The Trouble with Growth

Forecasting is a dangerous business. Yet every sustainability plan depends on it. The challenge is not just technical, but cognitive: the human brain is wired for simplicity, and the future is not.

Consider a company with a modest ambition: grow its revenue by 3% a year until 2050. At first glance, this sounds like a slow, steady incline. But over 27 years, that figure more than doubles. Without any further changes, so too might the company’s carbon emissions.

This is where exponential-growth bias rears its head. Most people, when asked to project future growth, instinctively reach for a ruler when they need a curve. They apply linear thinking to exponential problems. And they get the answer wrong.

The maths of misjudgement

In a 2016 experiment, economists Matthew Levy and Joshua Tasoff posed a simple question. One asset starts with a value of $100 and grows at 10% each period. A second asset is fixed. What must the second asset's value be to match the first after 20 periods?

The correct answer—$672.75—requires only high-school mathematics. Yet most respondents were wide of the mark. A third guessed $300, as if the $100 investment were growing by $10 per period. This isn’t ignorance of maths; it is the shape of exponential growth that tricks the mind. Even more revealing, those who answered worst were often the most confident in their answers.

Other studies have shown that neither income nor education insulate people from this illusion. In unfamiliar domains, like emissions forecasting, even those who understand compounding in financial contexts fall into the trap.

A bias with consequences

For climate strategists, this bias is more than an academic curiosity. Emissions forecasting often begins with projecting the company’s underlying activity: tonnes of output, kilometres travelled, units sold. If this activity grows steadily—3%, say—then emissions may follow suit unless mitigated.

But if a forecaster applies linear reasoning, they will underestimate the trajectory. A 3% increase each year for 27 years is not a 3 × 27 = 81% rise. It is (1.03)^27—a 127% increase. Left unchecked, that kind of error can derail an entire net-zero plan.

Modelling the world as it is

This is why tools and methodologies must incorporate exponential logic by design. Left to their own devices, even well-meaning sustainability professionals may anchor on incorrect baselines. Emissions pathways, once set, can lock firms into commitments that are harder—and costlier—to unwind later.

Indeed, some of the worst offenders may be those who appear most confident in their models. A little scepticism, or at least humility in the face of exponential processes, may be a greater asset than enthusiasm.

Beyond the curve

The irony is that exponential growth is not exotic. It governs interest rates, viral contagion, and compound returns. But its effects unfold quietly—then suddenly. Businesses planning for 2050 cannot afford to treat activity growth as linear, nor allow their emissions models to reflect that misconception.

The path to net zero is steep enough without walking it blindfolded.