What is Just Transition, and how can it impact CSR Policy?

  • November 14, 2022

Over the past few years, in a bid to tackle climate change, governments and businesses around the globe have committed to reducing their carbon footprint to become net zero.

However, as the transition to sustainable activities is made, it is essential to remember that the effects of these changes in activity and the impact of climate change will only be felt equally by some regions and parts of society. This is where Just Transition comes into play.

What is Just Transition

The principle of Just Transition is that a healthy economy and a clean environment should co-exist by ensuring that the benefits of moving to sustainable practices are widely shared while also supporting those who stand to lose economically. 

When carried out correctly, all stakeholders who could be impacted by transitional changes, especially the most vulnerable in society, should be involved in effective dialogue to ensure that the rights and livelihoods of workers are secure as economies move to sustainable production.

The United Nations Paris Agreement of 2015 - in which 193 parties agreed to reduce their emissions and work together to adapt to the impacts of climate change – acknowledges and highlights the importance of considering workers when responding to climate change:

...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...

Real-world issues

Understanding the social and economic impact of climate change and transition actions on societies, economies, and investments can help to reduce inequalities and give a voice to those most impacted. 

For instance, regions or businesses that currently rely heavily on fossil fuel production are likely to see dramatic job losses in sectors such as; mining, transportation and processing of fuels, electric power generation and production of items specifically designed for use with fossil fuels for example; combustion engines, gas cookers, coal plants, oil pipelines and petrol or diesel cars.  

While the transition will also create many jobs in producing renewable energy and associated innovation to develop sustainable products, workers who lose their jobs may not have the skill set to move straight into a new ‘green job’. Equally, countries that currently rely on fossil fuel-related businesses to support their economy may not be able to compensate immediately with renewable energy jobs as they may not exist in those regions, and it could take many years for the infrastructure to be in place for that to change.

So preparing to adapt by re-training staff, investing in the development of sustainable technologies in the most affected regions to create new jobs, and offering funding support to local communities affected by transition actions, can all help to ensure that no one is left behind in a low-carbon world.

CSR policy, risk and investment

In business terms, Just Transition should now be a key focus point for governance teams. 

Introducing strategies to support Just Transition into CSR policy could benefit both the communities who are receiving the support and also help companies who, aside from contributing to the creation of a more globally fair and sustainable economic environment, are also likely to enjoy increased employee engagement by as much as 74% as working for a socially responsible employer continues to move up the list of priorities for many workers. 

Additionally, there are advantages to supporting Just Transition in risk management. This could be in the form of third-party Risk, where it is vital to ensure that supply chains are free from unjust working practices, which could cause reputational damage or financial risk where the breakdown of buying and selling channels in regions that experience sudden high levels of unemployment could disrupt consumer behaviour which could affect profits.

Finally, an organisation’s Just Transition strategy can form part of ESG reporting, which is often a vital tool now used by investors to evaluate whether a venture will have long-term sustainability and assess if it will be seen to be a socially responsible investment which supports global welfare. Supporting Just Transition can improve investor confidence in their ability to see a good ROI, increasing the likelihood of securing investment.

Supporting Just Transition could have far-reaching long-term benefits for all involved, and preparing for it through sound governance strategies could help avoid mass unemployment and long-term economic downturns for countries reliant on fossil fuel-based industries. Supporting growth and development in these regions could see a fairer deal for the communities involved and a more stable global economy.

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