Achieving a just transition

The report emphasises that accelerating the reduction of greenhouse gas (GHG) emissions is crucial for achieving a net zero economy, as outlined in the Paris Agreement. The transition away from fossil fuels and the growth of renewable energy are critical actions. However, the report highlights that people must be at the centre of this transition. Many businesses focus narrowly on reducing Scope 1-3 emissions without fully considering the social impacts of their climate transition plans. Companies need to incorporate a just transition approach, ensuring that no one is left behind and sustainable development is prioritised.

Alignment with key reference frameworks

The report stresses the importance of businesses aligning with global frameworks such as the Task Force on Climate-Related Financial Disclosures (TCFD) and the Transition Plan Taskforce (TPT). These frameworks provide guidance on managing climate transition risks and integrating social considerations. The TPT’s recommendations, issued in 2023, encourage companies to account for the social impacts of decarbonising their value chains. Additionally, the EU’s Corporate Sustainability Due Diligence Directive sets clear expectations for human rights and environmental due diligence, which further supports a just transition. Businesses must align their strategies with these frameworks to remain compliant and competitive.

Clarifying corporate responsibilities and opportunities

Corporate climate actions impact both people and nature. Transition and physical risks are two major categories businesses must manage. Transition risks stem from regulatory, financing, and stakeholder changes, while physical risks arise from extreme weather and other climate impacts. Businesses must take steps such as retiring high-emitting assets, sourcing cleaner energy, and integrating nature-positive solutions into their operations. The report recommends that businesses evaluate climate risks through a social lens and take advantage of opportunities to invest in green skills and living wages, contributing to both business resilience and climate justice.

Transition planning: impact dimensions

The report identifies four key dimensions that businesses must consider in their transition plans: workforce, community, consumers/customers, and nature. For the workforce, companies must address skills gaps and reskilling needs to support both current and future operations. Communities may experience both positive and negative effects from corporate climate actions, such as the construction of new renewable energy infrastructure or the closure of high-emitting assets. Consumer behaviours may shift as new products emerge, and vulnerable populations may be disproportionately impacted by changes in business operations. Finally, businesses must assess how their activities affect ecosystem services and ensure that natural resources are protected.

Five just transition challenges

The report outlines five main challenges: managing cumulative impacts, engaging stakeholders during asset closures, addressing climate-related risks to workers, ensuring rights in nature-based solutions, and influencing policy. Businesses must work with governments, communities, and other organisations to address these challenges. The report highlights the importance of collaboration and long-term planning to mitigate these risks and maximise opportunities for social inclusion. Addressing these challenges will require companies to invest in green skills development and ensure their lobbying efforts align with climate and labour rights.

Call to action

The report concludes by urging businesses to take proactive steps in embedding just transition principles into their climate strategies. It highlights that a just transition is not only a moral imperative but a business necessity to ensure long-term sustainability. Companies are encouraged to collaborate with stakeholders, engage in policy discussions, and integrate social impacts into their decision-making processes. In doing so, they can contribute to a more equitable, resilient, and sustainable global economy.