Embedding just transition in practice

Our key takeaway: We need to act a lot faster on just transition. For companies, embedding just transition considerations can be done by using the frameworks, standards, methodologies and tools already at their disposal. By bringing together existing strategies on climate change, human rights, workforce development, and stakeholder engagement, companies can prepare themselves for the fast-approaching future where a just transition to a net-zero economy will take centre stage. A report from the World Benchmarking Alliance, Grantham Research Institute on Climate Change the Environment, and Council for Inclusive Capitalism has three main recommendations for companies: (1) Embed accountability for just transition in existing climate strategies and in broader long-term objectives and priorities, including addressing risks of harm to key stakeholder groups in their products and services; (2) Base just transition strategies on social dialogue, collective bargaining agreements, decent work, labour rights and employment opportunities and challenges in multiple sectors, including energy, agriculture, transport and construction; and (3) Work with and advocate for governments to strengthen the enabling environment for companies to contribute to the just transition, including through regulations and incentives. ‍

The World Benchmarking Alliance (WBA), the Grantham Research Institute on Climate Change and the Environment at the London School of Economics and the Council for Inclusive Capitalism published Moving from Pledges to Implementation: A Guide for Corporate Just Transition Action (October 2023):

• Collaboration for effective regulations and incentives: The first key message in the report is that “[b]usinesses, policymakers, and workers should collaborate to identify and implement effective regulations and incentives to build capacity and overcome barriers to a just transition.” The report points out that there is a “clear” business case for companies to consider just transition principles in their activities and decision-making. But there is still a gap between policy commitments and taking action in practice—what the report calls a “fragmentation of efforts” to implement a cohesive and comprehensive plan for a just transition that covers all of the key points of the ILO’s just transition guidelines for companies and governments. The report indicates that companies’ just transition efforts require parallel and complementary action by governments and other stakeholders. For example, companies and trade unions can sign global framework agreements that include just transition priorities in order to simultaneously protect worker voice and labour rights and build company and worker readiness for a just transition. As another example, companies can partner with policymakers to match the economy-wide upskilling of a net-zero-ready workforce with the hiring needs of individual companies, especially through vocational training opportunities.
  

• Integrate just transition into existing disclosure requirements: The second key message is that “[j]ust transition considerations are increasingly integrated into disclosure requirements and businesses that enact just transition policies now will be able to deal with climate and social impacts more effectively in the future.” While sustainability disclosure schemes have mostly focused on climate considerations to date, “there is an increasing shift to integrate the social dimensions of the low-carbon transition including in emerging and developing economies.” These include the double materiality requirement of the European Sustainability Reporting Standards (ESRS), the revised Global Reporting Initiative (GRI) standards, and the decision of the International Sustainability Standards Board (ISSB) to include just transition considerations, among other emerging developments. And it will pay dividends to be prepared: “While some of these efforts are at an early stage, companies that act now by better integrating just transition guidance are likely to be more resilient and prepared for upcoming changes. Companies that do not act now risk facing important challenges in the future.”
  

• Use existing frameworks to track progress and plan for the future: The third key message is that “[b]usinesses should use existing just transition tracking progress methodologies and tools to improve their level of readiness and to anticipate and plan for changes over time.” The report states that a just transition business strategy should be grounded in existing standards and methodologies, including the UN Guiding Principles on Business and Human Rights, the ILO Standards, the OECD Guidelines, and others. In other words, companies already have the knowledge and the tools at hand to integrate just transition into their business strategies and to track and report progress. At the centre is “[m]eaningful social dialogue with labour unions,” which can help companies build their understanding of the needs and potential risks to key stakeholder groups.