Who are we transitioning for?

Co-authored by Michael Hayes, Global Climate and Renewables Leader, KPMG, and Avery Johnstone, Associate, Global Decarbonization Hub & Global Chair, Leaders 2050.

Suppose we transition to net zero, and we don’t do so in a just way (e.g. Including, but not limited to, Indigenous engagement, gender inclusion, labour rights, equitable energy access, etc.). In that case, the question begs, who are we transitioning for??

It is well established that climate change impacts the world’s most vulnerable more than any other part of society. The World Bank reports that certain social groups, including women, children, persons with disabilities, Indigenous peoples, and migrant workers, amongst others, are particularly vulnerable to crises and, often, compounding crises. The Intergovernmental Panel on Climate Change (IPCC) has highlighted the need for climate solutions that conform to procedural and distributive justice principles for more effective development outcomes. Governments, particularly in low- and middle-income countries, recognise this by designing policies to address it. So, what about the business world?

We often hear critiques of just transition work based on speed or priority – that solving environmental issues will inherently solve social issues (e.g. Forced migration, famine, geopolitical tensions) and we must tackle the environment first. But, knowing what we do about the challenges to speed and scale climate action and net zero, are we willing to wait another 26 years (or, in a pessimistic view, even longer) even to consider the people who will continue to live on this planet? The challenge and opportunity of this transition is a systems-level change - do we want to risk creating yet another system of structural inequality?

The climate crisis is about people. So, too, is the energy transition. Social and environmental impact are inextricably linked and inseparable to solve. An energy transition, let alone just one, will not happen without the mass mobilisation of people and capital towards a new way of thinking, working, and living. And it is well underway, for example:

1. We are in the midst (though in the early stages) of scaling renewables.
2. The US has embedded climate justice into its Inflation Reduction Act legislation, establishing a federal government-wide goal that 40 per cent of the overall benefits of certain Federal investments flow to disadvantaged communities that are marginalised, underserved, and overburdened by pollution.
3. Young people are leaving or turning down offers of employment at companies that no longer align with their values.

The just transition is happening, and the business needs to get on board to mitigate incoming risks and benefit from the prospective opportunities.

There is an economic and moral imperative to address environmental and social issues in a nexus – not least because one accelerates action with the other, and time is not on our side here. Some statistics to support this:

• The phase-out of coal alone could lead to the loss of 12 million fossil fuel jobs, a shift that poses challenges for affected workers, communities, businesses operating those assets and investors counting on the returns (Source: IRENA, 2020a)
• Companies with more female board directors are 21 per cent more likely to have set emission reduction targets. (Source: World Economic Forum, from UNEP and World Bank)
• Investing in gender equality could reduce global greenhouse gas emissions by up to 15% by 2050. (Source: United Nations Environment Programme (UNEP) and the World Bank)

To treble renewable energy, embedding social impact assessments are just as important as the planning permissions or grid access. It should be the license to operate. Affordable and clean energy is only one of the 17 SDGs – alongside climate action – but will only be possible by co-achieving several if not all, of the others (including quality education, decent work and economic growth, gender equality, responsible consumption and production, and most importantly, partnership for the goals).

We have a long road ahead of us and significant goals to reach to ensure the sustainability of our planet. It will be a journey that we cannot leave anyone behind. We risk complete systems failure if we do not include holistic and intersectional perspectives and action in this transition.

Bottom Line: The private sector will be at risk if it does not take action now. Businesses have a duty and responsibility to their communities and our planet. If a climate investment is not just, it is redundant and detrimental to the future inheritors of our Earth. We must call for just transition action and investments exclusively moving forward.

Co-authored by Michael Hayes, Global Climate and Renewables Leader, KPMG, and Avery Johnstone, Associate, Global Decarbonization Hub & Global Chair, Leaders 2050.