Understanding RCPs and SSPs: Essential Climate Scenarios for Your Business Strategy

Which climate scenarios are important for your company? Quite simply: Both RCPs and SSPs offer crucial insights to assess climate change risks and identify opportunities. RCPs help you analyze physical climate risks such as extreme weather events or rising temperatures. SSPs, on the other hand, show how societal developments can impact your markets and business models. By combining both scenarios, you can gain a holistic understanding of climate change impacts and respond more effectively to future challenges. For instance, the IPCC highlights that using both RCPs and SSPs together allows organizations to simulate a wide range of plausible futures, improving resilience planning and risk management.

What you should know:

• RCPs illustrate how greenhouse gas concentrations and temperatures could develop by 2100. For example, RCP8.5 projects a global mean temperature increase of up to 4.8°C by 2100, while RCP2.6 aims to keep warming below 2°C (IPCC AR5).
• SSPs describe possible social and economic developments that influence these emissions, such as population growth, economic trends, and policy choices (DKRZ).
• Both scenarios are essential for complying with regulations such as the CSRD and the EU Taxonomy.

Recommendation: Use at least two scenarios—one that reflects the Paris Climate Agreement targets (e.g., RCP2.6 with SSP1), and one that represents worst-case scenarios (e.g., RCP8.5 with SSP5). This way, you’ll be well prepared to minimize risks, seize opportunities, and meet regulatory requirements. The Task Force on Climate-related Financial Disclosures (TCFD) also recommends this dual-scenario approach for robust climate risk assessment.

What are Representative Concentration Pathways (RCPs)?

RCP Basics

Representative Concentration Pathways (RCPs) are scenarios used to project future concentrations of greenhouse gases in the atmosphere. They do not directly describe emissions, but rather the resulting concentrations, and were officially introduced by the IPCC. RCPs are central to climate modeling, providing standardized pathways for global temperature projections and risk assessments.

The original four RCPs—RCP2.6, RCP4.5, RCP6.0, and RCP8.5—are named after the expected changes in radiative forcing between 1750 and 2100. These values range from 2.6 to 8.5 W/m². The higher the RCP value, the greater the temperature rise and the impacts of climate change. For example, RCP8.5 is often referred to as the “business as usual” scenario, projecting severe impacts if emissions continue unabated (Carbon Brief).

In the IPCC’s Sixth Assessment Report, new RCPs were introduced in addition to the original pathways: RCP1.9, RCP3.4, and RCP7. RCP1.9 aims to limit global warming to below 1.5°C. RCP2.6 requires carbon dioxide emissions to decline from 2020 and reach zero by 2100.

These scenarios form the basis for systematic assessment of climate-related risks, which are increasingly used by companies. For example, the Network for Greening the Financial System (NGFS) utilizes RCPs in its climate scenario analyses for financial institutions.

How Companies Use RCPs

RCPs help companies assess physical risks such as hurricanes, floods, or droughts up to the year 2100. They enable you to analyze risks for individual assets or entire portfolios—under different global warming scenarios. For instance, a real estate company may use RCP8.5 to stress-test its portfolio against extreme heat and flooding risks, while a logistics firm might use RCP4.5 to evaluate supply chain vulnerabilities.

A practical example is the Bayerische Landesbank, which integrates RCP-based climate risk analyses into its lending decisions. Patrick Th. Gruninger, Chief Specialist in Credit Management, explains:

“Thanks to the detailed and meaningful assessment of physical risks from natural disasters and climate change with the Climate Change Edition, we can make well-founded credit decisions in our risk analysis.”

By identifying potential climate risks early, companies can strategically steer their investments to achieve safer returns. Supply chains can also be designed to be less vulnerable to climate-related disruptions. According to McKinsey, companies that integrate RCP-based climate risk analysis into their planning are better positioned to mitigate losses and capture new market opportunities.

RCPs for Regulatory Compliance

RCPs also play a central role in meeting regulatory requirements such as the CSRD and the EU Taxonomy. They are used to assess physical climate risks, set emissions reduction targets, and fulfill reporting obligations. For example, the TCFD recommends scenario analysis using RCPs to disclose climate-related risks and opportunities in financial filings.

The choice of the appropriate RCP depends on specific business requirements and climate goals. RCP2.6 represents a scenario with sharply reduced emissions, while RCP4.5 and RCP6.0 are moderate stabilization scenarios. RCP8.5, on the other hand, describes a scenario with unmitigated emissions.

The data provided by RCPs on emissions, concentrations, and land use are essential for climate models and risk assessments. They help companies meet both regulatory requirements and voluntary standards in managing climate risks.

What are Shared Socioeconomic Pathways (SSPs)?

SSP Basics

After looking at RCPs as a basis for physical climate risk assessment, SSPs expand this perspective to include the socioeconomic context. SSPs serve as frameworks that describe possible future societal developments and the associated emissions pathways. They examine various scenarios that consider technological, social, and political developments as well as climate-related challenges (DKRZ).

Unlike RCPs, which focus on greenhouse gas concentrations, SSPs emphasize the socioeconomic background. They show how different societal developments can lead to various emissions trajectories. They define possible scenarios that could occur without targeted international climate action.

There are five SSPs, ranging from sustainable development (SSP1), through a moderate path (SSP2), to regional rivalry (SSP3), inequality (SSP4), and fossil-fueled development (SSP5). While RCPs show where we could be headed climatically, SSPs illustrate which societal pathways could lead us there. For example, SSP5 describes a world with rapid economic growth driven by fossil fuels, resulting in high emissions, while SSP1 envisions a sustainable, equitable society with lower emissions (Carbon Brief).

How SSPs Support Business Planning

SSPs give companies the opportunity to assess risks from societal transformations and identify long-term opportunities. They describe global development trends such as population growth, urbanization, technological innovation, and resource distribution. These factors directly influence the business environment and can significantly impact markets, supply chains, and investment decisions. For example, a company operating in emerging markets may use SSP3 to anticipate risks from regional instability and protectionism, while a technology firm may leverage SSP1 to plan for growth in green innovation sectors.

While RCPs primarily map physical climate risks like floods or droughts, SSPs enable analysis of transition risks arising from societal changes. SSP1 (Sustainability), for example, describes a world with low barriers to climate protection and adaptation. In contrast, SSP3 (Regional Rivalry) brings high barriers for both areas.

For German companies, SSPs are particularly valuable as they help better understand the impact of various societal and political developments on business models. In an SSP1 scenario, companies could benefit from investments in green technologies, while SSP3 could mean protectionist measures and limited international cooperation.

Using SSPs in Combination with RCPs

Linking SSPs and RCPs provides a comprehensive picture of the interactions between socioeconomic trends and climate factors. This creates models that can simulate different future scenarios. This holistic approach helps companies address both physical and transition risks in a targeted way. According to the IPCC AR6, combining RCPs and SSPs enables more nuanced scenario analysis, supporting strategic planning and resilience-building.

Examples like Amsterdam and Copenhagen show how such integrated models can be used. Both cities have planned sustainable urban development projects to ensure that infrastructure investments remain resilient to climate change in the long term. For companies, this means they must consider both the physical impacts of climate change and society’s responses to it.

The following table shows recommended combinations for different scenarios:

The SSPs were first published in 2016 and play a central role in climate modeling for the IPCC’s Sixth Assessment Report. They can be flexibly combined with different emissions reduction targets, making them a valuable tool for companies wanting to analyze different strategies and their impacts on business operations. For more on SSPs, see the DKRZ SSP overview.

RCP vs. SSP: Which is More Important for Companies?

Now that we’ve covered the basics of RCPs and SSPs, let’s take a closer look at how these scenarios can be applied in practice. The following comparison will help you identify the right models for your specific business requirements and time horizons.

Main Differences Between RCPs and SSPs

RCPs (Representative Concentration Pathways) focus on projecting greenhouse gas concentrations, while SSPs (Shared Socioeconomic Pathways) map out future socioeconomic developments. RCPs were specifically developed for climate models to represent emissions pathways and associated radiative forcing. In contrast, SSPs focus on factors such as population growth, education, and political developments to describe possible societal scenarios.

A key difference lies in the time horizon: RCPs provide projections up to the year 2100, while SSPs cover long-term trends and narratives. SSPs also offer greater flexibility, as they can be combined with various emissions reduction targets. This makes them especially useful for analyzing different strategies. For example, the Carbon Brief notes that SSPs allow companies to test the robustness of their strategies against a range of socioeconomic contexts, not just climate outcomes.

RCP vs. SSP Comparison Table

Source: Based on data from IPCC AR6 and Carbon Brief.

Which Scenarios Match Your Business Requirements?

The right scenario depends heavily on your time horizon and business objectives. For short-term actions (up to 2025), topics like CO₂ pricing, regulatory requirements, and supply chain optimization are key. In the medium term (up to 2030), technological developments and market changes play a central role, especially regarding the achievement of SDG targets. In the long term (up to 2050), the focus is mainly on assessing physical risks and adapting business models.

RCPs are particularly helpful for assessing physical risks. They provide concrete temperature forecasts, which are important for infrastructure investments or site selection. Scenarios like RCP2.6 and RCP8.5 vividly illustrate how different temperature changes can have varying impacts. For example, the IPCC AR6 shows that the difference between RCP2.6 and RCP8.5 could mean the difference between manageable and catastrophic climate impacts for many sectors.

SSPs, on the other hand, are ideal for strategic business planning and ESG reporting. SSP1 and SSP5 describe optimistic future scenarios: SSP1 focuses on sustainable practices and investments in education and health, while SSP5 depicts an energy-intensive, fossil-fuel-based economy. In contrast, SSP3 and SSP4 show more pessimistic developments with lower social investments, rapid population growth, and increasing inequalities. These scenarios are especially useful for stress testing and preparing for extreme situations.

For compliance requirements, a combination of RCPs and SSPs can be beneficial. For example, SSP scenarios indicate that global GDP by 2100 is expected to be four to ten times higher than in 2010, which has significant implications for market forecasts and investment decisions (Carbon Brief).

SSPs also provide valuable insights into how societal choices influence greenhouse gas emissions and how the Paris Agreement climate goals could be achieved. This information can help you strategically integrate climate scenarios into your corporate strategy.

How to Integrate Climate Scenarios into Your Corporate Strategy

To better understand climate-related risks and opportunities, it’s crucial to deliberately incorporate RCPs and SSPs into your strategy. This enables a structured analysis that helps you make informed decisions. Once the need for such an analysis is clear, the next step is to select the appropriate scenarios.

Selecting the Right Scenarios

The choice of suitable scenarios depends on your goals and industry environment. The Task Force on Climate-related Financial Disclosures (TCFD) recommends using at least two scenarios to address climate change uncertainty. This includes one scenario that represents the Paris Agreement targets (e.g., SSP1-1.9) and one that extends current trends (e.g., RCP8.5). This approach is echoed by leading consultancies such as McKinsey, who stress the importance of scenario diversity for robust planning.

Your scenarios should be tailored to your specific context—such as industry, geographic location, and risk profile. It’s important to note that SSP1 assumes low challenges for mitigation and adaptation, while SSP3 presents high challenges in both areas. SSP5, meanwhile, forecasts the strongest global warming and provides a strong climate signal, which may be relevant in certain research contexts.

Tools and Methods for Scenario Analysis

To effectively integrate climate scenarios into your strategy, you can use digital tools that precisely model risks and financial impacts. These scenario analyses should be part of your risk management processes to better address the complex challenges of climate change.

A proven approach involves three steps: first, a qualitative assessment; then a quantitative analysis with concrete indicators; and finally, the development of an action plan with short- and medium-term measures.

Various tools are available for analysis. Publicly accessible scenarios from organizations such as the IPCC, NGFS, or IEA are transparent and provide a solid foundation, but are often general. Custom scenarios offer more specific insights but require more effort and may include subjective elements. Industry-specific scenarios are based on high-quality data and are often comparable within a sector, but may also have sector-specific biases.

For physical risks, you can use tools like WRI Aqueduct, Climate Central, or Four Twenty Seven. For transition risks, Carbon Delta, Ortec Finance, or PACTA offer valuable support. Integrated platforms such as Cervest, ClimateIQ, or S&P Climate Credit Analytics combine various analytical areas, making comprehensive assessment easier.

Regularly updating your scenario analyses is essential, as both climate forecasts and your business environment are constantly evolving. These analyses help you minimize risks, identify opportunities, and better assess the impact on your business.

Such methods can also help you identify weaknesses in your strategy. If needed, external support can speed up and streamline the process.

How Fiegenbaum Solutions Supports You

Fiegenbaum Solutions is your partner for developing ESG strategies based on robust climate scenarios. Johannes Fiegenbaum and his team offer tailored solutions to strategically integrate RCPs and SSPs into your business context.

The consulting services include impact modeling and scenario analyses, complemented by concrete recommendations for your decarbonization strategy. Especially regarding regulatory requirements such as the CSRD and EU Taxonomy, Fiegenbaum Solutions supports you with reporting and compliance.

Project management is flexible—whether on a project basis for specific challenges like climate risk analyses, or as a retainer for ongoing advice on sustainability and climate issues. For startups and companies with a strong impact focus, there are also special terms tailored to their development phase and goals.

Thanks to a combination of market insights, regulatory expertise, and entrepreneurial perspective, Fiegenbaum Solutions gives you the opportunity to future-proof your business model. With data-driven analyses, you can develop sustainable strategies while achieving efficiency gains. This makes your organization not only more resilient, but also better prepared for future challenges.

Key Takeaways for Companies

For German companies, RCPs and SSPs are indispensable for making informed decisions and complying with legal requirements. These climate scenarios provide the foundation for a future-oriented corporate strategy that reduces risks while highlighting opportunities.

RCPs analyze the physical impacts of climate change, such as extreme weather events or rising temperatures. SSPs, on the other hand, consider socioeconomic developments, including market and societal trends. By combining both approaches, companies gain a more comprehensive view of risks and opportunities, making strategic decisions easier.

Combining physical and socioeconomic perspectives delivers a broader understanding. Especially important: Data shows that even SSP1 without climate policy does not achieve the Paris climate targets. SSP2 with 80 GtCO₂/year (comparable to RCP8.5) underscores the urgency (Carbon Brief). These figures make it clear why proactive strategies are essential.

How can this be implemented in practice? Choose two scenarios: one aligned with the Paris targets and one reflecting current trends. Use tools like the Climate Atlas or the Climate Impact Explorer to conduct robust analyses.

Regulations such as the CSRD or the EU Taxonomy require precise information on climate risks. Scenario analyses are key here. Companies of all sizes can benefit by annually selecting suitable scenarios tailored to their industry, region, and specific risks.

Equally important is regularly updating these analyses. Climate forecasts and economic conditions are constantly changing—only those who adapt their strategies will remain capable and successful in the long term.

FAQs

How can companies use RCP and SSP scenarios to optimize their strategies for climate risks and sustainability?

Companies can combine RCP and SSP scenarios to make informed decisions in dealing with climate risks. While Representative Concentration Pathways (RCPs) provide scientific forecasts of possible climate developments, Shared Socioeconomic Pathways (SSPs) show how socioeconomic developments influence emissions and their impacts. Combining both approaches enables in-depth analysis of physical risks and economic frameworks. The IPCC recommends this integrated approach for robust climate risk management.

With the help of these scenarios, companies can develop targeted strategies to prepare for various climate scenarios. This includes not only complying with regulatory requirements such as the CSRD and EU Taxonomy, but also developing sustainable business models. Especially in Germany, where climate protection and decarbonization play a central role, these scenarios provide a valuable foundation for long-term planning and ESG strategies.

What methods and tools help companies effectively integrate climate scenarios into their strategies?

Companies can effectively incorporate climate scenarios into their strategies by relying on proven methods and tools. A tried-and-tested approach is to develop at least three different scenarios to map out various possible futures. This approach makes it easier to assess potential risks and opportunities more precisely. The TCFD and NGFS both provide guidance and toolkits for scenario analysis.

Scenario analysis tools and best-practice frameworks play a crucial role. They help identify climate-related risks and develop strategies for adaptation or decarbonization. In addition, they support companies in achieving ESG goals and complying with regulations such as the CSRD or EU Taxonomy.

By combining these tools and approaches, companies gain a stronger foundation for strategic planning and are better equipped to respond to future challenges.

How do RCPs and SSPs help companies meet the requirements of the CSRD and EU Taxonomy?

RCPs and SSPs: Tools for Assessing Climate Risks

RCPs (Representative Concentration Pathways) and SSPs (Shared Socioeconomic Pathways) are indispensable instruments for analyzing the impacts of climate change. They help companies make informed decisions on how to respond to climate risks while seizing opportunities. These scenarios provide a solid foundation for strategically adapting and future-proofing sustainability strategies.

Moreover, RCPs and SSPs make it easier to meet the requirements of the CSRD (Corporate Sustainability Reporting Directive) and the EU Taxonomy. They form the basis for forward-looking analysis of climate impacts. By integrating these scenarios into your processes, you can optimize your reporting, better manage risks, and effectively implement your decarbonization strategies. For further reading, see the IPCC AR6 and Carbon Brief’s SSP explainer.