WEF framework for an equitable transition

Our key takeaway: On the heels of Davos, where climate change and the net-zero transition were hot topics, the World Economic Forum has developed a new framework to guide company and government decision-making when it comes to a fair and equitable green transition. The report puts forward a framework that cross-sects eight core components of a green transition with five pillars of economic equity, showing how they can interact to create both positive and negative impacts on people. Yes, the green transition will have winners and losers—but without deliberate, careful interventions on the part of companies and policymakers, the losers are likely to be the individuals and populations who already face poverty, lack of access to education and employment, food insecurity, lack of economic opportunity and more. WEF’s framework underscores the importance for the private sector of applying a human rights lens to their environmental initiatives and investments as they do with any business activities, including assessing risks to people, preventing and mitigating impacts, and creating space to hear directly from the people who could be most impacted. 

The World Economic Forum (WEF) published Accelerating an Equitable Transition: A Framework for Economic Equity (January 2024):

• The intersection of a green transition with economic equity: WEF’s framework provides a structured way to think about "where the mitigation actions of the green transition might result in inequity on the lives of people, whether as workers, entrepreneurs or consumers.” According to WEF, “the risk of the green transition widening inequalities is not a peripheral concern.” For example, “[i]n no region of the world do the bottom 50% of the population own more than 5% of wealth, nor contribute to more than a quarter of their region’s emissions. Yet climate policies such as carbon taxes and efficient equipment mandates can have a disproportionate impact on low- and middle-income groups, including in advanced economies.” To level the playing field, businesses and governments will need to take actions for a green transition without losing sight of fairness.
  

• Addressing the risk of transition-caused labour market dislocation: One key risk highlighted by the report is that lower-income, lower-skilled individuals are faced with a high risk of losing out in the labour market as the economy transitions towards new skillsets. The report underscores that despite a projected net gain of 25 million new jobs in the green economy over the next five years, around 78 million workers operating outside of the green economy are likely to lose their jobs by 2030. In practice, this will mean a fundamental mismatch between the demands of a changing market and how people earn a living. For example, looking at the cross-section of “greening agriculture and food production” (a component of green transition) and “access to financing and investments” (a component of economic equity), smallholders, family-owned farms and women working in agriculture will face the compounded challenges of current barriers to access finance with the lack of green finance and tech in developing countries, compared to large, industrialised farms in developed countries. As another example, “moving to a circular economy” (green transition component)  will impact “employment and job transition” (economic equity component) in both positive and negative ways. The ILO estimates that a shift to a circular economy is likely to create 6 million jobs net, but this is likely to affect employment for vulnerable people working in the current waste management value chain in Asia and Africa who may be left out of new employment in a more formalised sector. For companies seeking to incorporate circular economy principles, it will be important to not only “offset” job losses but to “also carry the opportunity of better quality of work, decent wages and improved records on child labour and human rights."
  

• Impacts of a green transition on access and affordability: The report points out that the green transition is likely to create lower-cost, localised energy sources that expand access for people living in poverty. At the same time, the short-term costs of switching to alternative energy and purchasing more sustainable (but expensive) goods and services are likely to pose an immediate challenge for these communities. For example, when looking at the intersections of “transitioning away from fossil fuels”, “moving to a circular economy” and “accessibility of goods and services” WEF reports that products now produced from oil and gas (like plastic) tend to be the most scalable and affordable, which could limit the ability of low-income people to purchase renewable substitutes until these supply chains mature and scale. The “green premium” for goods produced in a circular economy could be up to 60%. In addition, while “greening agriculture and food production” is more sustainable, it’s also more costly to implement and can reduce yields compared to conventional agriculture, raising foods costs and putting people at risk of food insecurity.