A Just transition

Faced with the climate crisis, companies are rapidly transitioning to a green economy. However, this transition is often painful, disrupting people’s lives and livelihoods. Businesses have often gone about the transition as if “transition is assured, justice is not.” Trade unions questioned this mindset in the US in the 1990s. The concept of just transition emerged from these struggles. 

Source:  LOGAN WEAVER | @LGNWVR / Unsplash

While the term still refers to the support for workers who lose their jobs due to environmental protection policies, it is now seen more widely to include support for racial justice and social equity in environmental and climate policy and includes impacted communities. 

The importance of a just transition is underscored by The Paris Agreement of 2015, stating, “Taking into account the imperatives of a just transition of the workforce and the creation of decent work and quality jobs in accordance with nationally defined development priorities.”

A just transition model must include the following:

  • Income support for workers during the entire duration of the transition
  • Local economic development tools for affected communities
  • Realistic training/retraining programs that lead to decent work
  • Knowledge sharing — the adoption of best practices from other jurisdictions
  • A framework to support labour standards and collective bargaining
  • A sectoral approach customized to regions and work processes
  • Research and development to provide support for technological adjustment
  • An equity lens to understand the impacts on racialized and indigenous communities

Companies are increasingly talking about stakeholder values. They must demonstrate their commitment to stakeholder value by ensuring that their sustainability commitments include a just transition. A just transition must be woven into the design for transition. Becoming net-zero needs to be backed up by a just and fair process. A just transition brings together the Environmental and Social pillars in ESG and Governance pillar provides the glue that keeps them together.

Published by Utkarsh Majmudar

Utkarsh Majmudar is a Fellow, IIM Ahmedabad and a professional with experience encompassing academics and administration at top business schools in India (IIM Lucknow, IIM Udaipur, and IIM Bangalore) and working with large corporations. His interest areas include corporate finance and CSR.

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