Episode 3: Enabling the Workforce of the Future

Full transcript

Ivy Kuo: Hello, I'm Ivy Kuo, Asia Pacific’s Sustainability Leader at PwC, and you're listening to ESG: Defining Asia Pacific's Future. This podcast series provides insights on the latest sustainability trends in the region to help you solve today's challenges and prepare to take on tomorrow's. In this second season, we focus on Asia Pacific's just transition to net zero. And I'm delighted to introduce you to PwC's expert in this topic, Kirsty Haymon.   

Kirsty Haymon: Thanks, Ivy, for the introduction. There's an increasing call to action to ensure that the shift to net zero is fair and inclusive. In this second season, we'll be exploring how stakeholders can achieve an environmentally sustainable global economy while also ensuring no one gets left behind. We have a great lineup of speakers covering topics from energy justice and human rights to community resilience and workforce transformation. Our guests will be sharing their views on Asia Pacific's just transition and the strategies being deployed in the region to drive inclusive opportunities for those most impacted by the shift away from carbon-intensive activities. 

Please note that the opinions expressed in this podcast are solely those of the speakers and do not reflect the views or opinions of any organisations with which they may be affiliated. Let's get started!

Welcome to our third podcast on Asia Pacific's just transition.   My name is Kirsty Haymon, and I've spent over two decades working in the region, advising governments, developers and investors on managing their environmental and social performance. Today, we're talking about the impacts of transition to net zero on people, and in particular on workforces. 

In a region where most businesses, nearly half of employers, and a significant contribution to GDP (Gross Domestic Product) comes from small to medium enterprises, it's of critical importance that we consider their workforces too. So how do we need to go about this? To help answer the question and many more, I've invited Devika Iyer from the United Nations Development Programme (UNDP) and Parul Munshi, a partner in PwC's South East Asia Consulting practise. Welcome to you both.

Devika Iyer: Lovely to be here, Kirsty.

Kirsty Haymon: Thanks, Devika. You are currently working with UNDP at the Regional Hub for Asia Pacific as the economic policy specialist for employment. Thanks for sharing your time with us today. I understand that you're working with the inclusive growth team in Bangkok. Tell us a little bit about the scope and breadth of your team's work, and obviously considering today's topic, your focus on the future of work.

Devika Iyer: Thank you, Kirsty. So I work with the inclusive growth team here at Bangkok, and our team covers a wide range of areas. We cover macroeconomic issues, public finance, social protection, the blue economy, and of course employment and future of work. And in terms of my work, I have worked on social and environmental issues for a number of years at UNDP and covering (a) range of areas including employment, social protection, development planning, and the poverty-environment nexus. The focus of my current role at the UNDP Regional Hub here in Bangkok is on employment and the future of work where I basically look at policy and programme issues related to informality, enterprise development, the just transition and digital transformation.

Kirsty Haymon: Thanks, Devika. So today's second guest is my colleague, Parul Munshi, our global lead for PwC's sustainable workforce offering, joining us from Singapore today. Parul, your team has been working recently on an Upskilling in Southeast Asia report. Can you share some of the key findings that your team came across?

Parul Munshi: Absolutely, Kirsty! absolutely thrilled to be chatting with Devika and you today on a subject that's extremely close to my heart and very close and central to the work that we are doing. As you just mentioned, I work across our global teams on crystallising what it is that we can do to support the workforce as a lever for sustainability transformation. And I think as you mentioned, skills is a very significant part of that agenda. In the report that you just mentioned, which was the Upskilling for Shared Prosperity in Southeast Asia, our research has shown that upskilling could grow Southeast Asia's GDP (Gross Domestic Product) by 4.3% by 2030 and a cumulative boost that will be valued at approximately $250 billion. There is also a lot that is very often said about the job disruption and the disruption potential of automation and sustainability action. What we are seeing is that this could actually unlock up to 670 odd thousand jobs in Southeast Asia, which is quite significant.

I think specifically I do want to call out from a Southeast Asia perspective that there are four key sectors that we are seeing that will benefit most significantly from upskilling action. Not surprisingly, of course, energy utilities, manufacturing, agriculture in a big way, and financial services. And I do think, again, looking forward to chatting to you about how each of these play a unique role in the sustainability transformation in Southeast Asia, especially the just transition.

Kirsty Haymon: So what I'm hearing is that there's a significant opportunity here around upskilling. But if we just take a step back for a moment, there is a significant systemic change that needs to happen. Then the need for this will only really increase as we move towards some of those net zero targets at both the government level but also for private sector. What are some of the key and immediate issues that the net zero transition is having on stakeholders, particularly employees that need to be addressed? Parul, I'll come to you first on that one.

Parul Munshi: I think to better propose solutions, we need to better understand the macroeconomic and the social political environment and how it plays out more uniquely in the context of Southeast Asia. I do think that our lesson from last year in the context of a turbulent economic environment, a very fractious political scenario, I think it has become even clearer that energy transition has to deliver not just net zero emissions, but also security from an energy perspective, resilience as well as affordability. And I think these are very critical to the context of Southeast Asia. But specifically focusing here, we do have a very fossil fuel based economy. Six out of the top 10 coal-using countries are in Asia. And I was just reading up that nearly 80% of our energy mix today is still coal, oil and natural gas. You put that together with the fact that we have such a massively growing middle class that then drives up energy consumption, there's a perfect storm there.

How do you balance these needs? And I think specifically in Southeast Asia, I'm quite concerned about the carbon tunnel vision. Don't get me wrong, I think emissions net zero is a very critical focus, but I think looking at it singularly in isolation without appreciating the interconnectedness of the S elements in ESG, I think is not going to lead us down a path of more sustainable solutions. I just wanted to call that out. Then specifically to your question on the key players and the impact specifically on the workforce. As I was mentioning earlier, even our most recent reports are showing that ultimately there is likely to be a much greater net uplift of jobs for instance, with renewables.

We are definitely seeing greater job creation with renewables than the destruction of jobs with the phasing out of coal and other fossil fuel based technology. I do want to call out the scenario where one is that we are potentially seeing the disruption of jobs in high emitting sectors of course. But the net inflow of jobs I think in Southeast Asia is something that we need to focus on. I think the complexities, what we don't know right now is how this will play out in the different geographies. And I think that requires data in a lot more cohesive planning with governments and the private sector to do that.

Kirsty Haymon: And I think here we are hearing that really there's a transition within the transition that needs to be managed. We need to create and manage expectations of employees. Devika, let me go to you for a moment and if we can just put this in the context of the sustainable development agenda as well. When we think of the ASEAN (Association of Southeast Asian Nations) context, we've got a lot of socioeconomic challenges already in existence. So what are the fundamental objectives and principles which really should be underscoring the approach from both the government as Parul mentioned, those policy frameworks in terms of managing the impact of this transition on workforces?

Devika Iyer: So the net zero transition will have asymmetrical impacts on workers and as Parul had mentioned specifically in carbon-intensive industries like coal, oil and gas and other industries as well, related industries. Now this could of course lead to job displacement or it could lead to a decline in earnings for lower skilled workers given that net zero jobs are more skill-intensive than brown jobs. And now these outcomes could have negative human development implications for the affected workers and their households. It could increase income and multidimensional poverty, it could increase food insecurity. It could impact both the physical and mental health of workers that have lost their jobs or members of their household. It could also contribute to a broader system of gender-based discrimination and it could also limit education of children in the household because of reduced income. Now, in terms of what the private sector can do to actually mitigate these issues, they can actually adopt, and I would use this very important term, operationalize the principles of the 2030 agenda for sustainable development.

Now, it's important to say that the agenda is actually grounded in human rights principles, and it's basically advocating for leaving no one behind in policy integration. And to just delve a little deeper into what the leaving no one behind principle actually means in the context of the net zero transition, it basically emphasises the importance of ensuring that all members of society, and particularly here, marginalised and vulnerable populations, and here we are talking about potentially workers who lose their jobs are included in the net zero transition and that they're not left behind in the process. And basically the agenda, it calls for policies and measures that prioritise the needs of the affected groups of these workers to ensure that the transition is equitable to all.

And this involves, of course, managing trade-offs and maximising synergies. And to basically manage these trade-offs, the policy integration principle calls for a participatory and integrated approach to policymaking, which involves of course all stakeholders, including of course, governments, the affected communities, workers who've lost their jobs, the private sector and civil society. So Kirsty, we have the principles in place. But what I would like to emphasise is operationalization is key.

Kirsty Haymon: I think we talked about this need for the trade-offs, but in particular the input of those affected stakeholders in our first podcast, that engagement with the workforce is really vital in terms of bringing them along on that process. Parul, can we just conceptualise this for a moment? Let's just bring this back to the context of ASEAN. Can you just go through some of the complexities that we've got in the ASEAN context that add the additional complexity to this issue? 

Parul Munshi: I don't think that any sort of sustainable solution can just be an outcome of not understanding and dealing with this complexity. One is I think the fact that there's a wealth of diversity in this region. On the positive perspective, we have a very large share of the world's workers that are under the age of 30. So I think there's a significant demographic dividend there. I think on the challenges side, nearly 80% of Southeast Asia's workforce are working in the informal sector without the requisite social protection, et cetera. So I do think that's something that has to be very up and centre of any conversation on the workforce and the just transition in Southeast Asia.

I do also want to call out the gender gap that we see in the labour force participation. Repeatedly we have seen that there's a significantly higher male labour force participation. There's a range because there's a diversity in the countries within Southeast Asia. But what I've seen is almost 10 to 30% higher (males) than females in the market. What we are also seeing, and I was looking at a recent OECD report, that Southeast Asian countries also have comparatively limited access to training opportunities and spend on skills. So I do think these are some of the structural dimensions of Southeast Asia that I wanted to call out are critical in any sort of solutioning that happens from a just transition perspective.

Kirsty Haymon: Devika, can I come to you? I think on the one hand a lot of these, the status and the demographics provide a bit of a challenge. But as Parul mentioned, there is an underlying opportunity here as well. If you look at the gender opportunity in terms of how we upskill and open those opportunities up for women, what other opportunities do we have in the region to capitalise on this transition?

Devika Iyer: I would say that in the face of the multiple challenges, the just transition also brings tremendous opportunities for the region and it could basically be a very powerful driver in creating decent jobs in sectors such as renewable energy, energy efficiency and also other green industries. Now, this could also provide opportunities for workers including informal workers and youth, and Parul had mentioned, the specific challenges there in the region and also help address issues such as unemployment and underemployment as well. We know that unemployment rates among youth in the ASEAN region are disproportionately high. So the just transition can actually bring opportunities for youth. Now, with gender gaps in the labour market in the region, which Parul had mentioned where the female labour force participation rates happen persistently lower than male rates, and this is across ASEAN member states, where actually many women tend to find employment predominantly in low-skilled and low-paying jobs.

The just transition can actually provide good opportunities for decent work as well as better wages. Now, the just transition, it could also provide a significant opportunity to improve working conditions for workers in sectors such as renewable energy where jobs tend to be safer and less hazardous than in carbon-intensive industries. So there are a lot of opportunities. And I would also like to mention that this transition can create new market opportunities for small and medium enterprises as well, linking them to regional and global value chains, improving their productivity, helping them realise growth, and also helping them create employment opportunities. And here I would just like to mention this issue of innovation. It should be noted that innovation and the development of new technologies and products will actually be very important to enable the just transition, and SMEs (small and medium enterprises) that are actually able to adapt and innovate, they can gain a competitive advantage in the marketplace. So as we can see, Kirsty, the just transition can bring about multiple benefits for the region's workforce.

Kirsty Haymon: Devika, thanks. So what are the drivers here for key stakeholders to be playing a more fundamental role in this process? What are the roles and responsibilities between those stakeholders ensuring that the opportunities accrue to everyone so we're not leaving people behind?

Devika Iyer: So I would just like to say that if we are to truly achieve a just transition, it is actually very important to effectively manage the trade-off. If the workforce transformation is not well-planned, this could have wide-ranging repercussions for workers, communities and the economy, and we've talked about some of those challenges in terms of job losses leading to economic insecurity, reversal of human development gains, and other issues which could have negative implications for economic growth. Now, here to address all these challenges, governments actually have a very critical role to play to enable this just transition. And there are a number of actions that governments can actually take to ensure fair and just transition. One, I would say, is that they need to support and actively engage in social dialogue with representatives of workers and employers' organisations and ensure that the needs of affected workers are actually considered in policies. And here social dialogue mechanism should be formalised, so it shouldn't just be a one-off.

And my second point here is that governments need to invest in education and training programmes to help workers, including of course, informal workers, women and youth, to acquire the skills they actually need to transition to the new, I would say low carbon economy. And this could include support for apprenticeships, vocational training, and higher education. And they could also invest in strengthening the delivery mechanisms for education and training. And my next point touches upon social protection, which Parul had actually mentioned earlier. Governments actually need to ensure that the affected workers have access to adequate social safety nets to ensure that they're able to cope during the transition. Governments also need to create an enabling environment for micro, small and medium enterprises to basically support their net transition and promote the creation of green jobs. And this could be done by providing financial incentives, including tax credits, loans, grants, as well as other means. It'll also be important here to support women and youth-led micro, small, medium enterprises, given that they often face discrimination and barriers in accessing resources and opportunities that can basically limit their economic participation and potential.

Kirsty Haymon: Parul, if I can come to you for a moment, if we think of the ASEAN region, we've got some economies here where there are limited resources available to create the incentives or to deliver those social protections that Devika was mentioning. Is there an additional role here for the private sector to be playing to enhance that transition?

Parul Munshi: I do think in fact the private sector and large enterprise especially need to work very closely and hand in hand because green jobs provide you with a double dividend of employment  generation and reduce negative environmental impacts. So I think as much as large organisations, I'm talking about large regional players, large global players, I think will need to take a leadership role and look at their workforce impacts, not just within the confines of their organisation as more narrowly defined, but actually across the value chain. So whether that is engaging, as you said earlier, Devika, for instance, taking that same example forward with suppliers that are a good mix of SME (small and medium enterprises) and MSMEs (micro, small and medium enterprises) scale, for instance, looking at the gender diversity of their suppliers. I think in the context of supplier resilience, in fact, if anything, this will only create greater resilience and stability in supply chains.

Secondly, and there is a lot more we can do in terms of taking a data-led approach to identifying which are those hot spots, both geographically, sector-wise that have the greatest potential for green job creation. There also needs to be a greater alignment across ASEAN countries on what is the definition of a green job, what do we mean by greening jobs in the transition environment, and where are we going to find those jobs. Then I think large enterprises need to play that role in ensuring both their immediate workforces and the value chain are getting the right skills. And again, not surprising, we are talking about the whole environment, Devika, as you mentioned on innovation and the innovation potential in Southeast Asia. It's not surprising, the WEF report that I just referred to. It actually calls out the two most significant skills, critical thinking and creative thinking. So both of them are very crucial to innovation. And the value creation opportunity for all of us I think is significant.

And lastly, I think as large organisations, Kirsty, are diversifying business models, like we said. Moving away from high emitting ones to say renewables or critical minerals, there is a very significant people plan where you are keeping humans at the centre of your approach. I think keeping a human-centred or a human-first approach is going to be critical to any business model transformation that happens with sustainability perspective in mind.

Kirsty Haymon: Devika, we've mentioned here, and I think you discussed this briefly at the beginning of our conversation. But is the extent of the informal workforce in Southeast Asia, in the worst case scenario where we can't manage the skills transition from the transition-in and the transition-out, what additional social protections are we looking at that are going to be required to assist both the SMEs (small and medium enterprises) and this informal sector, come along with the large institutions that do have the capacity and resources at hand? And what roles and responsibilities might be at play in helping to deliver those?

Devika Iyer: So ASEAN has about, I think 244 million workers in informal employment, which is nearly about 80% of the region's workforce. And many of these workers will be actually affected by the just transition because they predominantly work in sectors that will disproportionately be impacted by the net zero transition. And it's important to highlight that most of these workers are not effectively and also adequately covered by existing social protection schemes. Traditional models of social protection, they're basically centred around safety nets such as cash transfers, food assistance, and healthcare services, which basically aim to alleviate poverty and reduce inequality. But it's important that actually countries go beyond this and adopt new models of social protection that alongside these safety nets, they also focus on building the resilience of workers in the face of the transition by actually investing in their education and skills and enabling access to new employment opportunities.

And Kirsty, there are multiple models that are already being implemented in some countries across the world. Just to give you an example, the government of Germany has implemented a very good model that actually can be implemented in other countries where the just transition of coal miners in Germany had been facilitated by linking social protection measures to skills development and employment services. This basically entailed covering vocational training costs for employed and the unemployed, including for transport, offering job placement support through job centres and employment services. And in terms of what advanced planning and measures that can be taken to avoid increased social inequities that displaced workers could face, I would say there are a number of things. One, I would say is it's important to identify first the vulnerable groups who are actually likely to be impacted by the net zero transition.

And this can be done through, for example, socioeconomic vulnerability assessments, of course stakeholder consultations. Second through identifying the skills gap through skills mapping and assessment, and this is what Parul had also mentioned. And also consultations with industry. This is among other methods. And here again, I would like to emphasise that it's also important to strengthen the delivery of skills by ensuring that skills providers, including technical and vocational education and training institutes, actually have the knowledge and capacity to deliver these skills. And my third point is to strengthen social protection systems and enable the expansion to adequately cover affected workers and actually better link these systems to labour market policies. And I would like to end by saying that it's really important that collaboration between all stakeholders, governments, vulnerable and affected workers, the private sector and of course civil society, come together to ensure that this net zero transition is actually inclusive and just.

Kirsty Haymon: Thanks, Devika. Parul, over to you one last question. What would you say would be your key recommendations that we need to take away in terms of immediate next steps? We've heard around some incentives, some models from other countries. When we think of the ASEAN region, what needs to happen now?

Parul Munshi: Yeah, I think building on what Devika said earlier, I think three things that are top of mind for me. One is data. I think we cannot shy away from having a data-led approach because it's only there that we understand where job creation is actually going to happen, where job destruction is likely to happen and what are the pathways going to be for transitioning workers. Two is, and Devika, you said that, but just cannot emphasise that enough, is collaboration. Whether that is collaboration between public and private sectors, whether that's collaboration between educational and you mentioned TVET (technical and vocational education and training) and other institutes of higher learning, primary education because there is a significant basic gap in skills that education has to actually provide. So, I do think that collaboration is going to be very critical and that is then further supported through incentives and subsidies from the government.

And finally, I think, it is finance, because we need to unlock the funding that is required to enable all these critical activities. And without the capital markets, there isn't going to be any energy transition, let alone a just one. I was looking at some numbers and it said half of the estimated US$100 trillion in global green investment will be required in emerging markets. And therefore, for example, the just energy transition partnerships, for instance, to me, provide a lot of hope that this transition capital, green capital is actually going to flow into the markets that need it the most in this part of the world. And I think that's going to be really critical.

How we encourage financial services to come up with blended products, more creative products that are actually going to push this capital into this region, I think remains to be seen and is a work in progress, but there's a lot happening. As I mentioned when I started, I think the whole loss and damage focus in COP27 has given us a lot more optimism around capital flows into this part of the world, which I think are absolutely foundational to anything we do from a just transition perspective.

Kirsty Haymon: So Devika, you've just mentioned some of the incentives and examples from Germany around what can be done. What would your three key recommendations be in terms of what needs to happen next from both the public and the private sector?

Devika Iyer: I would focus here on governments in terms of immediate next steps, and one is to create an enabling environment for small and medium enterprises and micro, small and medium enterprises, to actually support the net zero transition, and here with a special focus on women and youth-led enterprises. This would entail enabling their access to finance, to technology and infrastructure and markets fostering innovation and building their capacity to support the transition. I would like to mention some of the good models where governments have supported these enterprises working alongside of course other partners.

And my second recommendation would be for governments to strengthen the education systems, including the TVETs. It's really important to basically enable quality skilling of the current workforce, particularly in affected sectors as well as the future workforce. And here, it's important that skills' development policies are actually reviewed and reformulated to be in line with the just transition. And in terms of the kind of skills, we are talking about a combination of skills including foundational, core and technical skills, including of course, STEM (science, technology, engineering, and math) skills, that's science, technology, engineering, and mathematics. And this is really critical to advance the just transition. It's also very important to ensure that access to education and training is equitable, taking into account gender considerations.

Now, my third point and my final point is the expansion and provision of adequate social protection for affected workers, including the informal workforce and strengthening its link to active labour market policies. And I've mentioned this before, the model that Germany had adopted to support coal workers is a good example. And it's also important to highlight that countries are actually moving towards developing integrated social protection and employment policies. So to end, Kirsty, I would like to say that by taking urgent and bold action, the public sector working with all stakeholders, including affected workers and the private sector, it can actually enable a successful just transition in the region. And we need all hands on deck.

Kirsty Haymon: Thanks to our guests today, Devika and Parul, for providing their insights into the implications of the net zero transition on the labour market. We’ve heard about the need to be wary of carbon tunnel vision, and – as on our previous podcasts – the need to operationalize action to ramp up the speed and scale of the transition.

We have an opportunity here to transform established conditions for vulnerable populations, particularly younger and female workers, and for small to medium enterprises to ensure that job disruption doesn’t lead to a further decline in earnings for lower skilled workers.

Fundamental to achieving these opportunities is investment in the delivery mechanisms for apprenticeships, vocational training, and higher education and, for SMEs (small and medium enterprises), financial incentives, including tax credits, loans, and grants. But there is a need for data to make informed, well-planned decisions. 

There is considerable work being done in some countries and through regional and international organisations which guides the way, but we need action now or economies will fail on the back of unemployment and increased socioeconomic displacement. We’ll take up this topic in our next podcast which explores what happens in regional economies that are not diversified, and the implications for our most vulnerable communities.

© 2023 PwC. All rights reserved. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details. This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.