Last week, Ksapa took part in a round table discussion on “Delivering sustainability and social impact through community engagement”. The event was organized by ESSEC and LSE Ideas to discuss emerging policies and practices in managing local risks and opportunities as part of social impact and ESG strategies. In this article, we look back at the challenges facing companies in their climate action, in particular the integration of social impacts into the broader framework of just transition.
Just transition is defined by the International Labour Organization as “greening the economy in a way that is as fair and inclusive as possible to everyone concerned, creating decent work opportunities and leaving no one behind.” Yet climate action by companies is often limited to putting in place procedures to reduce greenhouse gas emissions. This focus tends to obscure other environmental problems (preservation of biodiversity, deforestation, access to water, etc.) as well as social issues (human rights, social inequalities, discrimination, decent pay, etc.).
Thinking about just transition means linking social and environmental considerations to ensure a transformation of the economy that leaves no one behind.
The challenges of just transition
Climate action without social considerations is an illusion. Yet companies are finding it difficult to connect the two, and face several challenges, which we set out below.
- Challenge 1 Planning: The absence of short-, medium- and long-term objectives makes it difficult to see the connections between climate change and social issues. In practice, for example, it can be complicated for technicians to adapt to the transformation of their job when the energy source in their plant is changing. This adaptation would have been made easier if the impact on the business had been considered from the start of the process.
- Challenge 2 Community engagement: To understand the issues involved in the just transition, local stakeholders need to be brought on board quickly in climate action projects. While the regulatory horizon remains the 2015 Paris Agreement’s goals, it is essential to translate these imperatives according to the needs of the people actually affected, and to place them at the heart of the initiatives. It is not enough to identify communities and talk to them, but rather to collect relevant data from the people on the ground. Involving local communities is one way of raising awareness of potential social impacts. For example, the move towards ‘net zero’ in agricultural supply chains means bringing suppliers and consumers closer together. We therefore need to think about the consequences for the communities of the first kilometre, the workers who are mainly located in the main production countries (China, Brazil, etc.). Their living and working conditions will inevitably be affected if production activities come to a sudden halt.
- Challenge 3 Education on global emergencies: We need to clarify the key terms – just transition, local communities, human rights, social impact, planetary boundaries – but also know how to understand them together. In every company, key functions and operational functions must be trained in the issues involved in just transition. It is also important to stress the importance of integrating the social impact into sustainability teams, where the emphasis is on decarbonisation and the Paris objectives, often leaving many environmental and human issues to one side.
- Challenge 4 Coordination with public authorities: Businesses are incapable of assuming all the social consequences, just as they cannot bear all the costs of climate action on their own. Public authorities must take over to anticipate and mitigate these impacts.
All these challenges must not slow down the implementation of actions that are becoming increasingly urgent. Especially as there are a number of levers that can be used to facilitate the just transition. Here are a few examples.
Levers for a just transition
- Anticipating regulations: The European Union’s SFDR, Green Taxonomy, CSRD and CS3D regulations provide an overview of the obligations that companies will face between now and 2025. It is in their interest to take these regulations into account as soon as possible, to clarify what is covered by social considerations, particularly the ‘S’ in ESG.
- Raising awareness of climate and social issues: Case studies drawn from the real issues facing the company can be used to educate decision-makers – including boards of directors – and foster a holistic understanding of climate action and its social consequences.
- Rethinking the organization of key functions: As with many other issues, restructuring organizations to avoid silos of expertise is welcome. Collaborative approaches and decisions based on larger interdisciplinary teams are essential.
- Measuring the benefits: New indicators based on EU regulations and non-financial reporting standards need to be created to measure their positive impact. It is vital to bring on board the financial players that have historically invested in fossil fuels – investments that continue to generate the greatest profits. The solution: demonstrate the benefits of climate and social actions to trigger a real change in practices.
Just transition must be designed in symbiosis with climate action. It is the social and environmental considerations as a whole that will enable a transformation of activities that is viable in the long term. To achieve this, the transformation must be supported by stakeholders, and in particular the local communities. A collaboration necessary to have direct access to information and to initiate concrete change. A change that is becoming inevitable as European Union regulations become ever stricter and climate and environmental issues ever more pressing.
Séphora is a Senior Consultant who contributes to Ksapa's consulting and advocacy activities. She works mainly on human rights, climate change and sustainability issues, and on European and international regulatory analysis and monitoring.