behaviour'
gains weight Public 'behaviour'
perception of gains perception of loss
convertor convertor
loss perception in
~
gain perception in ~

Perception of potential gain Perception of potential loss

perception of perception of perception of perception of

gain in gain out loss in loss out

Potential gain Potential loss

perceptions perceptions

Loss and gain

perceptions

Perception effect

Effect of perceptions
on belief

Figure 13. Effect of indirect experience on belief in CC

The relative significance of each signal in shaping the perceptions of the organisation will vary
depending on the organisation’s specific characteristics. For the time being, we have considered
that the three signals have the same relevance in the formation of the organisation’s perceptions.
However, it is possible to assign a different relevance to each indicator according to the particular
characteristics of the organisation under consideration.

Contrary to the case of direct signals of climate change related events, we have assumed that
indirect climate signals are easily recognised by the organisation, that is, that they are perceived
somewhat unambiguously as events associated to climate change, and hence as indicators that
climate change could actually be happening. In our view, it is reasonable to think that all the events
outlined above are inherently climate change related, so in principle it does not make sense to
consider that the organisation will attribute their occurrence to other potential causes. 15

As already indicated, the organisation will form its perceptions of possible impacts on its future
competitiveness level based on the experience of these indirect signals. We have considered that
the anticipated impacts from potential future weather events can be perceived by the organisation
as affecting the competitiveness of the organisation in a positive or in a negative way: they can be
perceived by the organisation as competitiveness diminishing (i.e. as involving a potential loss of

15
Previous research on the subject - such as the aforementioned analysis by Berkhout et al (2004)- also support this
assumption.

24
competitiveness), but they can also be perceived as competitiveness enhancing, that is, as a
potential source of opportunities for the organisation to increase its competitiveness level in the
long run – c.f. Porter Hypothesis (Porter and van der Linde, 1995). The formation of both types of
perceptions is represented in the model through the variables Perception of potential loss and
Perception of potential gain respectively (see figure 13).

We have also considered that the higher the magnitude of the variables representing the indirect
signals (i.e. the more reports indicating risks and/or opportunities arising from climate change
effects, the more pressure/or lack of pressure from the public and government, etc…), and the more
frequent their occurrence, the stronger their influence will be on the organisation’s perceptions for
every time period, and hence the higher the effect of the perceptions on the belief in CC of the
organisation.

In addition, the extent to which these signals will affect the perceptions of potential losses and
gains in the competitiveness of the organisation will also depend (in a nonlinear way) on the
perceived vulnerability and adaptive capacity of the organisation respectively.16 In particular, we
have assumed that, for a given time period, the higher the perceived vulnerability of the
organisation, the higher the perceived negative impacts from future climate events will be, and
hence the higher the organisation’s perceptions of potential losses in competitiveness as a
consequence of these impacts. Likewise, for a given time period, the higher the perceived adaptive
capacity of the organisation, the higher the perceived positive impacts from future climate events
will be, and hence the higher the organisation’s perceptions of potential gains in competitiveness as
a consequence of these impacts (see figures 13 and 14). As in the case of the experience of direct
climate related impacts, the perceptions of potential losses/gains in competitiveness of the
organisation will decrease in value (through the outflows perception of loss out/perception of gain
out) as a consequence of the lack of experience of indirect climate change related signals.
Perceptions of losses weight

1
1
Perceptions of gains

0,8
0,8
weight

0,6 0,6

0,4 0,4

0,2 0,2

0 0
0 1 2 3 4 5 6 7 8 9 10 0 1 2 3 4 5
Vulnerability Adaptive capacity

Figure 14. Effect of the perceived vulnerability and adaptive capacity of the organisation on its
perceptions of losses and gains

The effect of the experience of indirect signals on the perceptions of gains and losses of the
organisation accumulates over time in the variables Perception of potential gain and Perception of
potential loss respectively. The combined effect of the accumulated perceptions of indirect signals

16
We are presuming here that the values that the organisation attributes to or perceives in relation to its
vulnerability and its adaptive capacity coincide with the ‘objective values’ of both variables as calculated by the
model.

25
over time on the belief in CC is calculated for every time period through the variable Effect of
perceptions on belief (see figure 14).

Finally, given that beliefs constitute also a factor shaping the perceptions of an organisation, the
effect of the perceptions of competitiveness’ losses and gains of the organisation on its belief in CC
at a given point in time will be influenced (in this case reinforced) by the belief in CC that the
organisation holds at that particular time. In other words, increases in the magnitude of the belief as
a consequence of an increase in the value of the organisation’s perceptions (due to the indirect
experience of climate change related signals) will cause further increases in the value of the belief
in CC in the future. In the model, this ‘reinforcing’ influence of belief on itself is defined through a
positive feedback in its dynamics as shown in figure 15.

Belief in CC ~
delaye d Effec t of perc eptions
on belief

Effec t of indirec t
experien ce on belief

Positiv e feedback
Belief in CC

Figure 15. Positive feedback in the dynamics of belief

4. Dynamics of belief in CC in a business organisation. Simulations results and discussion

In this section, we present the results of some selected simulations of the model that illustrate
the dynamics of belief in CC in a business organisation for different scenarios.

4. 1 Effect of experience of direct signals on belief in CC

The following selected simulations explore the dynamics of the belief in anthropogenic climate
change (ACC) of a business organisation for the case in which the organisation is only
experiencing weather events (i.e. it is only experiencing direct climate change related signals) of
different magnitudes and with different frequencies. In order to represent a fairly general case, in
all the selected simulations, we have set the default or initial value of the adaptive capacity of the
business to the particular weather event to be 2 (i.e. at a medium level on a scale of 1 to 5), and the
sensitivity to the event to be 2 (also at a medium level on a scale of 1 to 5). The level of profits of
the organisation before impacts (measured as a percentage of turnover) oscillates between 11 %
and 14% throughout the 20 year simulation period. The average level of profit of the industry is set
to be 13%, and the weather event initiates at time step 2. In principle, the default ‘memory’ of the
organisation is 4 time steps, that is, the effect that the 'perceived' direct experience of climate events
has on belief remains in the memory of the organisation for 4 years. Since changes in
organisational perceptions as a result of experience occur more easily than corresponding changes

26
in organisational beliefs, in the simulations, the effect of the experience of impacts on perceptions
is set to remain in the memory of the organisation for less time (2 years). The starting value of
belief in CC is 0, that is, we are considering that initially the organisation does not believe that
climate change is occurring.17

Figures 16 and 17 represent the time trajectories of belief in ACC for the cases in which the
business is experiencing a mild weather event (magnitudes =1 and 3 respectively on a scale of 1 to
10) taking place with different frequencies: 1 year (blue line), 3 years (red line), 7 years (pink line),
and 15 years (green line).
Belief ACC: 1 - 2 - 3 - 4 -

1: 100

1: 50

1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4
1: 0
0.00 5.00 10.00 15.00 20.00

Y ears 14:25 29 Sep 2004

Untitled

Figure 16 Belief in ACC (Magnitude of the weather event =1)

As the graphs illustrate, if the weather event does not have a strong magnitude, it will not have a
significant effect on the formation of a belief in CC by the organisation, even for the case in which
it takes place every year (i.e. for Frequency =1). This scenario represents the situation in which the
value of the adaptive capacity (AC) of the business organisation is high enough for it to cope with
the impacts of the weather event so that the subsequent reductions in its level of profits are
negligible. Indeed, during the whole simulation period, the decreases in profits as a result of very
mild weather events are below the relevant thresholds, namely the Industry average profit
convertor and the Impacts on profits threshold. This means that, for the default levels of these
thresholds (13 and 10 respectively), the level of profits of the business do not deviate effectively
from the average profit in the industry and from its normal profits trend. Thus, in this case, the
event is not interpreted as climate change related by the organisation, and its experience does not
have a significant influence in the formation of its belief in ACC. This is reinforced by the fact that
the organisation is not receiving any indirect climate change related signals, as well as by a lack of
a ‘weather effect’ on belief (as defined in previous sections), since this effect is negligible for mild
weather events.

17
These initial values characterise the particular type of business organisation that we have used as a ‘generic
business’ in our simulations. It has to be noted that they can be changed appropriately to undertake the same
analysis for an alternative type of business that has, for instance, a different level of profits, different sensitivity
to the weather event, a management culture that involves a different organisational memory, etc.

27
 Belief ACC: 1 - 2 - 3 - 4 -

1: 100

1: 50

1
1
2 2 3 4
1: 0 1 2 3 4 1 2 3 4 3 4
0.00 5.00 10.00 15.00 20.00
Y ears 15:18 06 Oct 2004
Untitled

Figure 17. Belief in ACC (Magnitude of the weather event =3)

In addition, due to the low value of belief throughout the simulation period, the effect of the
positive feedback on the dynamics of belief, as defined in the previous sections, is also practically
zero. Indeed, when the organisation is only experiencing mild weather events (magnitude= 1 to 3),
belief does not reach a significantly high level to reinforce itself through the shaping of the
perception of the weather events as climate change related. Finally, in this scenario, there is no
impetus for the business to change its adaptive capacity. The organisation will not invest any effort
or resources in improving its ability to cope with climate impacts, since weather signals are
perceived as not climate change related, hence climate change is not believed to be something
which is occurring at all. Consequently, in this case, the value of the adaptive capacity of the
organisation decreases as time goes by, and its vulnerability level to the weather event (determined
only by the sensitivity of the organisation to the event) after an initial increase, maintains a constant
value in the long run (see graphs in figure 18).

Adaptiv e Capacity : 1 - 2 - 3 - 4 - Vulnerability : 1 - 2 - 3 - 4 -

1: 5 1: 10

3 4 1 2 3 4 1 2 3 4
1 2
4
3
1: 3 1: 6 2

1
1

3
4
1
2
3 4 1 2 3 4 1 2
1: 0 3 4 1: 1
0.00 5.00 10.00 15.00 20.00 0.00 5.00 10.00 15.00 20.00

Y ears 14:25 29 Sep 2004 Y ears 14:00 29 Sep 2004

Untitled Untitled

Figure 18. Adaptive capacity and vulnerability (Magnitude of the weather event = 1 and 3)

Figures 19 and 20 show the simulation results for belief in ACC, adaptive capacity and
vulnerability for a different scenario. In this scenario, the business organisation is experiencing the
impacts of a stronger weather event (magnitude = 5) taking place with different frequencies (as
defined before). As the graph in figure 19 shows, for an event of magnitude 5 (medium in a scale
of 1 to 10) to have an influence on the belief in ACC of the business, the event has to occur very
frequently. In particular, only when the organisation suffers the impacts of the event on its profits

28
every year, after a period of time, will the event be considered as climate change related, and hence
come to have a significant effect on the belief in ACC of the organisation. For higher values of the
variable Frequency (that is, for less frequent weather events), belief does not reach a significant
level during the whole simulation period. This is due to several reasons. First, as we have pointed
out in the introduction of the paper, changes in organisational beliefs generally require quite regular
and robust evidence that something in the environment of the organisation is changing. In the
current scenario, when the event occurs less often than once a year, the magnitude of the event is
not high enough to have a very significant effect on belief - the business has enough time between
events to 'recover' from their impacts. This, together with the lack of indirect climate change related
signals, makes it difficult for belief to increase from its initial level (set to 0). In addition, the
positive feedback of belief on perceptions is not very strong in this case either since, for events less
frequent than annual, belief does not reach a significantly high level during the whole simulation
period.

Belief ACC: 1 - 2 - 3 - 4 -
1: 100

1: 50
1 1

2 2
3 4
1 2 3 4 2 3 4 3 4
1: 0
0.00 5.00 10.00 15.00 20.00
Y ears 17:06 07 Oct 2004
Untitled

Figure 19. Belief in ACC (Magnitude of the weather event =5)

When the organisation experiences a weather event of the same magnitude that takes place
annually, its belief in ACC reaches a more significant level, due to the accumulation of impacts on
its profits year after year. In this case, the positive feedback of belief on the perceptions of the
organisation also starts to have a more significant influence on the formation of its belief in ACC.
Now, increases in belief are reinforced every time step, since the level of belief is enough to shape
or influence the organisation's perceptions so that the next time that a weather event occurs it is
more easily interpreted as climate change related. The effect of the positive feedback on the
dynamics of belief is illustrated in figure 20. This figure shows the time trajectories of belief for the
current scenario (magnitude of the weather event = 5, frequency of the weather event = 1) with the
effect of the positive feedback (blue line) and without it (red line).

It has to be noted that, despite having a moderately strong and frequent event, belief in ACC still
does not reach a significant level in the long run (it is only around 50% - see graphs in figures 19
and 20). This is mainly due to the effect of the negative feedback in the dynamics of belief, as
defined in the previous sections of the paper. As we indicated there, in the model, we have
assumed that significant values of belief in ACC will trigger action on the part of the organisation
directed to increase its adaptive capacity, with the aim to cope with the impacts of future weather
events. In the simulation results presented in the graphs above for the current scenario, the effect of

29
the negative feedback on the dynamics of belief in ACC is especially strong. This is because, in
this case, in order to illustrate the influence of the negative feedback, we have considered that all
the attempts directed to enhance the adaptive capacity by the organisation, as a result of an increase
in its belief in ACC are successful (i.e. the value of the variable Adaptation result convertor is 1,
c.f. section 3). In addition, for these simulations, actions on the part of the organisation are
triggered for a relatively low value of belief, i.e. the negative feedback starts to operate for a low
value of belief (30 %).

Belief ACC: 1 - 2 -
1: 100

1: 50
1 1 2
2

2
1

1: 0 1 2
0.00 5.00 10.00 15.00 20.00
Y ears 18:37 07 Oct 2004
Untitled

Figure 20. Belief in ACC (Positive feedback on/off)

As the graph in figure 21 shows, when the value of belief in ACC is below the 'action threshold' =
30%, the value of the adaptive capacity of the organisation does not change for the first time
steps/years of the simulation. When belief in ACC reaches a more significant level- over the
threshold- which happens around the 10th time step/year for our current case of an annual event,
actions on the part of the business aimed to increase its adaptive capacity are triggered. In these
simulations, we are considering that all the actions will lead to positive results, that is, they will
always result in an increase of the value of the adaptive capacity of the organisation. Vulnerability
in turn will be reduced (since we are considering that the value of the sensitivity of the organisation
is constant), so that the organisation will be able to cope 'better' with the impacts of subsequent
weather events, the reductions in profits will be lower, the weather events will be 'less noticeable',
and hence belief will not reach a very high level in the long run.

Adaptiv e Capacity : 1 - 2 - 3 - 4 - Vulnerability : 1 - 2 - 3 - 4 -

1: 5 1: 10

2 3 4 2 3 4 2 3 4
1
4
3
1: 3 1 1: 6 2 1

1
1
1
2 1
3
4
1
2 3 4
2 3 4 2 3 4
1: 0 1: 1
0.00 5.00 10.00 15.00 20.00 0.00 5.00 10.00 15.00 20.00
Y ears 17:21 13 Oct 2004 Y ears 17:21 13 Oct 2004
Untitled Untitled

Figure 21. Adaptive capacity and vulnerability (Magnitude = 5, Frequency =1, Belief’s threshold
for AC change = 30, Adaptation result convertor = 1)

30
In the more realistic case in which the adaptations are not always successful (i.e. they do not result
in increases in the value of adaptive capacity) or have a lower degree of success (i.e. they result in
smaller increases in adaptive capacity), belief in ACC will attain a higher value in the long run,
since the effect of the negative feedback as a consequence of organisational action is less
significant in this case. Indeed, due to a lower level of success in the adaptation attempts of the
business, the value of the adaptive capacity will not grow as much. Consequently, the organisation
will only be able to cope partially or 'less well' with the impacts of subsequent weather events: the
reductions in profits will be more significant, the events will be more noticeable for the
organisation, and the value of its belief in ACC will be higher in the long run.

The graph in figure 22 shows the time trajectories of belief for different degrees of success of the
organisation's adaptation attempts: no success (Adaptation convertor= 0) so that the effect of the
negative feedback is zero, and belief reaches its higher level in the long run for the current scenario
(pink line). Medium success (Adaptation convertor= 0.5), so that the influence of the negative
feedback is only moderate so that belief reaches a lower value in the long run (red line). And
complete success (Adaptation convertor= 1), that is, the case in which the negative feedback has its
maximum effect, so that belief only reaches a moderate high level in the long run (blue line and
also the scenario represented in figures 19 and 20). The graphs in figure 23 show the time
trajectory of adaptive capacity and vulnerability for these different cases.

Belief ACC: 1 - 2 - 3 -

1: 100

2
1: 50
2 3 1
1

3
2
1

1: 0 1 2 3
0.00 5.00 10.00 15.00 20.00
Y ears 18:48 07 Oct 2004
Untitled

Figure 22. Belief in ACC (Negative feedback different degrees of success of adaptations)

Adaptiv e Capacity : 1 - 2 - 3 - Vulnerability : 1 - 2 - 3 -

1: 5 1: 10

2 3 3 3
1

3
1: 3 1 1: 6 2 2
1 1 2
1 1
2 1
2 2
3

1
2 3
3 3
1: 0 1: 1
0.00 5.00 10.00 15.00 20.00 0.00 5.00 10.00 15.00 20.00
Y ears 18:48 07 Oct 2004 Y ears 18:48 07 Oct 2004
Untitled Untitled

Figure 23. Adaptive capacity and vulnerability for different degrees of success of adaptations

31
The extent of the influence of the negative feedback on the dynamics of the belief in ACC of the
business organisation will also vary depending on the values of the threshold set for belief in ACC
to trigger action. Figures 24 and 25 represent the different trajectories of belief in ACC and
adaptive capacity (vulnerability) respectively for different values of this threshold (and the current
scenario, i.e. for an event of magnitude 5 that occurs every year, and the default value of the
adaptation convertor = 1). As the graph in figure 24 shows, the higher the value of the action
threshold, the later the effect of the negative feedback starts to operate, and hence the higher the
value of belief in ACC in the long run.

Belief ACC: 1 - 2 - 3 -
1: 100

2 3
1: 50 1 1

3
2
1

1: 0 1 2 3
0.00 5.00 10.00 15.00 20.00
Y ears 15:24 26 Oct 2004
Untitled

Figure 24. Belief in ACC

Action threshold = 70 (pink line), 50 (red line), 30 (blue line)

Adaptiv e Capacity : 1 - 2 - 3 - Vulnerability : 1 - 2 - 3 -

1: 5 1: 10

1 2 3 2 3 3

1 2 3
1: 3 1: 6 2
1 1
1 1
1 2
2
3

1 2 3
2 3 3
1: 0 1: 1
0.00 5.00 10.00 15.00 20.00 0.00 5.00 10.00 15.00 20.00
Y ears 15:24 26 Oct 2004 Y ears 15:24 26 Oct 2004
Untitled Untitled

Figure 25. Adaptive capacity and Vulnerability

Action threshold = 70 (pink line), 50 (red line), 30 (blue line)

The dynamics of Belief in ACC will also vary depending on the ‘memory’ of the organisation, that
is, depending on how long the influence of the experience of a weather event that happens at a
certain point in time continues affecting the belief of the organisation over time. As we have
indicated in the introduction of this section, we have set this value to be 4, that is, we have assumed
that the effect of the experience of direct climate impacts on belief remains in the memory of the
organisation for 4 years. This means that the influence that a weather event occurring in a certain
year has on belief will remain affecting the formation of belief for 4 years. Consequently, during
those 4 years, the effect of subsequent weather events will be added to the influence of previous
ones, and it will be this accumulated experience that will shape the formation of belief in the

32
organisation. Thus, the longer the influence of successive weather events remains in the memory of
the organisation, the greater their influence on belief in ACC year by year, and the higher the value
of belief in the long term. Figure 26 illustrates this effect for the current scenario (weather event of
magnitude 5 occurring annually) showing the different trajectories of belief in ACC for different
values of the memory of the organisation: 2 years (blue line), 4 years (red line), and 6 years (pink
line). Figure 27 shows the corresponding time paths for the adaptive capacity and the vulnerability
of the business organisation for the same case.

Belief ACC: 1 - 2 - 3 -
1: 100

2
1: 50 2

3
1 1
2

1: 0 1 2 3
0.00 5.00 10.00 15.00 20.00
Y ears 12:12 27 Oct 2004
Untitled

Figure 26. Belief in ACC (Different values for the memory of the organisation)

Adaptiv e Capacity : 1 - 2 - 3 -
Vulnerability : 1 - 2 - 3 -
1: 5
1: 10

2 3 1 1
1
2
3
1: 3 1: 6 2
3
3 2
1
1 3
3 2
2 2

1
2 3
1 1
1: 0 1: 1
0.00 5.00 10.00 15.00 20.00 0.00 5.00 10.00 15.00 20.00
Y ears 13:05 17 Oct 2004 Y ears 13:05 17 Oct 2004
Untitled Untitled

Figure 27. Adaptive capacity and Vulnerability (Different values for the memory of the
organisation)

In the following simulations we explore the dynamics of belief in ACC for the case in which the
business organisation is experiencing a very strong weather event (magnitude=10) with different
frequencies. Figures 28 and 29 show the simulation results for this scenario. The frequencies of the
weather event are as before: 1 year (blue line), 3 years (red line), 7 years (pink line), and 15 years
(green line), the default values for the rest of variables are maintained with the exception of the
value of the Adaptation convertor which, in order to represent a more plausible case, is now equal
to 0.5.

33
 Belief ACC: 1 - 2 - 3 - 4 -
1: 100

1
1

1: 50

1
2 2

2 3

3 4
1: 0 1 2 3 4 3 4 4
0.00 5.00 10.00 15.00 20.00
Y ears 18:49 19 Oct 2004
Untitled

Figure 28. Belief in ACC (Magnitude of the weather event=10)

Adaptiv e Capacity : 1 - 2 - 3 - 4 - Vulnerability : 1 - 2 - 3 - 4 -

1: 5 1: 10

1 3 4 3 4 3 4
1 2
4
3
1 2
1: 3 1: 6 2
1 2
1 2 1
2
2 1
3
4
1
2 3 4
1: 0 3 4 3 4 1: 1
0.00 5.00 10.00 15.00 20.00 0.00 5.00 10.00 15.00 20.00
Y ears 18:49 19 Oct 2004 Y ears 18:49 19 Oct 2004
Untitled Untitled

Figure 29. Adaptive capacity and vulnerability (Magnitude of the weather event=10, Adaptation
convertor=0.5)

As the graphs above show, the value of belief in ACC again only reaches significant levels for very
strong weather events that take place with certain frequency (annually and every three years). The
impacts of weather events that occur less frequently are not strong enough for the organisation to
interpret them as climate change related, hence they do not have a strong influence on the
formation of its belief in ACC. In other words, decreases in profits as a consequence of less
frequent weather related events are not significant enough for the organisation to consider them as
climate change related signals. As in the case of a weather event of magnitude 5, this is reinforced
by the absence of indirect signals and by a lack of effect from the variable Weather effect as
defined in the previous section (this variable is set to be zero for high values of the variable
Frequency, that is, for less frequent events). Similarly, the interplay of additional factors such as
the effect of negative and positive feedbacks or different values for the memory of the organisation
will affect the dynamics in the same way as they did in the simulations for the previous scenarios,
and make the level of belief change accordingly in the long run.

The dynamics of belief in ACC for this case (i.e. a weather event of magnitude 10 occurring less
frequently) is mainly related to the fact that the decreases in profits as a result of infrequent events
are again, most of the time, below the relevant thresholds (the Industry average profit convertor
and the Impacts on profits threshold). This means that, for the default levels of the thresholds,
despite the high magnitude of the weather events, the business is generally still ‘doing well’ in

34
relation to the average business in the industry and to its normal profits trend. Put differently, the
reductions on profits as a result of the weather events, although quite high at the time that the
events occur, are not frequent enough to effectively accumulate and be considered by the
organisation as climate change related. As a result, they do not affect the formation of its belief in
ACC in a significant way.

Figure 30 illustrates the effect that a change in the values of the thresholds has in the dynamics of
belief. In particular, it illustrates the case in which these values are higher so that the business now
is performing worse in relation to both the average in the industry and its normal profits trend.
(Industry average profit convertor = 18, and Impacts on profits threshold =15). As the graph
shows, the accumulation of impacts on profits due to weather events that are infrequent are now
‘noticed’ by the organisation and interpreted as climate change related, thus in this case have a
more significant effect on the belief in ACC of the business for higher values of the variable
frequency, i.e. for less frequent weather events (see figure 28).

Belief ACC: 1 - 2 - 3 - 4 -
1: 100 1
1

1: 50 2 2
1 4
3

3 4 3 4 4
1: 0 1 2
0.00 5.00 10.00 15.00 20.00
Y ears 11:58 20 Oct 2004
Untitled

Figure 30. Belief in ACC (Magnitude = 10, Industry average profit = 18,
Impacts on profits threshold = 15)

Finally, as we have indicated in previous sections, once the weather events have been considered as
climate change related by the business, i.e. their impacts on profits recognised as direct signals that
climate change is likely to be occurring, the extent to which these signals influence belief in ACC
also depend on the importance that the organisation places on them for the formation of this belief.
This is represented in the model by the variables Industry average weight and Previous year’s
profit weight. In the current version, we have assumed that the effect of both signals on the belief in
CC of the organisation increases with the magnitude of the signals in a non linear way as shown in
figure 9. Figures 31 and 32 show the simulation results for higher values of both weights, for the
case of an event of magnitude 5 and 10 respectively. In these simulations, we have assumed that
the organisation now places greater importance on the perceived direct signals (decreases in
profits) to form its belief in ACC. As the graphs illustrate, for these scenarios, belief reaches a more
significant value but again only for low values of the variable Frequency, that is, for quite frequent
weather events.

35
 Belief ACC: 1 - 2 - 3 - 4 -
1: 100

1
1: 50 1

1 2 2

2 3 4
1 2 3 4 3 4 3 4
1: 0
0.00 5.00 10.00 15.00 20.00
Y ears 14:20 20 Oct 2004
Untitled

Figure 31. Belief in ACC (Magnitude =5, Higher values of Industry average weight
and Previous year’s profit weight).

Belief ACC: 1 - 2 - 3 - 4 -
1: 100
1

1: 50

1
2 2

2
3 4
3
1: 0 1 2 3 4 3 4 4
0.00 5.00 10.00 15.00 20.00
Y ears 15:06 20 Oct 2004
Untitled

Figure 32. Belief in ACC (Magnitude = 10, Higher values of Industry average weight
and Previous year’s profit weight).

The simulations results presented in this section have shown that, in general, for a business
organisation to believe in climate change, starting from a situation of 'not believing' that climate
change is occurring at all, it is necessary for it to experience strong and frequent direct signals of
climate change over a prolonged period of time. The precise exposure duration necessary depends,
among other things, on the magnitude and the frequency of the signals. In addition, once the
organisation has formed its belief in climate change (that is, once it believes that climate change
could be occurring), sustained experience of climate change signals is still required to maintain
and/or build up this belief. In the scenarios considered in this section, that is, in the absence of
indirect signals of climate change, more robust direct evidence of climate change, in the form of
highly frequent weather extremes and anomalies, is generally required to have a significant
influence on the formation and building up of the belief in climate change. In the following section,
we explore the dynamics of belief in CC for the alternative case in which the business is only
experiencing indirect climate change related signals.

36
4. 2 Effect of experience of indirect signals on belief climate change
The simulations in this section explore the dynamics of Belief in CC18 for the case in which the
business organisation is only experiencing indirect signals of climate change. That is, when the
organisation is observing changes in government regulations and policies in relation to climate
change (represented in the model by the variable Government behaviour), changes in the attitude
of customers and potential customers towards the issue (represented in the model by the variable
Public behaviour) and also changes in the number of scientific reports dealing with the effects of
climate change (represented in the model by the variable Science reports).

As we indicated in a previous section of the paper, the relative significance of each one of these
indirect signals on the perceptions of potential gains/losses in the competitiveness level of the
business organisation (and ultimately on its belief in CC) will vary depending on the organisation’s
specific characteristics. In principle, we have considered that, in our organisation type, the three
signals have the same relevance in the formation of belief. This means that the default values of the
variables that define the weights of the perceptions (publicgain/lossweight,
governmentgain/lossweight, and sciencegain/lossweight) are the same. In relation to the magnitude
of the indirect signals that the business organisation experiences, for the subsequent simulations,
we have used the following scenario: scientific authorities are confident that climate change is
happening. Therefore, the number of reports aimed to change the 'mindset' of organisations in the
business sector, i.e. the value of the variable Science reports, grows steadily throughout the first
part of the simulation period, and decreases after a while (about 12 time steps), for instance, due to
a shift of attention towards a new other highly relevant scientific issue. The behaviour of the
government follows a similar trend, but a more conservative one: the number of actions aimed to
tighten policies and regulations regarding climate change, the value of the variable Government
behaviour, grows in the same fashion but its magnitude is less than in the case of the science,
probably due to the existence of conflicting economic versus environmental interests. The public
follow a more erratic trend, and their level of concern or interest in the issue of climate change is in
general lower than that of the government and science (i.e. the variable Public behaviour has a
lower value throughout the whole simulation period). Figure 33 shows the time trajectory of the
three signals and of belief in CC for this scenario and for a default value of the perceptions of
potential gains/losses weights of 33%.

18
In this case, the analysis focuses on the dynamics of belief in CC instead of belief in ACC (anthropogenic
climate change), since we have assumed that the organisation will attribute climate change to human activity
only if it is experiencing direct climate change related signals in the form of significant and frequent weather
events.

37
 1: Public 'behav iour' 2: Gov ernment 'behav iour' 3: Science reports 4: Belief in CC
1: 5
2:
3:
4: 100

3
1: 3
2
2: 3
3: 1
4: 50 1
2
3
2 3 4
4
1
4
1
1: 2
2: 4
3: 0
4: 0
0.00 5.00 10.00 15.00 20.00
Y ears 13:46 21 Oct 2004
Untitled

Figure 33. Belief in CC, Science reports, Government behaviour and Public behaviour (scenario 1)

As the figure shows, despite the fact that the organisation is ‘receiving’ fairly robust indirect
signals, belief in CC does not reach a significantly high level (less than 50%). This indicates that,
the presence of indirect signals that are not backed up by real evidence that the climate is changing,
(that is, by the occurrence of weather events), is not enough to make the business believe that
climate change can be happening. This is also true for the case of stronger indirect signals. Figure
34 shows the same simulation results but for a scenario in which the magnitude of the indirect
signals is higher and grows steadily throughout the simulation period. Again, belief in CC only
reaches a very moderate level (slightly over 50%).

1: Public 'behav iour' 2: Gov ernment 'behav iour' 3: Science reports 4: Belief CC
1: 5
2:
3:
4: 100
3
1 2
1

2 3
1
2 3
1: 4
2: 3 1
3: 2 3
4
4: 50
4

4
1:
2:
3: 0
4: 0
0.00 5.00 10.00 15.00 20.00
Y ears 13:55 21 Oct 2004
Untitled

Figure 34. Belief in CC, Science reports, Government behaviour and Public behaviour (scenario 2)

As we have just pointed out, the fact that in these simulations we have not considered the presence
of direct signals, that is, that the organisation is not experiencing impacts from weather events on
its profits, is a fundamental factor for this lack of growth in the value of belief in CC. Indeed, in
this case, the business will end up paying less and less attention to the indirect signals since there is
no ‘reality’ supporting them. Any initial impetus in belief as a consequence of the observation of
changes in the behaviour of the government, the scientific community and the public in relation to
climate change will loose strength with the passing of time. For instance, warnings from the

38
government and the scientific community concerning potential adverse effects of climate change
will not have the same influence on belief in the absence of actual impacts from weather changes,
since without actual evidence backing them up, the organisation could consider that they are
exaggerations and/or that climate change could be merely a ‘fad’.

In addition, since belief does not reach a very high value throughout the simulation period, the
reinforcing effect of the positive feedback from belief to perceptions of gains and losses (as defined
in section 3) is fairly weak, contributing also to the lack of growth in belief in CC of the
organisation (see figure 15 in section 3). Figure 35 illustrates the influence of the positive feedback
on belief, showing the different simulation results for belief in CC with and without the feedback
for the values of the indirect signals corresponding to scenario 2.

Belief CC: 1 - 2 -
1: 100

1: 50 2
2

1 1
2
1

1 2
1: 0
0.00 5.00 10.00 15.00 20.00
Y ears 11:48 27 Oct 2004
Untitled

Figure 35. Belief in CC (Positive feedback on/off)

Another factor contributing to the lack of growth in belief in CC of the business organisation for
these scenarios is related to the dynamics of its adaptive capacity and vulnerability. As indicated in
section 3, in the current version of the model we have considered that the extent to which indirect
climate change signals affect the perceptions of potential losses and gains in competitiveness is
determined respectively by the vulnerability and the adaptive capacity of the organisation. In
particular, we have assumed that, for a given time period, the higher the vulnerability of the
organisation, the higher the perceived negative impacts from future climate events will be, and
hence the higher the organisation’s perceptions of potential losses as a consequence of these
impacts. Likewise, for a given time period, the higher the adaptive capacity of the organisation, the
higher the perceived positive impacts from future climate events will be, and hence the higher the
organisation’s perceptions of potential gains as a consequence of these impacts (c.f. graphs in
figure 14, section 3).

In addition, we have assumed that the organisation will take action directed to increase its adaptive
capacity in relation to climate events when its belief in ACC reaches a significant value. That is,
when it believes that climate change is occurring and it is caused mainly by human activity. As we
have indicated in the introductory section, the reason behind this hypothesis is the assumption that
the organisation will consider that nothing can be done to counteract the effects of climate change
if it is exclusively caused by something as capricious as nature. In the simulations above, since the
organisation is not experiencing any impacts from weather events, it will not take action to
improve its adaptive capacity at any point. As a consequence, the value of the variable adaptive

39
capacity will decrease with the passing of time and become zero in the long run, so that
vulnerability will take a constant value in the long term. This will have two opposing effects on the
perceptions of gains and losses on the part of the organisation. On the one hand, the decrease in the
value of adaptive capacity will reduce the effect of the indirect signals on the perceptions of gains,
and hence their effect on belief. On the other hand, the subsequent increases in the value of
vulnerability will reinforce the perceptions of potential losses and hence their influence on belief.
However, since vulnerability (after an initial increase) stabilises at a constant value, the reinforcing
effect of the perceptions of losses on belief is not strong enough to make belief grow and reach a
higher level.19 Figure 36 illustrates these effects, showing the time trajectories of perception of
gains and losses in this case for scenario 2.

1: Perception of potential gain 2: Perception of potential loss

1: 100
2:

2
1: 50
2: 2

1
2
1
1
1: 1
2: 0
0.00 5.00 10.00 15.00 20.00
Y ears 10:27 27 Oct 2004
Untitled

Figure 36. Perceptions of potential gains/losses (scenario 2)

As in the case of the simulations for the scenarios that included only direct signals, additional
factors that play a role in shaping the dynamics of belief in CC are related to the 'memory' of the
organisation. The memory of the organisation for the above simulations is again the default value,
4 time steps. That is, the effect of the experience of indirect signals of climate change on belief
remains in the memory of the organisation for 4 years. This means that the influence that the
behaviour of the public, government and scientific authorities in a certain year has on belief will
remain affecting the formation of belief for 4 years. As in the case of direct signals, the longer the
influence of this indirect experience remains in the memory of the organisation, the greater its
accumulated effect on belief in CC, and hence the higher the value of belief in the long term.
Figure 37 illustrates this effect for scenario 2 for different values of the memory of the
organisation: 2 years (blue line), 4 years (red line), and 6 years (pink line).

19
In the current version of the model, the perceptions of losses and gains in competitiveness have the same
relevance in the formation of the belief in CC of the organisation. For the case in which an organisation places
more importance on the perceptions of losses, for the same value of vulnerability and the current scenario, belief
would reach a higher value as a consequence of this reinforcing effect.

40
 Belief CC: 1 - 2 - 3 -
1: 100

1: 50 2
3 2

1 1
1

1 2
1: 0
0.00 5.00 10.00 15.00 20.00
Y ears 12:00 27 Oct 2004
Untitled

Figure 37. Belief in CC (Different values for the memory of the organisation – scenario 2)

Finally, the duration of the effect that experiencing indirect signals has on the perceptions of gains
and losses in the competitiveness of the organisation will also influence the dynamics of its belief
in CC. As pointed out earlier, changes in organisational perceptions as a result of (direct and
indirect) experience occur more easily than the corresponding changes in organisational beliefs. In
all the simulations carried out thus far, the effect of the experience of climate impacts on the
perceptions of the organisation has been set to remain in its memory of for less time (2 years). This
means that the effect that an increase in the concern of the public, the government or science about
climate change issues at a point in time has on the perceptions of gains/losses of the organisation
will remain in its memory (and hence will keep on affecting its belief in CC) for 2 years. If we
increase the duration of this effect, successive increments in the value of the perceptions of
gains/losses (see figure 39) will add up and will have a stronger effect on belief, making it reach a
higher value in the long run. Figure 38 illustrates this effect on belief for scenario 2 and for values
of the memory of the organisation regarding perceptions equal to 1 year (blue line), 2 years (red)
and 3 years (pink line).

Belief CC: 1 - 2 - 3 -
1: 100
3

1: 50 3 2
2

1 1
1
3

1 2
1: 0
0.00 5.00 10.00 15.00 20.00
Y ears 10:14 28 Oct 2004
Untitled

Figure 38. Belief in CC (Different values for the memory- perceptions)

41
 Perception of potential gain: 1 - 2 - 3 - Perception of potential loss: 1 - 2 - 3 -
1: 100 1: 100

3 2
1: 50 1: 50 2

2
3

2 3 1
3 1
1
2
2
1 1 3
2 1
1 1 2 3
1: 0 1: 0
0.00 5.00 10.00 15.00 20.00 0.00 5.00 10.00 15.00 20.00
Y ears 11:00 28 Oct 2004 Y ears 11:00 28 Oct 2004
Untitled Untitled

Figure 39. Perceptions of potential gains/losses (Different values for the memory- perceptions)

As the simulation results in this section and the previous one have shown, when the business
organisation experiences exclusively direct or indirect signals in relation to climate change, its
belief in climate change only reaches a fairly moderate level even for the cases in which the signals
are quite frequent and fairly high in magnitude. In general, the formation and the building up of a
belief in CC of an organisation will require the presence of both direct and indirect signals of
climate change. In the following section, we show the simulation results for the dynamics of belief
in CC for this more general case.

4. 3 Effect of experience of direct and indirect signals on belief in CC

In this section we explore the dynamics of belief in ACC for the case in which the organisation is
experiencing impacts on its profits as a result of weather events and also anticipating or perceiving
potential gains/losses in competitiveness as a consequence of the presence of indirect signals of
climate change. The following simulations illustrate the effect that the experience of both direct
and indirect signals of climate change has on the belief in CC of our generic organisation for the
climate scenarios used in the previous sections. Figure 40 shows the trajectories of belief in ACC
for the different magnitudes and frequencies of weather events as in section 4.1, and for the
scenario 1 for indirect signals in section 4.2. Figure 41 shows the simulation results for the same
case but for the values of the indirect signals corresponding to scenario 2.

As the simulation results in figures 40 and 41 show, in the presence of indirect signals, belief in
ACC reaches fairly higher levels for the same climate scenarios (i.e. the same values of the
magnitude and frequency of the weather event) used in section 4.1. In particular, for scenario 2, in
which the intensity/magnitude of the indirect signals is higher, the growth in the magnitude of
belief is greater and much quicker than in the case in which the organisation is experiencing only
impacts from weather events. Figure 43 shows the simulation results for a different scenario in
which the indirect signals have lower intensity (c.f. scenario 3 in figure 42). In this scenario, the
public, the government and the scientific community are showing very little concern on climate
change issues. In this case, belief grows more slowly and reaches a lower value, but only for the
case in which the organisation is experiencing only moderately strong and frequent weather events.

42
 Belief ACC: 1 - 2 - 3 - 4 - Belief ACC: 1 - 2 - 3 - 4 -
1: 100 1: 100

1
4
1: 50 1: 50
3
1
2
1
2
1 3 4
2 1 3
2 2
1 2 3
4 3 4 4 3 4 3 4 4
1: 0 1 2 3 1: 0 1 2
0.00 5.00 10.00 15.00 20.00 0.00 5.00 10.00 15.00 20.00
Y ears 14:54 28 Oct 2004 Y ears 15:10 28 Oct 2004
Untitled Untitled

Magnitude of the weather event = 1 Magnitude of the weather event = 3

Belief ACC: 1 - 2 - 3 - 4 - Belief ACC: 1 - 2 - 3 - 4 -
1: 100 1 1: 100 1 1
4
3
4
1
3 2
2
2
1
1: 50 1: 50
2
2
1
3
2
3

4 4
1 2 3 3 4 4 1 2 3 3 4 4
1: 0 1: 0
0.00 5.00 10.00 15.00 20.00 0.00 5.00 10.00 15.00 20.00
Y ears 15:13 28 Oct 2004 Y ears 15:15 28 Oct 2004
Untitled Untitled

Magnitude of the weather event = 5 Magnitude of the weather event = 10

Figure 40. Belief in ACC – Scenario 1 (indirect signals), Frequencies =1 year (blue line), 3 years
(red line), 7 years (pink line), and 15 years (green line).

Belief ACC: 1 - 2 - 3 - 4 - Belief ACC: 1 - 2 - 3 - 4 -

1: 100 1: 100

3 4

1
1: 50 1: 50 2
1
2
1
3 4
2 1 3
2
2
1 2 3
4 4 3
1: 0 1 2 3 3 4 4 1: 0 1 2 3 4 4
0.00 5.00 10.00 15.00 20.00 0.00 5.00 10.00 15.00 20.00
Y ears 13:51 29 Oct 2004 Y ears 13:51 29 Oct 2004
Untitled Untitled

Magnitude of the weather event = 1 Magnitude of the weather event = 3

Belief ACC: 1 - 2 - 3 - 4 - Belief ACC: 1 - 2 - 3 - 4 -
1: 100 1 1: 100 1 1 4
1 3
4
3

2
2
2
2 1

1: 50 1: 50
2
1 3
2 3

4 4
3 3 4 4 3 3 4 4
1: 0 1 2 1: 0 1 2
0.00 5.00 10.00 15.00 20.00 0.00 5.00 10.00 15.00 20.00
Y ears 13:52 29 Oct 2004 Y ears 13:52 29 Oct 2004
Untitled Untitled

Magnitude of the weather event = 5 Magnitude of the weather event = 10

Figure 41. Belief in ACC – Scenario 2 (indirect signals), Frequencies =1 year (blue line), 3 years
(red line), 7 years (pink line), and 15 years (green line).

43
 1: Public 'behav iour' 2: Gov ernment 'behav iour' 3: Science reports 1: Public 'behav iour' 2: Gov ernment 'behav iour' 3: Science reports

1: 5 1: 5
2: 2:
3:
3:
3
1 2
1

2 3
3 1 3
3 2
1: 1:
2 2: 3 1 3
2: 3 1 2
3: 1 3:
3
2
2 3

1
1 2

1: 1:
2: 2:
3: 0 3: 0
0.00 5.00 10.00 15.00 20.00 0.00 5.00 10.00 15.00 20.00
Y ears 11:56 29 Oct 2004 Y ears 12:00 27 Oct 2004
Untitled Untitled

Scenario 1 Scenario 2
1: Public 'behav iour' 2: Gov ernment 'behav iour' 3: Science reports
1: 5
2:
3:

1:
2: 3
3:

2 3 1 1 3
1 2 2 3
1: 1 2
2:
3: 0
0.00 5.00 10.00 15.00 20.00
Y ears 12:37 29 Oct 2004
Untitled

Scenario 3
Figure 42. Indirect signals scenarios

Belief ACC: 1 - 2 - 3 - 4 - Belief ACC: 1 - 2 - 3 - 4 -

1: 100 1: 100

1: 50 1: 50

1
1
4
2 2 3
1 1
1 2
2 2 3 4 3
1 2 3 4
1: 0 1 2 3 4 3 4 4 1: 0 1 2 3 3 4 4
0.00 5.00 10.00 15.00 20.00 0.00 5.00 10.00 15.00 20.00
Y ears 12:39 29 Oct 2004 Y ears 12:38 29 Oct 2004
Untitled Untitled

Magnitude of the weather event = 1 Magnitude of the weather event = 3

Belief ACC: 1 - 2 - 3 - 4 - Belief ACC: 1 - 2 - 3 - 4 -
1: 100 1: 100 1
1

1
1

1: 50 1: 50 1 2 2

4
2 2 2 3
1 4
3
2
3
3
4 4 3
1: 0 1 2 3 3 4 4 1: 0 1 2 3 4 4
0.00 5.00 10.00 15.00 20.00 0.00 5.00 10.00 15.00 20.00
Y ears 12:37 29 Oct 2004 Y ears 12:35 29 Oct 2004
Untitled Untitled

Magnitude of the weather event = 5 Magnitude of the weather event = 10

Figure 43. Belief in ACC – Scenario 3 (indirect signals), Frequencies =1 year (blue line), 3 years
(red line), 7 years (pink line), and 15 years (green line).

44
5. Conclusion
In this paper we have presented a computer based simulation model aimed to explore the dynamics
of the belief in climate change of business organisations. The model simulates the formation of
belief for a generic business type in a specific sector and in relation to weather events to which the
business organisation has a certain level of sensitivity. On the other hand, the model allows the
adjustment of specified parameters to reflect alternative cases for different types of businesses with
corresponding sensitivity to various weather events. It also allows the user to explore the dynamics
of belief in climate change of the defined organisation-type for a large range of climate change
related scenarios.

The simulation results have shown that, in general, for a business organisation to believe in climate
change in the first instance (that is, starting from a situation of 'not believing' that climate change is
occurring at all), it is necessary for it to experience strong and frequent (direct and indirect) signals
of climate change over a prolonged period of time. The precise exposure duration necessary will
depend, among other factors, on the magnitude and the frequency of the signals. Once the
organisation has formed its belief in climate change (that is, once it believes that climate change
could be occurring), sustained experience of climate change signals is still required to maintain
and/or build up this belief. In addition, the simulations show that, in the absence of indirect signals
of climate change (such as stricter government regulations and policies, or an increase in the
number of scientific reports on the issue), more robust direct evidence of climate change, in the
form of highly frequent weather extremes and anomalies, is generally required to have a significant
influence on the formation and building up of the belief in climate change. Similarly, in the
absence of anomalous weather event and impacts, the indirect or mediated experience of climate
change signals will not have a significant effect on the formation of belief in climate change. In
general, the analysis shows that the presence of both direct and indirect signals of climate change is
required for the emergence and building up of belief in climate change in a business organisation.

At this point, the relationships among the different variables of the model remain hypothetical.
However, they are designed so as to be empirically testable through standard analytical methods. In
fact, the next step is our work will be the calibration and empirical validation of the model by
employing a survey data collection and analysis with members of a relevant business sector as a
sample. In addition, the decision and adaptation processes that take place within the business
organisation, together with the dynamics of the behaviour of other agents considered in the model,
such as the public or government institutions, are represented as ‘black boxes’ since the level of
analysis of Stella models (and systems dynamics models in general) is mainly the macro-level.
Still, we consider the model very useful, since it provides a representation of the dynamics of belief
and its main drivers at this macro level. In our view, its use as a simulation tool helps improve our
understanding of how the organisation's decision-makers may change their perceptions and beliefs
regarding climate change, and modify the form and functioning of the organisation accordingly,
serving as a base for the analysis of the general and adaptive behaviour in the business sector in
relation to climate change.

45
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 APPENDIX – Adaptive capacity scenarios

Scenario 1 Scenario 2 Scenario 3

Option 1 Option 2 Option 3 Option 4 Option 1 Option 2 Option 3 Option 4 Option 1 Option 2 Option 3 Option 4
ff(2) 2 5 2 4 ff(2) 4 5 2 5 ff(2) 4 5 3 1
ff(3) 2 2 4 2 ff(3) 4 2 2 5 ff(3) 2 2 5 2
ff(4) 3 2 4 3 ff(4) 4 2 5 5 ff(4) 3 4 5 1
ff(5) 3 3 4 1 ff(5) 4 3 3 5 ff(5) 2 3 4 2
ff(6) 4 1 5 1 ff(6) 4 1 4 5 ff(6) 5 2 3 3
ff(7) 5 1 5 5 ff(7) 4 1 4 5 ff(7) 5 1 3 2

EF1 EF2 EF3 EF4 EF1 EF2 EF3 EF4 EF1 EF2 EF3 EF4
1 0.22 0.11 0.4 0.4 0.6 1 1 1 0.8 1 1
FF1 FF2 FF3 FF4 FF1 FF2 FF3 FF4 FF1 FF2 FF3 FF4
2 1 2 1 4 1 2 5 2 1 3 1

PCC1 PCC2 PCC3 PCC4 PCC1 PCC2 PCC3 PCC4 PCC1 PCC2 PCC3 PCC4
2 0.22 0.22 0.4 1.6 0.6 2 5 2 0.8 3 1

CCI CCI CCI

2 5 3

ADAPTIVE CAPACITY: AC = AC { D1; … ; D7 }, with (D1,…,D7), Di = Determinants of adaptive capacity

FEASIBILITY FACTOR for any adaptation option (j) in D1: FFj = min {ffj(2), … ffj(7)}, j=1, …m ( number of available adaptation options)
ffj(i), i= 2,…, 7, judgements about the strength or weakness of the adaptation option (j) in relation to Di

EFFICACY FACTOR for any adaptation option (j) in D1: {EFj}

POTENTIAL COPING CAPACITY of an adaptation option (j): PCCj = {{EFj }{FFj }}, j=1, …m

ADAPTIVE CAPACITY INDEX: AC = CCI = max {PCC1 , …, PCCm}

49
 Scenario 4 Scenario 5 Scenario 6
Opt 1 Opt 2 Opt 3 Opt 4 Opt 1 Opt 2 Opt 3 Opt 4 Opt 1 Opt 2 Opt 3 Opt 4 Opt 5
ff(2) 4 5 3 4 ff(2) 1 5 5 1 ff(2) 3 5 5 2 5
ff(3) 4 2 3 5 ff(3) 2 3 5 2 ff(3) 4 4 5 2 5
ff(4) 3 2 3 3.5 ff(4) 2 3 1 1 ff(4) 5 4 4.5 2 4
ff(5) 4 4 3 4 ff(5) 2 2 5 2 ff(5) 4 3 5 2 4
ff(6) 4 4 3 4.5 ff(6) 2 3 5 1 ff(6) 4 2 5 2 4
ff(7) 5 4 3 4 ff(7) 2 3 5 2 ff(7) 3 3 5 2 5

EF1 EF2 EF3 EF4 EF1 EF2 EF3 EF4 EF1 EF2 EF3 EF4 EF5
0.3 0.4 0.6 1 0.5 0.5 0.5 0.5 0.003 0.12 1 0.0001 0.1

FF1 FF2 FF3 FF4 FF1 FF2 FF3 FF4 FF1 FF2 FF3 FF4 FF5
3 2 3 3.5 1 2 1 1 3 2 4.5 2 4

PCC1 PCC2 PCC3 PCC4 PCC1 PCC2 PCC3 PCC4 PCC1 PCC2 PCC3 PCC4 PCC5
0.9 0.8 1.8 3.5 0.5 1 0.5 0.5 0.009 0.24 4.5 0.0002 0.4

CCI CCI CCI

3.5 1 4.5

50
 Scenario 7 Scenario 8 Scenario 9
Opt 1 Opt 2 Opt 3 Opt 4 Opt 5 Opt 1 Opt 2 Opt 3 Opt 4 Opt 5 Opt 1 Opt 2 Opt 3 Opt 4 Opt 5
ff(2) 4 5 2 1 4 ff(2) 4 5 2 4 5 ff(2) 4 5 1 4 2
ff(3) 2 4 2 2 4 ff(3) 2 2 1 4 5 ff(3) 4 2 1 5 2
ff(4) 3 4 2 1 4 ff(4) 3 2 1 4 5 ff(4) 4 2 2 5 2
ff(5) 1 4 2 2 4 ff(5) 2 3 3 4 3 ff(5) 4 3 3 3 2
ff(6) 1 4 2 1 5 ff(6) 3 1 3 4 3 ff(6) 4 4 2 3 2
ff(7) 5 4 2 2 5 ff(7) 5 1 4 4 3 ff(7) 5 4 2 3 2

EF1 EF2 EF3 EF4 EF5 EF1 EF2 EF3 EF4 EF5 EF1 EF2 EF3 EF4 EF5
1 1 1 1 0.1 0.9 0.4 0.06 0.0001 0.5 0.3 0.4 0.8 0.0001 0.2

FF1 FF2 FF3 FF4 FF5 FF1 FF2 FF3 FF4 FF5 FF1 FF2 FF3 FF4 FF5
1 4 2 1 4 2 1 1 4 3 4 2 1 3 2

PCC1 PCC2 PCC3 PCC4 PCC5 PCC1 PCC2 PCC3 PCC4 PCC1 PCC2 PCC3 PCC4 PPC5
1 4 2 1 0.4 1.8 0.4 0.06 0.0004 1.2 0.8 0.8 0.0003 0.4

CCI CCI CCI

4 1.8 1.2

Summary
Scenarios AC- CCI FF1 FF2 FF3 FF4 FF5 EF1 EF2 EF3 EF4 EF5 PCC1 PCC2 PCC3 PCC4 PCC5
5 1 1 2 1 1 0.5 0.5 0.5 0.5 0.5 1 0.5 0.5
9 1.2 4 2 1 3 2 0.3 0.4 0.8 0 0.2 1.2 0.8 0.8 0.0003 0.4
8 1.8 2 1 1 4 3 0.9 0.4 0.06 0 0.5 1.8 0.4 0.06 0.0004 1.5
1 2 2 1 2 1 1 0.22 0.11 0.4 2 0.22 0.22 0.4
3 3 2 1 3 1 1 0.8 1 1 2 0.8 3 1
4 3.5 3 2 3 3.5 0.3 0.4 0.6 1 0.9 0.8 1.8 3.5
7 4 1 4 2 1 4 1 1 1 1 0.1 1 4 2 1 0.4
6 4.5 3 2 4.5 2 4 0.003 0.12 1 0 0.1 0.009 0.24 4.5 0.0002 0.4
2 5 4 1 2 5 0.4 0.6 1 1 1.6 0.6 2 5

51
The trans-disciplinary Tyndall Centre for Climate Change Research undertakes integrated research into the
long-term consequences of climate change for society and into the development of sustainable responses
that governments, business-leaders and decision-makers can evaluate and implement. Achieving these
objectives brings together UK climate scientists, social scientists, engineers and economists in a unique
collaborative research effort.
Research at the Tyndall Centre is organised into four research themes that collectively contribute to all
aspects of the climate change issue: Integrating Frameworks; Decarbonising Modern Societies; Adapting to
Climate Change; and Sustaining the Coastal Zone. All thematic fields address a clear problem posed to
society by climate change, and will generate results to guide the strategic development of climate change
mitigation and adaptation policies at local, national and global scales.
The Tyndall Centre is named after the 19th century UK scientist John Tyndall, who was the first to prove the
Earth’s natural greenhouse effect and suggested that slight changes in atmospheric composition could bring
about climate variations. In addition, he was committed to improving the quality of science education and
knowledge.
The Tyndall Centre is a partnership of the following institutions:
University of East Anglia
UMIST
Southampton Oceanography Centre
University of Southampton
University of Cambridge
Centre for Ecology and Hydrology
SPRU – Science and Technology Policy Research (University of Sussex)
Institute for Transport Studies (University of Leeds)
Complex Systems Management Centre (Cranfield University)
Energy Research Unit (CLRC Rutherford Appleton Laboratory)
The Centre is core funded by the following organisations:
Natural Environmental Research Council (NERC)
Economic and Social Research Council (ESRC)
Engineering and Physical Sciences Research Council (EPSRC)
UK Government Department of Trade and Industry (DTI)

For more information, visit the Tyndall Centre Web site (www.tyndall.ac.uk) or contact:
External Communications Manager
Tyndall Centre for Climate Change Research
University of East Anglia, Norwich NR4 7TJ, UK
Phone: +44 (0) 1603 59 3906; Fax: +44 (0) 1603 59 3901
Email: tyndall@uea.ac.uk
Tyndall Working Papers are available online at
http://www.tyndall.ac.uk/publications/working_papers/working_papers.shtml

Mitchell, T. and Hulme, M. (2000). A Country-by- Köhler, J.H., (2002). Long run technical change
Country Analysis of Past and Future Warming in an energy-environment-economy (E3)
Rates, Tyndall Centre Working Paper 1. model for an IA system: A model of
Kondratiev waves, Tyndall Centre Working Paper
Hulme, M. (2001). Integrated Assessment
15.
Models, Tyndall Centre Working Paper 2.
Adger, W.N., Huq, S., Brown, K., Conway, D. and
Berkhout, F, Hertin, J. and Jordan, A. J. (2001).
Hulme, M. (2002). Adaptation to climate
Socio-economic futures in climate change
change: Setting the Agenda for Development
impact assessment: using scenarios as
Policy and Research, Tyndall Centre Working
'learning machines', Tyndall Centre Working
Paper 16.
Paper 3.
Dutton, G., (2002). Hydrogen Energy
Barker, T. and Ekins, P. (2001). How High are
Technology, Tyndall Centre Working Paper 17.
the Costs of Kyoto for the US Economy?,
Tyndall Centre Working Paper 4. Watson, J. (2002). The development of large
technical systems: implications for hydrogen,
Barnett, J. (2001). The issue of 'Adverse Effects
Tyndall Centre Working Paper 18.
and the Impacts of Response Measures' in the
UNFCCC, Tyndall Centre Working Paper 5. Pridmore, A. and Bristow, A., (2002). The role of
hydrogen in powering road transport, Tyndall
Goodess, C.M., Hulme, M. and Osborn, T. (2001).
Centre Working Paper 19.
The identification and evaluation of suitable
scenario development methods for the Turnpenny, J. (2002). Reviewing organisational
estimation of future probabilities of extreme use of scenarios: Case study - evaluating UK
weather events, Tyndall Centre Working Paper 6. energy policy options, Tyndall Centre Working
Paper 20.
Barnett, J. (2001). Security and Climate
Change, Tyndall Centre Working Paper 7. Watson, W. J. (2002). Renewables and CHP
Deployment in the UK to 2020, Tyndall Centre
Adger, W. N. (2001). Social Capital and Climate
Working Paper 21.
Change, Tyndall Centre Working Paper 8.
Watson, W.J., Hertin, J., Randall, T., Gough, C.
Barnett, J. and Adger, W. N. (2001). Climate
(2002). Renewable Energy and Combined Heat
Dangers and Atoll Countries, Tyndall Centre
and Power Resources in the UK, Tyndall Centre
Working Paper 9.
Working Paper 22.
Gough, C., Taylor, I. and Shackley, S. (2001).
Paavola, J. and Adger, W.N. (2002). Justice and
Burying Carbon under the Sea: An Initial
adaptation to climate change, Tyndall Centre
Exploration of Public Opinions, Tyndall Centre
Working Paper 23.
Working Paper 10.
Xueguang Wu, Jenkins, N. and Strbac, G. (2002).
Barker, T. (2001). Representing the Integrated
Impact of Integrating Renewables and CHP
Assessment of Climate Change, Adaptation
into the UK Transmission Network, Tyndall
and Mitigation, Tyndall Centre Working Paper 11.
Centre Working Paper 24
Dessai, S., (2001). The climate regime from
Xueguang Wu, Mutale, J., Jenkins, N. and Strbac,
The Hague to Marrakech: Saving or sinking
G. (2003). An investigation of Network
the Kyoto Protocol?, Tyndall Centre Working
Splitting for Fault Level Reduction, Tyndall
Paper 12.
Centre Working Paper 25
Dewick, P., Green K., Miozzo, M., (2002).
Brooks, N. and Adger W.N. (2003). Country level
Technological Change, Industry Structure and
risk measures of climate-related natural
the Environment, Tyndall Centre Working Paper
disasters and implications for adaptation to
13.
climate change, Tyndall Centre Working Paper 26
Shackley, S. and Gough, C., (2002). The Use of
Tompkins, E.L. and Adger, W.N. (2003). Building
Integrated Assessment: An Institutional
resilience to climate change through adaptive
Analysis Perspective, Tyndall Centre Working
management of natural resources, Tyndall
Paper 14.
Centre Working Paper 27
Dessai, S., Adger, W.N., Hulme, M., Köhler, J.H.,
Turnpenny, J. and Warren, R. (2003). Defining
and experiencing dangerous climate change,
Tyndall Centre Working Paper 28
Brown, K. and Corbera, E. (2003). A Multi-
Criteria Assessment Framework for Carbon-
Mitigation Projects: Putting “development” in
the centre of decision-making, Tyndall Centre
Working Paper 29
Hulme, M. (2003). Abrupt climate change: can
society cope?, Tyndall Centre Working Paper 30
Turnpenny, J., Haxeltine A. and O’Riordan, T.
(2003). A scoping study of UK user needs for
managing climate futures. Part 1 of the pilot-
phase interactive integrated assessment
process (Aurion Project), Tyndall Centre
Working Paper 31
Xueguang Wu, Jenkins, N. and Strbac, G. (2003).
Integrating Renewables and CHP into the UK
Electricity System: Investigation of the impact
of network faults on the stability of large
offshore wind farms, Tyndall Centre Working
Paper 32
Pridmore, A., Bristow, A.L., May, A. D. and Tight,
M.R. (2003). Climate Change, Impacts, Future
Scenarios and the Role of Transport, Tyndall
Centre Working Paper 33
Dessai, S., Hulme, M (2003). Does climate policy
need probabilities?, Tyndall Centre Working Paper
34
Tompkins, E. L. and Hurlston, L. (2003). Report to
the Cayman Islands’ Government. Adaptation
lessons learned from responding to tropical
cyclones by the Cayman Islands’ Government,
1988 – 2002, Tyndall Centre Working Paper 35
Kröger, K. Fergusson, M. and Skinner, I. (2003).
Critical Issues in Decarbonising Transport: The
Role of Technologies, Tyndall Centre Working
Paper 36
Ingham, A. and Ulph, A. (2003) Uncertainty,
Irreversibility, Precaution and the Social Cost
of Carbon, Tyndall Centre Working Paper 37
Brooks, N. (2003). Vulnerability, risk and
adaptation: a conceptual framework, Tyndall
Centre Working Paper 38
Tompkins, E.L. and Adger, W.N. (2003).
Defining response capacity to enhance climate
change policy, Tyndall Centre Working Paper 39
Klein, R.J.T., Lisa Schipper, E. and Dessai, S.
(2003), Integrating mitigation and adaptation
into climate and development policy: three
research questions, Tyndall Centre Working Paper
40
Watson, J. (2003), UK Electricity Scenarios for
2050, Tyndall Centre Working Paper 41
Kim, J. A. (2003), Sustainable Development and
the CDM: A South African Case Study, Tyndall
Centre Working Paper 42
Anderson, D. and Winne, S. (2003),
Innovation and Threshold Effects in
Technology Responses to Climate Change,
Tyndall Centre Working Paper 43
Shackley, S., McLachlan, C. and Gough, C. (2004)
The Public Perceptions of Carbon Capture and
Storage, Tyndall Centre Working Paper 44
Purdy, R. and Macrory, R. (2004) Geological
carbon sequestration: critical legal issues,
Tyndall Centre Working Paper 45
Watson, J., Tetteh, A., Dutton, G., Bristow, A.,
Kelly, C., Page, M. and Pridmore, A., (2004) UK
Hydrogen Futures to 2050, Tyndall Centre
Working Paper 46
Berkhout, F., Hertin, J. and Gann, D. M., (2004)
Learning to adapt: Organisational adaptation
to climate change impacts, Tyndall Centre
Working Paper 47
Pan, H. (2004) The evolution of economic
structure under technological development,
Tyndall Centre Working Paper 48
Awerbuch, S. (2004) Restructuring our
electricity networks to promote
decarbonisation, Tyndall Centre Working Paper 49
Powell, J.C., Peters, M.D., Ruddell, A. & Halliday, J.
(2004) Fuel Cells for a Sustainable Future?
Tyndall Centre Working Paper 50
Agnolucci, P., Barker, T. & Ekins, P. (2004)
Hysteresis and energy demand: the
Announcement Effects and the effects of the
UK climate change levy, Tyndall Centre Working
Paper 51
Agnolucci, P. (2004) Ex post evaluations of CO2
–Based Taxes: A Survey, Tyndall Centre Working
Paper 52
Agnolucci, P. & Ekins, P. (2004) The
Announcement Effect and environmental
taxation, Tyndall Centre Working Paper 53
Turnpenny, J., Carney, S., Haxeltine, A., &
O’Riordan, T. (2004) Developing regional and
local scenarios for climate change mitigation
and adaptation, Part 1: A framing of the East
of England, Tyndall Centre Working Paper 54
Mitchell, T.D. Carter, T.R., Jones, .P.D, Hulme, M.
and New, M. (2004) A comprehensive set of
high-resolution grids of monthly climate for
Europe and the globe: the observed record
(1901-2000) and 16 scenarios (2001-2100),
Tyndall Centre Working Paper 55
Adger, W. N., Brown, K. and Tompkins, E. L.
(2004) The political economy of cross-scale
networks in resource co-management, Tyndall
Centre Working Paper 65
Turnpenny, J., Haxeltine, A., Lorenzoni, I.,
O’Riordan, T., and Jones, M., (2005) Mapping
actors involved in climate change policy
networks in the UK, Tyndall Centre Working
Paper 66
Turnpenny, J., Haxeltine, A. and O’Riordan, T.,
(2005) Developing regional and local scenarios
for climate change mitigation and adaptation:
Part 2: Scenario creation, Tyndall Centre
Working Paper 67

Vincent, K. (2004) Creating an index of social Bleda, M. and Shackley, S. (2005) The formation
vulnerability to climate change for Africa, of belief in climate change in business
Tyndall Centre Working Paper 56 organisations: a dynamic simulation model,
Tyndall Centre Working Paper 68
Shackley, S., Reiche, A. and Mander, S (2004) The
Public Perceptions of Underground Coal
Gasification (UCG): A Pilot Study, Tyndall Centre
Working Paper 57

Bray, D and Shackley, S. (2004) The Social

Simulation of The Public Perceptions of
Weather Events and their Effect upon the
Development of Belief in Anthropogenic
Climate Change, Tyndall Centre Working Paper 58

Anderson, D and Winne, S. (2004) Modelling

Innovation and Threshold Effects
In Climate Change Mitigation, Tyndall Centre
Working Paper 59

Few, R., Brown, K. and Tompkins, E.L. (2004)

Scaling adaptation: climate change response
and coastal management in the UK, Tyndall
Centre Working Paper 60

Brooks, N. (2004) Drought in the African Sahel:

Long term perspectives and future prospects,
Tyndall Centre Working Paper 61

Barker, T. (2004) The transition to

sustainability: a comparison of economics
approaches, Tyndall Centre Working Paper 62

Few, R., Ahern, M., Matthies, F. and Kovats, S.

(2004) Floods, health and climate change: a
strategic review, Tyndall Centre Working Paper 63

Peters, M.D. and Powell, J.C. (2004) Fuel Cells for

a Sustainable Future II, Tyndall Centre Working
Paper 64