The report describes the current state of the just transition discourse amongst businesses and proposes a path forward for businesses and investors to integrate just transition considerations into business decisions. The authors identify the just transition as a critical enabling factor in reaching net zero, noting how governments are increasingly recognizing that climate policies that do not take into account the effects on employment, communities, and consumers run the risk of failure. According to the authors, as the strategic case for just transitions has deepened, leading companies in the energy system have begun to formalize their responses as part of wider climate change strategies., Investors can also play a significant role by making sure that the social dimension is fully integrated into their assessment, stewardship, capital allocation, and policy activities.
The report presents a seven-point framework that combines the governance dimension for businesses (in terms of strategy, policy dialogue, and transparency) with a stakeholder component (including workers, communities, supply chains, and consumers). The intention is for this framework to be used in investment assessments and due diligence, shareholder engagement and stewardship, as well as the capital allocation decisions for portfolio companies. The framework is applied to analyze the work accomplished to date by five European international power utility firms.
The report identifies key lessons, including that businesses acknowledge some of the core foundations of just transitions, though the strategic approach is still emerging, with and that transparency and disclosure on just transitions is still lagging. It also points out how it is likely that investors will increasingly expect an active interest from companies to promote just transitions through public policy advocacy. Furthermore, supply chain realities loom large, in terms of generating quality green jobs for local people and also making sure that sustainability and human rights due diligence are intensified in international sourcing from developing countries. The authors highlight the need for community engagement to move from traditional corporate social responsibility activities to a more transformational model that is built upon co-creation. The report concludes with some critical next steps needed, including: promoting convergence around common approaches; modeling to help identify priority areas for investors; understanding better the role of participation and investor dialogues in just transition plans; along with clarifying the investor role in just transitions in emerging and developing economies.