Missing from the equation: The role of the private sector in delivering just transitions

The concept of a just transition has become mainstream, as seen from initiatives across the world, from Dubai to China, New Zealand, and the Philippines. However, the role that private actors can and should play in this remains unclear.

Bangkok financial district
A view of the financial district in Bangkok, Thailand. Image: Pexels.

From 3 to 13 June, climate experts gathered in Bonn (Germany) for the UNFCCC’s 60th Climate Change Conference (SB60). Among the topics discussed was the advancement of the Just Transition Work Programme (JTWP) – an initiative operationalised at COP28 (Dubai) under the UAE consensus.

In Dubai, the JTWP recognised the need to develop pathways to better assess the socio-economic impacts of climate policies. This includes: aligning climate action with the upholding of labour and human rights, decent work, international cooperation, and social dialogue. As part of the JTWP’s first two-day dialogue at Bonn this year, experts convened to further discuss the work started at COP28 and to highlight the need to integrate just transition principles into national climate plans. Several just transition pathways emerged out of these discussions, from its overlaps with other UN negotiation tracks, the role of finance, and the diverging types of justice needed to match local country needs.  

Yet there remains an elephant in the room: the “what”, “if”, and “how” of the role that the private sector can play in delivering just transition strategies. To some extent, private actors, and particularly private finance, are increasingly called to play a bigger role in funding the transition, in response to fiscal constraints faced by both developed and developing countries today. Yet, this is also a response to the growing realisation that non-state actors need to play a meaningful part in the transition – to realise justice and, just as importantly, to avoid the perpetuation of injustice. Indeed, the role that private actors can and should play in just transitions is a contentious matter, given a long shadow of previous misdoings and rising instances of climate litigation. 

Just transition planning is a crucial way to involve the private sector while upholding its accountability. It requires companies to develop a comprehensive overview of the transition’s social impacts on stakeholders across their value chains, and to establish robust social dialogue mechanisms to respond accordingly. However, analysis from the World Benchmarking Alliance shows that while companies often have some form of green job creation strategy in place, less than 1 per cent are effectively planning for the transition. The LSE Just Transition Finance Lab shows that there are case studies of just transition integration amongst private actors, such as energy utility SSE in Scotland or Ayana Renewable Power in India, but these are still too few and far between. The lack of implementation of just transition plans by companies could put up to 24 million direct workers at risk, with many more indirect and direct economic impacts.

While still in its infancy and expected to continue until 2026, there are tangible steps that the JTWP can take to clarify the private sector’s role. The first is outlining the types of public policies that can truly hold companies accountable in delivering a just transition. Country climate plans – also known as Nationally Determined Contributions (NDCs) and Long-Term Low Emission Strategies (LT-LEDS) – should act as a north star for this, more so as countries are expected to revise their NDCs by 2025. However, upcoming analysis from IDDRI and WBA shows that out of all G20 NDCs and LT-LEDS, none currently explicitly reference corporate just transition plans.

Beyond NDCs, states can implement other public policies to accelerate private sector action for a just transition. Authored by the Just Transition Finance Lab, the UK Transition Plan Taskforce released an independent assessment of how to integrate just transition considerations are in different climate disclosure frameworks this year. Similar developments are underway in Asian countries such as China. The Philippines also stands out with its 2016 Green Jobs Act, which supports a just transition through financial incentives, standards, enterprise development and skills building. Other countries have incorporated just transition principles in their conditions for public funding and procurement. These cases show that countries do not have to reinvent the wheel. While there is no one-size-fits-all, these policies play a crucial role in developing just transition strategies that bring on board both the public and the private sector while ensuring accountability from both parties.

Recent work by Climate Strategies and the Just Transition Finance Lab has shown that just transition-related indicators are also a critical tool in helping set policy objectives for just sectoral transitions. By expressing the transition in tangible terms, indicators provide a solid basis for stakeholder dialogue over the trajectory, co-benefits, and trade-offs of the transition.

Indicators and targets are needed domestically as well as internationally. At the domestic level, some governments have started to think about measuring Just Transitions. Notably, New Zealand complemented its decision to no longer issue oil and gas licences in the Taranaki region with the development of well-being related metrics. The country has also worked with businesses and Indigenous communities to develop regional economic development plans. South Africa’s Presidential Climate Commission is also developing a monitoring and evaluation framework for just transitions that can be applied to multiple stakeholders. 

Internationally, metrics and targets can also clarify the role of the private sector. Similarly to how the Global Biodiversity Framework includes a Target 15 for businesses to disclose their impacts on biodiversity, the JTWP could also include clearer targets for companies and the wider private sector to implement Just Transitions plans. 

Building on the current international momentum, the JTWP has a unique opportunity to bolster the implementation of just transitions. A key part of this is to better define the “just” component. As all eyes now head to COP29, a litmus test for the JTWP will be its ability to chart a clear path forward for both governments and the private sector.

Joachim Roth is Climate Policy Lead at the World Benchmarking Alliance. Jodi-Ann Wang is Policy Analyst in sustainable finance at the Grantham Research Institute, in the London School of Economics and Political Science. Inés Jiménez Rodríguez is Programme and Networks Associate at Climate Strategies.

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