Asia Pacific’s just transition

• A combination of forces is prompting Asia Pacific businesses to prioritise their transition towards a net zero economy - often in advance of government action due to stakeholder pressure and reputation risk - while simultaneously adapting to the impacts of climate change. In the collective race towards net zero, it’s important that no social group or community is left behind.
• In creating a more environmentally sustainable global economy, a just transition is essential. The transition must embed a respect for human rights, contribute to sustainable employment, and develop resilient communities.
• While Asia Pacific governments have a fundamental role to play, businesses also play a significant and crucial part in the solution. This should include inclusive opportunities for stakeholders who are most impacted by the shift away from carbon intensive activity, while also delivering added value for employees, shareholders and other stakeholders.
• With non-energy sectors contributing more than 40% of greenhouse gas emissions, and nationally determined contributions (NDCs) identifying multi-sector mitigation plans, the roles and responsibilities do not solely lie with energy companies. The transformational change required will affect us all.⁷

Numerous organisations have created frameworks to achieve such outcomes. Amongst these are the International Labour Organization’s⁸ guidelines, the Council for Inclusive Capitalism⁹ and the Just Transition Initiative.¹⁰ While each framework varies, a common thread is that a just transition is only possible when we prevent and minimise the social injustices that could stem from a net zero transition, particularly in relation to the most vulnerable groups in society. The net zero pathway may also provide opportunities to improve processes, services, knowledge and innovation, to promote productivity and resource efficiency, as well as to diversify and revive communities.

Unfortunately, data from the Climate Action 100 March 2022 Benchmark assessments shows that a majority of the largest global emitters are not sufficiently prepared to deliver a just transition. While 44 companies - representing 75% of those assessed - globally have publicly acknowledged the importance of a just transition as part of their net zero strategies, only 11 have taken proactive steps in developing policies and plans.¹¹ Similarly, the World Benchmarking Alliance indicates that only nine companies have made any substantive progress towards implementing decisive plans to support and influence the shift to a just, societal transformation, according to its 2021 Just Transition assessment of 180 companies in high emitting sectors.¹²

As part of a net zero transition that prioritises justice and fairness, assisting the developing world through this transition is both a gesture of global solidarity and an ethical duty. The private sector has a role to play in enabling a successful low-carbon transition.¹³ While developed markets are likely to have the finances to reach their long-term climate goals, in emerging markets the funding gap remains wide. It is estimated that emerging markets require almost US$94.8 trillion to transition; there is an estimated US$83 trillion opportunity for private investors.¹⁴ This is an opportunity for Asia Pacific business leaders to consider inclusive opportunities for stakeholders who will be most impacted by the shift away from carbon intensive activity, while also delivering added value for employees, communities and shareholders.

We see four key considerations for the private sector to address transitional risks and put people at the heart of their decarbonisation plans.

Engage broadly with stakeholders

Consultation with stakeholders (including workers, unions and workforce representatives, governments, impacted communities and civil society organisations) to negotiate a strategic direction that is both fair and equitable is fundamental for a just transition. Such dialogue will not only inform the way forward, but can reduce risks and improve transition outcomes. Engagement at all stages, from initial discussions on climate adaptation and net zero ambitions, to planning, implementation, monitoring and reporting at sectoral, regional, national and local levels will help maximise positive impacts.

A participatory approach to developing company-level climate action is important for workers and communities to create new industries, jobs and social services provisions that are responsive to stakeholder needs. Without a meaningful voice in the planning process, the right to organise and collectively bargain, equitable outcomes are impeded. In contrast, companies that engage in social dialogue tend to avoid costly industrial conflict and have higher productivity, leading to resource productivity and lower costs.

Establish a workforce for the future

Companies needing to transform or diversify their operations - as a result of government-led net zero policy or internal net zero strategy - should consider implications on their workforce. Ideally, any investment in new operations or infrastructure should lead to secure, high-quality jobs that deliver benefits and a living wage. This may also represent a significant opportunity to recruit and invest in historically underrepresented groups and break down long-held barriers to career progression. Strong labour practices and employee engagement will enable companies to have a competitive advantage and assist with productivity and retention.

In parallel, where existing employees can be retained and redeployed, they should be guided into emerging roles through reskilling or upskilling. Working with local governments and vocational institutes to forecast skill needs and foster a cross-sector collaboration can reduce the need for additional social protections.

Develop sustainable value chains

Recognising the complexity of their value chains, business leaders should plan for potential implications on suppliers as a result of their net zero transition. Managing expectations and communicating changes to policies and procurement practices is necessary to support them in their own efforts to mitigate risks to workers. In a globally connected world, effectively engaging supply chains is key to mitigating impacts and seeking competitive advantage.¹⁵

The likelihood of altered demand for certain products and services is high, and smaller or lesser-resourced suppliers may find the changing landscape particularly difficult to navigate. In addition to championing human rights related to conditions of work, pay, and occupational health and safety, companies should support formalisation of work through their supply chains through training, capacity building, certification and advocating for legislation.

Build resilient communities

The ripple effect of a company’s net zero transition will be particularly acute in areas where assets need to be decommissioned. This can lead to large-scale retrenchment, particularly in communities dependent on high emitting sectors, which should be managed through a time-bound plan for closure and implementation of social protection measures where alternative employment opportunities cannot be identified locally.

There is a need to drive investment in community economic diversification or renewal to maintain economic growth. This may include concerted efforts to regenerate infrastructure and preserve local biodiversity, supporting local development initiatives, and establishing ongoing partnerships for regional grants to drive regional growth and social stability.

These four themes will be the subject of further industry collaboration to promote and enhance Asia Pacific’s just transition, to ensure it’s not just a transition.