With international momentum building for a just transition, Shafaq Ashraf, Antonina Scheer and Sangeeth Selvaraju use the assessment results of the Climate Action 100+ framework to explore how the world’s largest companies are addressing the social aspects of decarbonisation.

A poorly managed transition to net zero emissions would cause immense human and economic costs, whereas a just transition has the potential to generate new jobs and bridge existing gaps in social and regional inequalities. At the 28th session of the Conference of the Parties to the UN Framework Convention on Climate Change (COP28) in 2023, funding arrangements were operationalised to channel support to countries and communities vulnerable to the impacts of climate change in the shift to low-carbon economies, as part of efforts to ‘leave no one behind’. To keep this momentum going, corporate actors have an important role to play.

The investor-led initiative Climate Action 100+ (CA100+) publishes annual updates on the climate performance of 150 of the world’s largest corporate greenhouse gas emitters through its Net Zero Company Benchmark. The latest results, from 2023, indicate that corporate action on the just transition is still in its early stages – despite growing expectations from investors that companies decarbonise while managing the social risks and opportunities of their transition strategies.

Indicator 9 of the CA100+ Benchmark assesses through two sub-indicators: (i) whether companies have set just transition commitments; and (ii) whether they are developing credible just transition plans. We discuss the findings of these aspects of the assessment below.

Committing to a just transition

Sub-indicator 9.1 – Commitment to just transition principles
Metric 9.1.a. The company has committed to decarbonise in line with defined just transition principles, recognising the social impacts of its decarbonisation efforts.
Metric 9.1.b. The company has committed to retain, retrain, redeploy and/or compensate workers affected by its decarbonisation efforts.
Metric 9.1.c. The company has committed that new projects associated with its decarbonisation efforts are developed in consultation with affected communities and seek their consent.
Source: Climate Action 100+.

The 2023 CA100+ assessment results show that three-quarters of companies have not committed to transitioning to net zero in accordance with just transition principles, defined either externally or by the companies themselves. Among the 76% companies that did not meet this metric, 6% had committed to a just transition but did not define any specific principles and 7% had clearly defined just transition principles but did not explicitly commit to them.

A just transition looks different for companies operating in diverse sectors and regions. Therefore, defining precisely what a just transition means in the context of a given company is crucial to ensure sufficient transparency for investors, who can use this to hold the company accountable to their commitments.

When defining just transition principles, many companies look to the Paris Agreement and the guidelines for a just transition developed by the International Labour Organization (ILO). These sources provide general guidance but are neither specific to corporate actors nor to sectors. However, some companies are now using sector-specific corporate frameworks as a foundation for their just transition commitments, such as the Just Transition Framework for Company Action by the Council for Inclusive Capitalism. This particular framework specifies what a just transition means for the energy sector, covering workforce transformation and community resilience. It has also been used by the German pharmaceutical and biotechnology company Bayer AG to determine its just transition approach, showing that companies can derive and adapt best practice from other sectors.

Only 23% of companies assessed by CA100+ commit to retaining, retraining, redeploying or compensating workers affected by the company’s decarbonisation efforts. Within this subset, more companies opt to retrain and reskill their workforce than offer them compensation – an observation that could guide how government action on the just transition can best complement existing corporate efforts.  

Alongside workers, communities are key stakeholders in ensuring a just transition. Only two CA100+ assessed companies, OMW and Repsol, commit to developing decarbonisation projects in consultation with affected communities and seeking their consent – which, according to the UN Declaration on the Rights of Indigenous Peoples, should be “free, prior, and informed”. Committing to obtaining consent sets a much higher bar than undertaking consultations, which a larger proportion of companies (12%; 19 in total) commit to doing.

Seeking consent is especially important in sectors such as mining and electricity production which can drastically impact local communities due to associated changes in employment, land use and practices for the extraction, utilisation and management of natural resources.

Precedents for genuine community participation are emerging in some companies not covered by this assessment. For instance, NWP Coal Canada has agreed that the Tobacco Plains Indian Band, the local Indigenous community, will have the right to veto a proposed mining project.

Planning and tracking a just transition

Sub-indicator 9.2 – Just transition planning and monitoring
Metric 9.2.a. The company has developed a just transition plan for how it aims to support workers and communities negatively affected by its decarbonisation efforts.
Metric 9.2.b. The company’s just transition plan was developed in consultation with workers, communities and other key stakeholders affected by its decarbonisation efforts.
Metric 9.2.c. The company discloses the quantified key performance indicators (KPIs) it uses to track its progress towards the objectives of its just transition plan.
Source: Climate Action 100+.

To evaluate the credibility of just transition commitments, the CA100+ Benchmark scrutinises companies’ planning processes around the just transition. Only 10% of assessed companies have a just transition plan, and of these only five (3% of total companies) have developed the plan in consultation with key stakeholders.

For a just transition plan to be deemed inclusive, it must be developed with all relevant stakeholders – particularly workers and communities. These just transition plans should also ideally be integrated into wider corporate transition plans.

Only two companies underpin their just transition plans with quantifiable KPIs. For example, Eni commits to increasing training hours for its employees by 20% in 2026 compared with 2022, to “update skills in line with business and technological developments”. Setting KPIs is fundamental to monitoring companies’ progress towards implementing just transition plans, but it remains a scarce practice.

Accounting for regional variations in just transition assessments

Tools for assessing companies’ progress on the low-carbon transition are generally insufficiently nuanced when it comes to their suitability for entities operating in emerging market and developing economies (EMDEs). While understanding and use of the term ‘just transition’ is growing in high-income countries, it has only very recently come to the fore in EMDEs. As a result, companies based in these countries may not explicitly disclose their progress on the just transition but still be engaged in relevant activities.

Making just transition commitments entails greater challenges for companies based in EMDEs compared with those in wealthier countries due to the different political economy considerations, varying net zero timelines and competing development priorities. Using the same framework and criteria for all companies worldwide may therefore produce biased results, showing EMDE companies to be poor performers without accounting for the additional constraints they face.

Among the 150 companies assessed by CA100+, 15 are headquartered in emerging economies (six in India; three in Brazil; three in Indonesia; two in South Africa; and one in Nigeria). Currently, all but three of these companies (NTPC Ltd, Eskom Holdings and Sasol Ltd) do not meet the criteria of the just transition indicator. Sasol Ltd scores positively on the highest number of metrics: it commits to defined just transition principles; pledges to retrain or compensate workers; and has developed a just transition plan.

Assessments must better calibrate the differences in the scope and context of the just transition so that companies across regions can be compared fairly. Relevant approaches for integrating such nuance into climate assessments in general might include indicator exemptions and use more granular regional pathways for quantitative benchmarking.

Taking forward the just transition imperative

The just transition is a vital consideration on the road to net zero. As corporate and public actors accelerate decarbonisation efforts, they must also devote appropriate resources to ensuring that the transition delivers real social gains for workers and communities. Alongside this, the transition needs to be shaped so that it does not increase poverty, inequality and social exclusion.

The CA100+ just transition assessment results show that the just transition is still a nascent priority for businesses. Commitments are becoming commonplace but they are rarely underpinned by credible plans and inclusive processes. However, companies can now benefit from the emerging sector-specific guidance tailored for corporate action. The task ahead is to ensure wider adoption and rapid progress in just transition commitments, planning and implementation. Investor engagement and policy reform can play a role here.

The biggest challenge – and opportunity – for the just transition lies in emerging and developing economies. Currently, companies in these countries appear to be lagging behind on just transition commitments and planning. Regardless of whether this stems from a lack of ambition or a gap in the assessment approach, more research and action are needed on this front.

A vital next step is to connect international climate initiatives such as CA100+ with efforts by EMDEs to achieve sustainable development goals, including through national reporting regimes such as India’s Business and Sustainability Report. Promoting socioeconomic gains and protecting workers and communities in EMDEs is of the greatest importance: without this, there will be no truly just transition.

The authors would like to thank Nick Robins and Valentin Jahn for their helpful reviews of this commentary. The commentary draws on research conducted at the Transition Pathway Initiative Centre (TPI Centre), based at the Grantham Research Institute on Climate Change and the Environment.

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