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Carbon-intensive Sectors at Start of Just Transition Journey

New benchmark report highlights lack of social factors in corporates’ transition strategies and “absence of a holistic approach to decarbonisation planning”. 

Firms at the sharp end of the transition toward a low-carbon economy are not yet incorporating social factors into their emissions reduction plans, according to a new study covering 180 large corporates in three sectors.

Despite the emergence of some good practices, a high proportion of high-emitting firms are currently failing to demonstrate efforts toward a just transition, said the World Benchmarking Alliance, in its Just Transition Assessment 2021.

“A small number of companies are displaying just transition leadership compared to their peers, but much more is needed from the vast majority,” the report concluded.

WBA benchmarked firms in the oil and gas, utilities and automotive sectors against six just transition indicators, resulting in an average score of 2.7 out of a maximum of 16. Only 5% of the assessed firms achieved more than the mid-level score of eight.

“Our assessments have revealed a systemic lack of disclosure on how companies identify, prepare for and mitigate the social impacts of their low-carbon transition strategies,” said the WBA.

“Our findings uncover a current absence of a holistic approach to decarbonisation planning, where emissions reduction is considered hand in hand with respect for human and labour rights to ensure a just and equitable low-carbon transition.”

UK power supplier SSE, which last year became the first utility company to publish a just transition strategy, achieved the highest score with 14. As a sector, utilities were generally awarded higher ratings, but still only achieved a sector average of 3.7, compared with 2.3 for auto manufacturers and oil and gas firms respectively.

A just transition is widely seen as an essential part of the shift away from fossil fuel dependency as it seeks to address the potentially negative economic impacts on employees, communities, customers and suppliers to firms urgently required to adjust their processes and business models to reduce greenhouse gas emissions.

A recent report prepared for the Financing a Just Transition by the London School of Economics’ Grantham Research Institute on Climate Change and the Environment, said national and local government hold primary responsibility for “delivering and coordinating” a just transition by setting expectations and frameworks for corporates, but added that financial institutions should play a supporting role by “fully integrating” environmental and social dimensions into their decision-making.

The UK government’s Green Gilt programme committed to reporting on the social co-benefits of green investments made with the proceeds, thus tacitly promoting the just transition approach.

The new report is part of a wider project by the WBA to measure the progress of 450 firms against the Paris Agreement and related UN Sustainable Investment Goals using Assessing Low-Carbon Transition (ACT) methodologies. The 180 firms in the new pilot were assessed against the ACT methodologies and new ‘just transition assessments’.

These assessments are based on firms’ performance against six indicators which collectively form a just transition roadmap for corporates to follow, according to the WBA. The six indicators are: social dialogue and stakeholder engagement; just transition planning; providing or supporting access to green and decent jobs; retaining and re- or upskilling workers; social protection and social impact management; and advocacy for policies and regulation supporting a just transition.

The two highest rated firms in the oil and gas sector were UK-listed bp and France’s ENGIE, the latter being commended for its commitment to engaging in social dialogue and collective bargaining “in order to establish the right conditions for its transformation and long-term economic, social and industrial performance”.

WBA asserted that bp was the only firm assessed in the oil and gas sector with a just transition plan that “respects and promotes the fundamental rights of affected stakeholders”, noting the extent and variety of its engagement with employees, investors, stakeholders and regulators.

“It has several employee-led forums and business resource groups and aims to build constructive relationships with labour unions formally representing some employees. Employees are consulted on a regular basis through team and one-to-one meetings and through an annual survey,” it said.

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