Six insights on green demand and systems thinking

By Richard Shen, Systems Transformation Youth Fellow, Climate Champions | November 15, 2024

In a world where “systems change” is frequently cited as essential for tackling global challenges, what does the term truly mean? Why do we refer to these structures as “systems,” and what does transforming them actually entail?

Richard Shen, Climate Champions Systems Transformation Youth Fellow, explores these questions through a nuanced perspective on green demand and systems thinking. Drawing on insights from his work with the Climate Champions Team, Shen sheds light on how systems thinking can drive impactful climate action. By understanding systems as interconnected networks of agents – dynamic and continuously evolving – Shen provides a roadmap for identifying the critical levers of change needed to build an equitable, net zero, and resilient future. His analysis delves into the structural barriers hindering green demand and offers strategic solutions to accelerate sustainable transformation.

1. What is systems thinking, and why is it essential for climate action?

A “system” is a network of interconnected and dynamic elements that evolve together over time. Systems thinking helps us understand the relationships and feedback loops within these networks, providing a way to address complex social-ecological challenges. This approach is essential for tackling sustainability issues, as it allows us to analyze interactions, non-linear behaviours, and the cumulative effects of actions within systems.

The IPCC’s AR6 SYR emphasizes the importance of systems transformations for global climate action, noting that “rapid and far-reaching transitions across all sectors and systems are necessary to achieve deep and sustained emissions reductions and secure a liveable and sustainable future for all.” By viewing climate action through a systems lens, we can better understand and tackle the interwoven challenges on the path to a just, net zero, and nature-positive world by 2050.

2. What are the key levers for systems change?

System change levers are powerful tools that can shift the structure of economic, environmental, or social systems. These levers include demand, technology and supply, policy, finance, and civil society. When activated together in a coordinated effort, they drive transformative change, addressing the root causes of sustainability issues rather than just their symptoms.

Effective systems change relies on all these levers working in harmony, creating a holistic approach that fundamentally shifts how a system operates.

3. What is the “Green Demand Gap”?

One of the main challenges to systems change in climate mitigation is the insufficient demand for green products, especially in high-emission sectors like cement and steel. The “Green Demand Gap” refers to the difference between current demand for green products and the level needed to meet climate targets.

According to the IEA’s 2024 Breakthrough Agenda Report, the green transition is slowed by limited demand in these sectors. The IPCC warns that to limit warming to 1.5°C, global GHG emissions must be cut by 45% from 2010 levels by 2030. Bridging this demand gap is essential to meeting these ambitious targets and accelerating the adoption of sustainable solutions.

Sufficient green demand is essential as it creates a strong and predictable market for near-zero/net-zero emission products. This, in turn, can drive investment and spur innovation in clean technologies. For example, large-scale green procurement commitments by governments and corporations provide the confidence needed for producers to transition away from carbon-intensive methods. Such market shifts enable economies of scale, reducing the costs of sustainable technologies, making them more accessible, and facilitating wider adoption. This, in turn, accelerates the replacement of high-emission practices with low-emission solutions, directly cutting GHG emissions.

4. How can green demand creation be viewed as a complex adaptive system?

The regime of green demand creation and management can be seen as a complex adaptive system with distinct characteristics:

• Self-organization: Various non-party stakeholders – companies, NGOs, government agencies, cities, and others – naturally form inter- and intra-sector coalitions and initiatives, building a network of actors that collectively influence green demand.

• Adaptation: Downstream companies, such as those in real estate, when facing the choice between procuring green products—such as near-zero steel — and their high-emission embedded counterparts often exhibit the characteristic of “adaptation”: they adjust their approach to fit a changing environment. Early adopters of green products create a ripple effect, influencing others to shift toward lower-emission choices and driving the industry toward sustainability. This competitive pressure encourages companies to embrace green goals, aligning with shareholder and consumer expectations.

5. What are the sensitive intervention points for scaling green demand?

Through collaboration with experts and partners, the Climate Champions Team has identified several sensitive intervention points where focused action could accelerate green demand:

• Limited demand aggregation: Demand aggregation – pooling demand across sectors – can help lower costs and attract investment. However, current efforts are often fragmented, limiting market influence.
• High capital costs: In emerging economies, higher capital costs make green projects less economically viable, especially in high-emission industries.
• Lack of standardized data and reporting: Without consistent data and reporting frameworks, it’s challenging to measure green demand and track progress, making stakeholder alignment difficult.
• Limited access to concessional capital: Large green projects require significant upfront investment, but concessional capital is limited. This lack of funding makes it difficult to finance projects at the scale needed to drive change.

6. How does the Climate Champions Team support green demand?

Understanding the urgent need to stimulate the green demand in the global climate action ecosystem, and the impediments it is currently facing, the Climate Champions Team has taken the role of convenor to promote faster green demand adoption by non-Party stakeholders (NPS).

Their efforts include:

• Reporting and measuring: Tracking progress on demand signals from non-party stakeholders in the Breakthrough Agenda Report.
• Platforming and advocacy: Promoting green demand initiatives and advocating for greater green procurement.
• Convening and connecting: Organizing discussions within the green demand community.
• Engaging businesses: Guiding businesses on how to increase demand for green products and solutions.

At COP29, stakeholders from all sectors will have the opportunity to rally behind green demand initiatives, scale up their efforts, and reinforce the pathways needed for a just transition. By embracing systems thinking and aligning actions across key levers of change, the global community can make significant strides towards closing the green demand gap and accelerating meaningful climate action.