The world is undergoing a rapid and fundamental shift to a low carbon economy. How this change happens and its impacts on individuals and communities could vary widely. The concept of a just transition (using the International Labour Organisation’s definition) is that this change happens in a way that is fair and inclusive, creating decent work opportunities, and leaving no one behind. It’s very much about where the environmental and the social parts of sustainability meet.
It’s a term that has been around at least since the 1980’s and has been used to apply to wider sustainable changes and the potential impacts on workers that needed to be considered. It is now used particularly with reference to changes related to climate change and indeed is referenced in the latest IPCC climate report which states, “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.”
The reason for the narrowing of focus on climate is because it is clear that the impacts of climate change on people are uneven, as are the consequences of many of the actions required to move to a low carbon economy. We have seen changes before which have been managed very badly – the closure of coal mines in the UK for instance led to devasting consequences for many local communities with the main employer closed and no new employment opportunities planned to replace it.
The concept is at play at a global level with many poorer countries at most risk from climate change seeing significant impacts from emissions that richer countries created. Within countries the focus is often on specific regions where carbon intensive sites like oil refineries or mines will close, and indeed a lot of the focus has been on energy specific industries. Indeed, some countries, including Scotland, have Fair Transition Commissions. More attention is now being paid to intergenerational fairness too and to how different sectors of society will be impacted.
So, what does all this mean for businesses? It’s clear that for high emitting sectors there is an expectation that the move to a lower carbon economy will mean that the workforce required in the future will not be the same as today. Employees will need to be supported and retrained and the impacts on whole areas will need to be considered. Some companies in this sector are already actively planning the change and have even published a Just Transition action plan e.g. SSE. But what about most businesses who don’t fit into the energy industry or even other high emitting sectors?
Firstly, consider your different stakeholder groups and think about how this big transition is going to affect them. Are you likely to change raw materials due to lower carbon footprints, or change suppliers? Can you help them to make the necessary changes? If this is likely to be a whole industry change then you might want to work through your industry association to work with competitors to support the supply chain through the chain (obviously ensuring that nothing you do falls foul of anti-competition law). Will you need to close factories or cease production of certain ranges? How will you support your workers through this process? What will be the impacts on the local community? If you are in a business-to-business environment, will the move to low carbon products mean that your customers will need to invest in new equipment or have to acquire new skills? What support can you give to help in these areas? If you are supplying to consumers, what will they need to do differently in order to transfer to new products? How can you make this process easier and affordable?
This point about affordability is one that is very pertinent now in many areas, particularly around the electrification of heat and transport. These moves required an up-front investment to be able to benefit from lower running costs. The people who would benefit most, in proportion to their income, are those least likely to be able to afford the upfront costs. The government of course has a big part to play here in terms of grants etc. but companies are looking at innovative finance models to make these zero up-front costs and therefore affordable to all. Could you tap into a much bigger market if you could find ways for consumers to spread the cost? On a more general level, do you add a price premium for a lower carbon product and so put a barrier into wider adoption?
This is not about companies becoming charities and giving away profit. But can you take account of these issues in your business strategy and in designing your products or services in such a way that you can increase your market or share? And can you strengthen relationships and your brand as a result?
A big theme of the just transition is one of engagement and communication. There are significant changes that will come as part of the move to a low carbon economy. There is already a lot of poor information, or downright misinformation, which confuses and leads to delay. If people feel things are imposed or that they will miss out they will rightly resist. So, wherever you think the impacts will be in your value chain, engagement and support through the changes is key.
About the Author
Chris is a senior strategic leader with over 25 years’ commercial experience including sales, marketing, strategic planning and major business change initiatives at AkzoNobel and ICI. He has a wide knowledge of sustainability and how to integrate this into business having held senior sustainability roles at AkzoNobel for 12 years, including as Global Sustainability Director Decorative Paints and AkzoNobel Planet Possible Programme Manager. Chris is now an independent sustainability consultant and a pension trustee director.
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