Just transition metrics for climate transition plans

Our key takeaway: Embedding just transition i.e., people, into climate transition plans is key, says the Transition Plan Taskforce (TPT) Just Transition Working Group. The buck doesn’t stop there. Companies need to disclose how they’re doing this, underpinned by clear and measurable metrics. Why? To ensure that their just transition plans are robust. To meet the expectations of investors who are increasingly looking for comparable data on the social dimension of sustainability disclosures. To accelerate the just transition. Does this sound complicated? Fear not! The Transition Plan Taskforce (TPT) Just Transition Working Group provides a range of just transition-relevant metrics that can be used by companies following the TPT Disclosure Framework and its Implementation Guidance. While the Just Transition Working Group recognises that companies (and financial institutions) are still in the process of disclosing and implementing just transition in their climate transition plans, the Group issues a call to action: just start somewhere. Perfection is the enemy of progress: “[j]ust transition planning is a journey, and while organisations may be on different parts of this evolution, we all have to start somewhere.”

The Just Transition Working Group of the Transition Plan Taskforce (TPT) published Putting People at the Heart of Transition Plans: key steps and metrics for issuers (April 2024. This report is to be read alongside ‘A compendium of just transition relevant metrics in 13 disclosure frameworks: April 2024’ which provides just transition-relevant metrics across 13 global disclosure frameworks to support preparers of transition plans:

• The need for greater clarity around just transition reporting: The report notes that “[e]mphasis is building towards the just transition” - which is defined in the TPT Disclosure Framework and the Explore the Disclosure Recommendations’ guidance (published in October 2023) as “anticipating, assessing, and addressing the social risks and opportunities of the transition to a low-GHG emissions and climate-resilient development, as well as ensuring meaningful dialogue and participation for impacted groups (including workers, communities, supply chains, and consumers) in transition planning.” At the same time, the Just Transition Working Group of the TPT notes that “[w]hile there has been a proliferation of transition plans guidance on mitigation and emissions reduction, the ‘how’ nevertheless remains missing, specifically on the social and people dimension. Aligning, allocating, and accelerating finance for just transition necessitates greater technical clarity around just transition reporting, including what to track and report, and how.” Therefore, these two reports provide greater clarity to companies that are seeking to strengthen their climate transition plans or just transition plans.
  

• Connection between the TPT documents and just transition: The report delves into where social considerations are included in the TPT Disclosure Framework and its accompanying Implementation Guidance. The report then looks at the three part of a just transition: 1) “Anticipate, assess and minimise social risks of the transition”; 2) “Identify, enable, and maximise opportunities and benefits of the transition”; and 3) “Ensure meaningful participation and dialogue in planning and execution.” The report describes how the TPT Disclosure Framework and its accompanying Implementation Guidance address these three elements, and provides example corresponding indicators. For instance, when it comes to meaningful participation and dialogue, relevant indicators include “% of employees in investee companies not covered by collective bargaining agreements” or a description of “stakeholder engagements with Indigenous Peoples, Local Communities and affected stakeholders in the assessment and management of nature- related dependencies, impacts, risks and opportunities.”
  

• The importance of metrics in just transition planning: The report emphasises the importance of data, metrics and indicators in improving the robustness of just transition planning. It delivers strategic business benefits: “it is the smart thing to do, as a reference point for financial instruments and products for financing the transition, and in providing forward-looking, strategic information to the broader capital markets ecosystem in mainstreaming social considerations in sustainable finance.” It is also critical to just transition planning: “metrics provide the transparency, measurability, comparability, and accountability needed for just transition activities, be it at the transaction, project, or entity level.” The end goal, says the report, is for metrics “to be measurable, material, and traceable over time.” At the same time, the journey must start somewhere. The report recommends that companies “[i]dentify current progress and impacts in just transition.” By doing this, companies are able to adopt a “more forward thinking approach for embedding social considerations in transition planning.” The report also recommends that companies “[i]mplement and pilot just transition planning and disclosures.” More needs to be done in implementing the just transition in climate transition plans and it “requires [companies] to be courageous in their efforts to engage and implement just transition efforts across their targets, operations, and governance.”