Beyond COP29: A Novel Framework for Tackling Climate Change

As policymakers gather in Baku, Azerbaijan, for the United Nations Climate Change Conference, also known as COP29, rising temperatures fueled by greenhouse gas emissions cast a dark cloud over climate action. The stakes couldn’t be higher — 2024 is on track to be the hottest on record.

The latest UN Climate Change report shows that the national climate pledges — developed by the signatories of the Paris Agreement to articulate how they will contribute to reducing greenhouse gas emissions — “fall miles short of what’s needed” to stop global warming from devastating economies and jeopardizing billions of lives.

Time is of the essence, but the traditional approaches to achieving net-zero emissions aren’t working. We must consider new frameworks grounded in entrepreneurial thinking to accelerate decarbonization across all sectors.

In “An Effectual Model of Collective Action for Addressing Sustainability Challenges,” published in the Academy of Management Perspectives, University of Virginia Darden School of Business Professor Saras Sarasvathy and her co-author, Anusha Ramesh, assistant professor of strategic management at Willamette University in Salem, Ore., offer a powerful model of collective action that can serve as a practical guide for entrepreneurs seeking to tackle complex environmental challenges.

Addressing Market Failure

Climate change is often attributed to market failure, which happens when markets fail to allocate resources efficiently. As Sarasvathy puts it, “When markets fail, the impulse is to immediately turn to centralized government-based solutions that are almost always predictive.”

Sarasvathy’s paper explores a non-predictive approach to tackling climate change. It combines two frameworks: effectuation, which offers a process model for entrepreneurship, and Nobel Laureate Elinor Ostrom’s institutional analysis and development (IAD) model of collective action, which occurs when groups work together to achieve a common objective.

“The role of entrepreneurs in the context of sustainable entrepreneurship is multidimensional,” says Sarasvathy. “They have political, social, institutional and economic roles, and they often change the rules of the game and create new institutional forms and new organizations.”

To be effective, sustainable entrepreneurs need a process model that accounts for the complexity and the interconnected nature of the problems they face.

“Ostrom developed the IAD framework for creating polycentric governance mechanisms such as public-private partnerships to solve market failure problems,” says Sarasvathy. “Effectuation offers a framework for understanding how entrepreneurs can address these market failures and develop sustainable solutions. What’s great is that effectuation integrates seamlessly with the IAD framework.”

A Process Model for Sustainable Entrepreneurship 

Effectuation, developed by Sarasvathy, consists of a unique logic embodied in five decision-making principles, which help entrepreneurs reduce reliance on predictive strategies in uncertain environments. Instead of trying to predict the future, effectual entrepreneurs work with things within their control to shape and co-create new futures.

According to Sarasvathy, effectual entrepreneurs don’t begin with a defined problem or goal. Starting with who they are, what they know, and whom they know (WWW), they ask what’s doable, given their WWW. They interact with various stakeholders and seek their commitments to co-create opportunities, ventures and markets.

Without Ostrom’s IAD principles, effectual entrepreneurs simply go where the process takes them. Guided by Ostrom’s IAD design principles, however, entrepreneurial interactions with various stakeholders and their commitments lead to collective action. That’s why, notes Sarasvathy, when negotiating with stakeholders, sustainability entrepreneurs must pay attention to the following: 

1. Defining clear group boundaries
2. Matching rules governing use of common goods to local needs and conditions
3. Ensuring that those affected by the rules can participate in modifying them
4. Ensuring the rule-making rights of community members are respected
5. Developing a system, carried out by community members, for monitoring compliance
6. Using graduated sanctions for rule violators
7. Providing accessible, low-cost means for dispute resolution
8. Building responsibility for governing the common resource in nested tiers from the lowest level up to the entire interconnected system

Each commitment from a stakeholder who self-selects into the process results in new means and new goals. Stakeholder commitments, guided by IAD design principles, eventually coalesce into new ventures, new institutions and new rules that are enduring and sustainable, according to Sarasvathy.

Applying Effectuation Principles to Climate Change

Let’s explore how COP29 participants, or anyone interested in fighting global warming, could benefit from Sarasvathy’s research on entrepreneurial thinking and decision-making.

Start with “Who You Are, What You Know, and Who You Know” (WWW). Instead of beginning with predefined goals, effectual entrepreneurs focus on existing resources. In the context of COP29, this means acknowledging each participating nation's unique strengths, expertise and networks. Countries should leverage their existing capabilities, whether in renewable energy technology, sustainable agriculture, or climate finance.

What Can We Do? With an understanding of their WWWs, nations can ask, “What can we do?” This shifts the focus from ambitious targets to doable actions. For example, a country with advanced solar technology might commit to sharing expertise with developing nations. And frugal innovations originating in developing countries, like jugaad in India, could be exported and scaled globally.

Seek Commitments through Interactions. Effectuation emphasizes building partnerships and co-creating opportunities through interactions. At COP29, this entails fostering dialogues and collaborations between governments, businesses, NGOs, and communities, not just top down, but also bottom up. Which entities are already working together? How can larger commitments be aggregated from smaller ones already proven on the ground?

Embrace the Crazy Quilt of Stakeholders. Instead of limiting engagement to specific groups, effectuation encourages welcoming diverse stakeholders who self-select into the process. This creates a “crazy quilt” of partnerships, fostering unexpected synergies. “This means that in addition to scheduled meetings with predetermined groups,” says Sarasvathy, “opportunities for open conversations and serendipitous activities need to be enabled and encouraged.”

Make Lemonade from Contingencies. Effectuation advocates for leveraging contingencies, even negative ones, as potential opportunities. Systematically chronicling and disseminating unexpected responses to climate challenges, especially from entrepreneurs and small communities would be powerful sources of innovative solutions.

By embracing the principles of effectuation and IAD, COP29 participants could move beyond traditional predictive approaches, fostering a more dynamic, collaborative response to climate change. Instead of fixating on increasingly unattainable net-zero targets, they could focus on leveraging existing resources and partnerships, transforming contingencies into opportunities for a more sustainable future.

UVA Darden Professor Saras Sarasvathy explores a new process model for sustainable entrepreneurship in "An Effectual Model of Collective Action for Addressing Sustainability Challenges," published in the Academy of Management Perspectives in November 2019.