Advancing the climate and equity imperatives together
While many of the discussions taking place at COP27 are focusing on a variety of technical aspects related to how to realize the transition to a net-zero world, WBCSD members have underlined that it will be crucial for leaders from business, government and civil society groups to recognize the fact that the climate emergency is inseparable from another urgent systemic risk: mounting inequality.
While inequality has been a part of our societies over the ages, we have reached a critical juncture. Wide disparities in income, wealth, and overall wellbeing, underpinned by deep, structural differences in the opportunities people have to achieve those outcomes, are leading to hundreds of millions of people being left behind and fueling widespread dissatisfaction and disillusionment.
Climate action is, of course, a critical part of the agenda to tackle inequality. The climate emergency is having profound impacts on people – impacts that are expected to deepen and, if left unchecked, will undermine human health, disrupt access to essential products and services, and destroy livelihoods. The World Bank estimates that 132 million people could be driven into poverty as a result of climate change impacts by 2030.
Furthermore, while the effects of climate change will be felt universally, as the Intergovernmental Panel on Climate Change (IPCC) makes clear, these trends are hurting the world’s most vulnerable populations first and hardest.
Put simply, it will not be possible to tackle inequality without robust climate action; however, at the same time, it will also be impossible to address the climate emergency without putting people at the center of this agenda and working to ensure that the journey to a net-zero world does not exacerbate existing inequalities, but creates a fairer, more prosperous future for all.
While we urgently need to transition to a net-zero economy, we also need a transition that is equitable and inclusive, that drives positive social impacts, and in which everyone can see opportunity.
The shift to a net-zero economy is already having significant social and economic impacts on workers, suppliers, communities and consumers at both the local and global level. Companies, governments and other stakeholders must establish collective ambition to mitigate negative impacts and ensure that the transition is effectively leveraged to drive just and inclusive outcomes for all.
Identifying the agenda for business action: Insights from energy and food & agriculture sectors
Against the backdrop of mounting recognition of the importance of equity considerations in the climate space and increasingly vocal calls from a wide range of stakeholders for a just transition to net zero, the challenge facing the business community is twofold. Companies need to work to identify the key actions that will be critical to realizing the ambition of an equitable and inclusive transition to net-zero in the context of their industry, as well as embarking on the partnerships and policy engagement that will help to make this ambition a reality.
Guidance on good practice for business action is beginning to emerge in this space. The Council for Inclusive Capitalism’s Just Energy Transition Framework provides practical guidelines on some of the key categories of business action that should sit at the heart of efforts to ensure a just transition. Leveraging this framework, this year, WBCSD, the Council for Inclusive Capitalism, and PwC have come together to support WBCSD member companies in collectively exploring the most impactful actions that companies can take in support of this agenda. These efforts have focused initially on exploring challenges and emerging best practice in the context of WBCSD’s Energy and Food & Agriculture Pathways - two value chains that will have crucial roles to play in the realization of a just transition toward a net-zero economy.
Moving forward, WBCSD, the Council for Inclusive Capitalism and PwC will be publishing sector-specific insight papers which outline case studies from member companies. In the meantime, some of the main insights that have appeared in discussions with companies are captured below:
Insights from the energy value chain:
The transition toward a net-zero energy system requires large-scale capital investment in new energy technologies and means of production, and changes to how energy is sourced at a global level. The scale and pace of this transition are unprecedented, and its impacts will be felt not only by energy businesses, energy-intensive industries and energy production-dependent economies, but by workers, consumers and communities alike.
Key actions that companies can take in support of a just transition across the energy value chain include:
1) Playing a proactive role in addressing growing challenges to energy access
- It will be important for companies to develop just energy transition plans that consider impacts on consumers and include initiatives to support them.
- Companies also have a key role to play in accelerating the transition to universal access to energy by supporting and executing projects that provide access to affordable, reliable and modern energy for people who live in remote, off-grid areas or whose access to energy supplies is unreliable. A key component of greater energy access is a (re)design of electricity markets to absorb and distribute renewable energies at scale.
2) Focusing on the needs of workers
- The scale and pace of change occurring across the energy sector with the transition to net zero is immense, and companies must actively support their workforces through this change.
- As a foundation, companies should ensure that any investment in infrastructure and new operations creates secure, high-quality jobs that respect labor rights, provide decent wages, benefits and social security, as well as ensuring worker safety and opportunities for training and promotion.
- The transition will also bring a need for new skills for workers at all levels, and companies will have to pursue a range of solutions to effectively guide workers into emerging roles and functions.
- The transition to net zero also presents energy companies with a significant opportunity to recruit and invest in underrepresented groups – equipping them with the green skills needed to thrive in a net-zero economy and breaking down historic barriers to training and promotion.
3) Addressing the disruption faced by stakeholders in the supply chain and local communities
- As well as looking within their own operations, energy companies should also assess economic and social impacts on surrounding communities and ecosystems associated with efforts to transition to net-zero.
- Companies can support local supply chains and communities to navigate this disruption, including through efforts to help local communities diversify their economies to become less dependent on a single asset.
4) Engaging with stakeholders and embracing transparency
- In developing plans for a just energy transition, it is vital that energy companies proactively identify the key stakeholders they need to engage, focusing on the most vulnerable and those who stand to be negatively impacted the most.
- Companies should also remain transparent regarding their just transition efforts, disclosing progress against their plans in a timely and regular fashion.
Insights from food and agriculture
Transitioning to a net-zero agriculture sector requires a transformational set of complex technical and socio-economic changes. Smallholder farmers, agri-food workers including SMEs, rural farming communities and consumers will feel the impacts of this transition most keenly. Putting people (and in particular farmers) at the heart of this transition is essential, and companies can lead the way through their ability to innovate and influence a well-developed network of value chain partners. At the same time, this will enable companies to minimize value chain risk and ensure resilient supply chains.
Key actions that companies can take in support of a just transition in the context of the food and agriculture sector include:
1) Respecting human rights and supporting livelihoods
- An equitable agri-food system transformation can only exist if all agricultural workers’ human rights are respected and safeguarded and opportunities for decent and productive employment are promoted across the value chain.
2) Scaling inclusive innovation
- Climate change and the transition toward a net-zero economy will create a range of educational and technological challenges for farmers. Innovations such as farmer-centric digital agriculture solutions and enhanced and accessible mechanization will be key enablers to bridge the gap. Innovation and technology have the potential to improve farm productivity, efficiency and incomes across the agri-food system.
3) Increasing access to finance and markets for rural communities
- Finance for sustainable agriculture is not reaching rural communities at the scale needed, and many farmers face limited market access. Increasing access to finance and markets so that SMEs and farmers can thrive by growing their businesses, strengthening rural economies and meeting climate goals will be critical to realizing a just transition.
Raising ambition and driving action moving forward
Moving forward, all sectors will benefit from coming together with peers and stakeholders to develop an understanding of how they can put people at the center of their respective efforts to realize the transition to net-zero – clearly identifying the risks that need to be mitigated and the opportunities to drive inclusion and equitable value creation.
Through its ongoing partnership with the Council for Inclusive Capitalism and PwC, WBCSD will continue to explore and elevate emerging best practice and insights with regard to how to realize a just transition across multiple industries and sectors.
We also perceive important opportunities to explore public-private partnerships that can create communities that can help steer the deployment of robust just transition strategies, leveraging, for instance, some of the models and insights that have been built up in recent years through initiatives to support the inclusive deployment of technology.
We look forward to building on the momentum that COP27 has generated around the just transition conversation and remain committed to aligning WBCSD’s members, and the broader business community, around a clear ambition for an equitable and inclusive net-zero transition – while also turning that ambition into tangible action.
Key WBCSD initiatives currently working to advance this action agenda include:
The Business Commission to Tackle Inequality – a multistakeholder, cross sector coalition of more than 60 leaders convened by the WBCSD to mobilize private sector action in support of tackling inequality and generating shared prosperity for all.
Global Agribusiness Action for Equitable Livelihoods – an initiative that brings member companies together to catalyze agri-SME finance and drive more investment into a just rural transition; to develop tools and training to help companies protect human rights; and to explore the role of inclusive and innovative business models in agricultural systems.
In the energy space, we are continuing our work on tackling inequality in the energy value chain with an expected focus on human rights due diligence, living wages and the just transition.