Why should businesses care about a just transition?

Companies are increasingly expected to report on their sustainability goals and commitments.  

Some use the Sustainable Development Goals (SDG) as their North Star, others are committed to the UN Global Compact, and still others set Science Based Targets for carbon reductions. In many cases, companies align to all three or even more, and progress is published in annual ESG or CSR reports.  

In this mix, a new term is entering the mainstream: the concept of a just transition. In a field already crowded with standards and acronyms, we ask two Ramboll experts what sets the just transition apart – and how it matters to your business.  

The green transition will also have downsides 

“The term just transition has emerged from an understanding that the green transition will also have negative consequences: for instance, some people in the fossil fuel-based ‘brown economy’ are likely to lose their jobs. By countering these negative social impacts, we can ensure a just transition,” says Vanessa Ludden, business manager specialising in assessing socio-economic impacts at Ramboll.  

"By trying to understand who the winners and losers of the green transition are likely to be, we can come up with policies and practices to counter and mitigate the risk of these inequalities widening" — Vanessa Ludden, business manager at Ramboll

Vanessa Ludden is based in Brussels, where Ramboll is assisting the European Union with research into the socio-economic impacts of the green transition. Vanessa is joined by her colleague in Copenhagen, Christine Rasmussen, market manager at Ramboll Management Consulting, who helps businesses and stakeholders within philanthropy, civil society and the public sector navigate the increasingly complex landscape of sustainability strategy. Christine adds:  

“As the green transition accelerates and affects societies still more, it may enlarge social inequities. But I think an important message is that it may also unleash new potential, for instance by ensuring more people get the green skills that will be in demand in the coming decades. The green transition is also a strong lever for citizen engagement and activism and we see it unite communities locally and across borders.”   

How is just transition different from other sustainability terms such as the SDGs or ESG? 

“The different terms are of course interlinked, but just transition is focused more on inequalities. By trying to understand who the winners and losers of the green transition are likely to be, we can come up with policies and practices to counter and mitigate the risk of these inequalities widening,” says Vanessa Ludden.  

The just transition is increasingly central to policymakers, after having first been popularised by civil society activists: it was inscribed into the Paris agreement, and the European Union has launched a Just Transition Mechanism (JTM) to mobilise €55 billion “to alleviate the socio-economic impact of the [green] transition”.  

Even in Google searches, the increasing interest is evident. Since 2018, Google searches for ‘just transition’ have increased fourfold, peaking during last year’s COP26, where just transition was one of the hottest topics.  

In your research, you explain that the green transition can have negative consequences. Can you give an example of that? 

“One example is the so-called renovictions. In many places, houses and homes are being made more climate resilient, which is good and necessary. But that also leads to higher property values, which in turn can price existing tenants out of the market, who are then forced to move. In many cases, they move further away from the city to lower quality housing,” Christine Rasmussen explains. 

3 ways businesses can contribute to a just transition 

According to Vanessa Ludden and Christine Rasmussen, companies should examine their value chain through a just transition lens, and failing to do so can carry reputational risk. They share three steps to get started:

1. Acknowledge the problem: Most of the research into the green transition has so far focused on the technical aspects of the green transition. However, knowledge is more limited with regards to the negative social impacts of the transition. Businesses have a role to play in acknowledging that their greening activities can potentially have negative social consequences.
   
   
2. Assess your impact: Your first goal should thus be to try to understand what the potential negative social impacts of the ‘greening’ of your service or product might be. You can do this either through conversations with your employees, or by reaching out to experts and other businesses in your sector. 
   
   
3. Take action: Ask yourself: are you ready to change production chains or processes? And to invest in building competences for those employees who may otherwise lose their jobs? Be ready to take action. As the transition accelerates, companies should also consider hiring experts outside the purely technical fields who can help them understand, assess and address the social impact of their products and services and mitigate potential negative impacts. 
   
   

Isn’t there a risk that we are asking too much of private companies? 

“So far, the green transition has – broadly speaking – been a technical, industry-related agenda. As the transition accelerates, the impacts are felt more broadly and the agenda starts being about social equity, employment, etc.: what jobs are lost, which new competencies we need, who has the green buildings, and who lives in the green areas,” Christine Rasmussen says. She adds:  

“You can’t answer such complex questions just with public sector involvement. You need all stakeholders to take part, and in the private sector we have a large role to play in who we hire, which competencies we look for, how we reskill, and how we decarbonise”. Vanessa Ludden adds: 

“it’s also about the private sector ensuring they have a role to play in developing different technologies that are accessible to people with lower incomes. In this way, the private sector can both expand their markets, which is good for business, while ensuring we are not excluding anyone from accessing the benefits of the green transition”.  

Ramboll has several decades of experience supporting companies map, understand and act on their social and environmental impact. To learn more about how we work, reach out to Vanessa or Christine here.  

To contact the editor of this article, please email Anders Brønd Christensen. For more stories like this, please subscribe to Ramboll's global sustainability newsletter.