Business in the just transition: why, what and how?
Clémence Billard Schachter, Manager, Policy & Just Transition, We Mean Business Coalition; Elisa Holteng, Lead Strategist, Climate & Just Transition, The B Team
We know what the science says: we need to halve global emissions in this decade to limit temperature increase to 1.5°C and avert the worst impacts of climate change. How we set out to deliver these emissions cuts will be critical to our long-term success. As the latest IPCC AR6 synthesis report finds: “Actions that prioritise equity, climate justice, social justice and inclusion lead to more sustainable outcomes, co-benefits, reduce trade-offs, support transformative change and advance climate resilient development.”
This is at the core of the concept of a just transition, as the International Labour Organization defines it; greening the economy in a way that is as fair and inclusive as possible to everyone concerned, creating decent work opportunities, and leaving no one behind. In other words, the just transition is about placing people at the center of climate action. It is what’s best for both people and the planet, and business has an important role to play.
Why should business care about the just transition?
All climate action planning – of companies, cities, regions, governments – needs societal buy-in to realize its full potential and be sustainable in the long term.
A just transition offers the necessary stakeholder-centric approach to planning for the shift to a decarbonized economy. It can improve oversight of transition benefits, risks and costs, increase social support for climate action, and ensure good relations with all groups that are affected – thereby allowing people and communities to thrive alongside business.
As we move away from fossil fuel-based economies towards green industrialization and more sustainable production and consumption patterns, incorporating just transition considerations into transition plans, whether at an international, national or company level, is both smart and socially responsible governance.
For business, embedding just transition in climate transition action plans helps to build resilience and mitigate material risks that may arise from climate and societal related disruptions of economic activities.
A company’s social license to operate will come to depend on how it factors a just transition into its corporate planning, so it is also increasingly seen by investors as an indicator of long-term profitability and a sustainable business model. By co-designing climate solutions with affected stakeholders, creating green and decent jobs across the value chain, and preparing people for the future of work, companies can play a positive role in the net zero transition – while seizing its economic opportunities.
It is both a moral imperative and good business.
For governments, integrating just transition considerations into national transition planning and policymaking helps build public support for high climate ambition, allowing them to go further, faster. This is true where meaningful participation of citizens allows for co-creation of climate policies and solutions. It is also the case for pathways and measures that protect those most vulnerable to the adverse impacts of the low carbon transition while delivering social and economic opportunities for affected workers and communities.
When business acts in support of a just transition, governments have the confidence they need to adopt more ambitious policies. Bold policies will in turn create an enabling environment for business to accelerate action and investments in the green economy: this is the ambition loop.
At an international level, equity is a key principle of international climate architecture including the Paris Agreement and the UN Framework Convention on Climate Change. Emissions must go down everywhere, and global climate goals cannot be achieved without cooperation between countries. By prioritizing support to low- and middle-income countries, especially those with debt vulnerability and those highly dependent on or with high potential for fossil fuel revenues, countries can build the trust necessary for decisive climate action in this decade.
At the recent Summit for a New Global Financing Pact, world leaders agreed that urgent measures must be taken to facilitate access to financing for vulnerable low- and middle-income countries. The role of the private sector in supporting a global just transition was highlighted, and the World Bank announced the launch of a Private Sector Investment Lab to tackle barriers hampering private sector investment in emerging markets.
What is business currently doing about the just transition?
There has been increased scrutiny from investors and civil society over how companies address just transition in their strategies and operations. As a result, businesses are starting to plan for and act in support of a just transition, for example:
- Following the publication of its Just Transition Strategy in late 2020, SSE recently shared a progress report, taking stock of actions and reporting against the company’s just transition commitments;
- 9 companies are actively participating in the Energy for a Just Transition collaboration, a business-led collaborative initiative, facilitated by BSR, in partnership with The B Team;
- 12 companies have committed to a total of 23 just transition actions on The Council for Inclusive Capitalism Just Transition Framework for Company Action;
- 27 major companies from across the energy and industrial sectors have signed The B Team Just Transition and Decent Jobs pledge;
- As of June 2022, 27 companies were participants of the UN Global Compact Think Lab on Just Transition, including Iberdrola, the first company to present its Climate Transition Plan to the United Nations, aiming to reach net zero emissions by 2040. The company’s plan is based on just transition principles, in line with the ten recommendations of the UN high-level expert group on the net zero emissions commitments of non-state entities.
Despite this encouraging movement from the business community, there are still few examples of what good looks like for companies. With a growing body of guidance for business, it can be challenging for companies to know where to start. At the same time, there are still sectoral gaps and few practical resources. A lack of best practices and clarity regarding the role of business in the just transition, as well as fragmented corporate approaches to managing the societal impacts of the green transformation have contributed to modest business engagement on the topic to date.
How is the We Mean Business Coalition helping business embrace its role in the just transition?
BSR, The B Team and the We Mean Business Coalition have launched the Just Transition Resource Platform, a living, regularly updated resource to scale business Ambition, Action, Advocacy and Accountability on the just transition.
In line with the 4 A’s of Climate Leadership, the Coalition’s framework for credible corporate climate action, the Platform provides an actionable frame for companies to integrate just transition in business strategies and operations. It builds on the work of leading organizations in this space including, among others:
- the Council for Inclusive Capitalism;
- the Grantham Institute on Climate Change and the Environment;
- the International Labour Organization;
- the Institute for Human Rights and Business;
- the UN Global Compact; and
- the World Benchmarking Alliance.
It synthetizes key takeaways and signposts to the best guidance available for companies to get started on their just transition journeys. With this Platform, we aim to socialize the important role business has to play in the just transition to net zero, clarify what is expected of companies and scale up business action.
Want to get involved in the We Mean Business Coalition’s Just Transition work?
- Share your story! Are you implementing some of the steps outlined in the Platform? Get in touch at [email protected] to share the lessons you’ve learned on your just transition journey or any feedback you may have on the Just Transition Resource Platform.
- Engage in policy advocacy in support of a just transition away from fossil fuels and towards renewable energy: reach out to [email protected] to learn the latest opportunities for companies to raise their voice in the lead up to COP28.