It is clear that 2021 will truly need to become the year of unprecedented climate action, if we are to ensure a future for humanity. There can be no doubt that a zero-carbon world is possible, but the sectoral and economic transformation we need is on a scale and timeframe faster than ever in our history. With that, comes a real potential for stranded workers and communities that are directly employed in sectors critical to climate stability. A just transition ensures environmental sustainability as well as decent work, social inclusion and poverty eradication.
The concept of a Just Transition has been lingering around since the 1990s, eventually becoming part of the Paris Agreement in 2015 where 197 signed the agreement to “take into account the imperatives of a just transition of the workforce and the creation of decent work and quality jobs in accordance with nationally defined development priorities.” The term Just Transition has gained considerable momentum over the last five years.
And rightly so. The social fabric of society is very closely knit to economic activity and the source of employment. History is full of examples where radical changes to the economy deprived people of their main source of income. Think of Detroit’s deterioration following the decline of its automotive industry or the collapse of Newfoundland’s fishing industry following the collapse of cod stock. These effects often last for decades and new examples continue to emerge, such as the millions of people deprived of their livelihoods in South-East Asia when fashion companies cancelled their orders during the COVID-19 crisis.
There will be many more disruptions in the future, caused by both the changing climate and the eventual decarbonisation of the economy to curb climate change. Unfortunately, we can’t afford to slow down the transition, it will only need to accelerate to reduce the impacts on all people, including future generations. It is therefore important that when we discuss a just transition, we don’t only focus on softening job losses in high emitting sectors such as coal. Instead, we propose to focus on three different dimensions across all sectors:
Helping employees making the appropriate switch
In 2020 alone, the oil and gas sector has shown one of the steepest declines in market capitalisation. Furthermore, $130 billion of investment has been dropped from the oil sector and tens of thousands of job losses have occurred. There is a clear movement of parties seeking to end fossil fuel extraction entirely, with Denmark’s latest announcement leading the way, forcing the industry to shift towards low- and zero-carbon energy solutions.
During the transition, it is imperative that employees receive the training needed to make the appropriate switch to working with clean energy technologies. Ensuring this timely switch prevents job losses but can also accelerate the transition across the entire sector. Stakeholders have become increasingly vocal towards the industry, calling for dedicated strategies that set out how companies to intend to manage the social implications.
Guarantee social protection and human rights in the supply chain
Developing a just transition should consider everyone within the entire supply chain, with a special focus on respecting human rights. Without consideration for human rights, we will only exacerbate existing inequalities and increase the potential for exploitation of already vulnerable groups.
As the Investor Advocates for Social Justice highlighted, serious negative social impacts are linked to the inputs for electric vehicle battery materials, such as child labour in cobalt mining in the Democratic Republic of Congo. In the latest crossover between our Corporate Human Rights Benchmark (CHRB) and the Automotive Benchmark’s Performance Update for 2020, our research found that 27 out of the 30 automotive companies were not setting expectations on their suppliers to manage forced labour and child labour risks.
As companies begin to shift towards greener power, demand for battery energy storage is expected to grow, particularly in the electric vehicle market. In this context, the observed lack of supplier engagement, especially in the areas of forced labour and child labour, is deeply concerning if we want to achieve a just transition.
Leaving no community behind
We know, unequivocally, that the climate crisis will hurt the world’s most vulnerable populations first and hardest. People who are already among the most vulnerable will be particularly hard-hit if climate action is stalled. An improperly managed low-carbon transition will cause violation of local communities’ and indigenous peoples’ rights, including violation of the right to a healthy and clean environment.
The food and agricultural sector is a good example of where the effects of a stalled transition are becoming very clear. As UN delegates have raised, destructive impacts of climate change cause decreased farming outputs and rising global hunger. The vast majority of farmers in the least developed countries – where almost a quarter of the populations suffer food insecurity – are small-scale producers. They are most vulnerable to environmental and price shocks and leaving no-one behind means more than just the workers in the high emitting sectors.
A pivotal role for business
Business will play a key role in facilitating an inclusive and equitable low-carbon transition. Uniquely placed, companies can outline and provide for protection of workers’ and communities’ rights. This is especially true for multinational companies, which have a huge workforce, extensive supply chains and impact communities across all countries they operate in.
These are the companies that are going to shape the role that business can play in bringing the separate goals within the SDGs together, kickstarting a just transition towards a sustainable future. In this context, the World Benchmarking Alliance identified the 2,000 most influential global companies. This will ensure laggards are being held accountable and leaders being recognised for the investments they need to take and the contribution to society they deliver.
To support and encourage a just transition across the three dimensions, companies can take the following actions:
- Analysis: identify social impacts of zero-carbon transition for own workers, supply chains and communities
- Targets: set and commit to at least net zero carbon strategy, embodied in science-based targets
- Strategy: develop just transition plans which address social impacts during decarbonisation, and report on progress
- Support: encourage new policies and collaborative action that enables governments to manage a just transition
Radical transformations always come with both risk and opportunity. A new report by McKinsey has projected that for 2050, the EU renewable power sector alone could see a net increase of 1.5 million jobs, including nearly 700,000 jobs in solar and 450,000 in wind. Business action will be a crucial factor in whether the risk or opportunities of the transition get the upper hand.
Bringing the pieces together
A Just Transition means a transformation which leaves no one behind. Leaving no one behind is also a core concept of the Sustainable Development Goals (SDGs) and the just transition narrative brings the Paris Agreement and the SDGs together; aiming for a liveable planet that is worth living on.
Regions and communities who currently depend on the extraction or processing of fossil fuels feel rightly threatened by the low-carbon transition. If we want decarbonisation to work, we must recognise the legitimate concerns of these communities. And if we want a transition which leaves no one behind, then these concerns and impacts must be addressed in a fair and just manner. Failure to do so will also fuel resistance, with the prospect of a global gilet-jaune movement pushing against the Paris Agreement.
As the global community is looking to initiate the Great Reset, starting at the World Economic Forum in Davos next week, it is essential to gather a profound understanding of the social impact of our current system. In preparation of doing so, next week the WBA will publish its newest Social transformation framework, providing a detailed account of successes and failures in the core dimensions of social responsibility. By breaking down the task of transformation, the report enables business, government and society to understand and ultimately act on their social impact.
Advancing the Just Transition from a concept into concrete action will be a challenge. The three dimensions outlined above provide a guideline, which can be built on to further define what a just transition looks like. As we continue to integrate social criteria into our Climate and Energy benchmarks in 2021, we aim to contribute to this process. While we don’t know everything yet, we do know that people must be at the heart of efforts to achieve the Paris Agreement and the SDGs. We invite parties to work with us to help better understand a Just Transition that leaves no one behind.