Just Transistion
The past two years have been remarkable in many ways. Of course, Covid has understandably grabbed headlines, but ESG principles also increased in both importance and prominence. Climate change went mainstream, and we witnessed trillions of dollars devoted towards assets that took into consideration environmental impact. Social issues such as diversity, inclusion, and equity also increased in importance and frequency.
It should be no surprise that when social and environmental issues rise in visibility, principles, processes, and practices also increase in mainstream conversation. This is really where “just transition “ came about. If you haven’t heard this term yet, you will, and it is but the latest hot topic in the world of ESG.
Credit: Sébastien Thibault
But what is “just transition?” Just transition takes the position that a healthy economy and a clean environment should be able to co-exist. To reach that vision, it cannot come at the expense of the health of the community or workers; at the expense of the economy, it should not negatively impact employment or economic assets. Any losses should be fairly compensated, and all external costs should be accounted for in the cost of the good or service. Those most impacted should have their voices heard the loudest, and the solutions should include their input.
Just Transition Principles include:
Workers, community residents, and Indigenous Peoples around the world have a fundamental human right to clean air, water, land, and food in their workplaces, homes, and environment.
There is no contradiction between simultaneously creating sustainable development, having a healthy economy, and maintaining a clean and safe environment.
Liberalization of environmental, health, and labor laws and corporate globalization – know no borders. Therefore, solutions call for local, regional, national, and global solidarity.
The development of fair economic, trade, health and safety, and environmental policies must include both the frontline workers and fence-line communities most affected by pollution, ecological damage, and economic restructuring.
The costs of achieving sustainable development, a healthy economy, and a clean environment should not be borne by current or future victims of environmental and economic injustices and unfair free trade policies.
Workers and community residents have the right to challenge any entity that commits economic and/or environmental injustices. These entities include governments, the military, corporations, international bodies, and mechanisms for securing corporate accountability.
We heard the term “Just Transition” quite a bit at COP 26 last month, but where is this likely to really land? For publicly traded companies, this may be a demand from activists, journalists, and policymakers. Still, that demand is more likely akin to holding organizations accountable to their own policies and statements. If you make a public-facing statement around environmental justice, be prepared to defend it and demonstrate that you are actually doing it.
This really goes back to the labor movement in the 1970s, when the first environmental protection laws were passed to address pollution in air and water. If pollution could harm communities, it could harm employees as well, and soon the labor movement was leveraging these laws as additional protection for workers. As time progressed, the labor and environmental movements found common causes, and the environmental justice movement was born.
Fast forward to 2018, at COP24, a declaration was approved that identified that the creation of decent work and quality jobs was crucial to ensure public support for long-term emission reductions and climate-resilient development, including reaching the goals outlined in the Paris Climate accord. In that declaration, the movement exited the labor movement slogan and gained an international audience.
In last month’s COP26 meeting, the Just Transition Declaration was signed by 16 North American and European governments, which called for “supporting fossil-fuel and other workers in their transition to new jobs as well as supporting and strengthening social dialogue on these topics.”
Enter BlackRock and 27 other companies who made similar pledges and have pointed out that a transition to a net-zero economy requires a fair and just transition that does not polarize. Without considering how the transition occurs, transitioning could lead to political uncertainty and keep us from truly reaching the goal.
As I read through those statements and then try to reel back how this may actually be applied, it goes back to a corporate culture focused on its people. One that considers every employee and the impact that the change our future holds has on those employees. It means making strategic decisions that have a long-term view. It means developing a sustainable mindset within your organization.
Our economy is going to transition to an economy based on renewable energy. No different than we transitioned from burning wood to steam to fossil fuels. With each leap in technology, it is important to consider the impacts of that advancement. To ensure that no one is left behind, is passed over, is forgotten. It means considering the long-term impacts of those new technologies and taking steps to ensure that we do not plunder the land as we have in the past.
The increasing demands for transparency will expose those organizations that attempt to fake it until they make it. The competition for funds will drive investors to compare organization against organization so that investors understand where to more likely mitigate the risk to their capital. For those investors, just as climate risks pose a threat to their investment, so too does the potential of their investment in an asset that is not prepared for the coming transition. Stranded assets are not prized assets, and failure to remain relevant can place capital in harm’s way.
We have seen this before, near the turn of the century, in one of the most discussed examples in business school, the tail of the buggy whip factory. Who would have imagined at that 1908 transportation conference, attended by hundreds of companies in the wagon and carriage industry, that when Henry Ford unveiled his Model T at the event, that life as they knew it was about to change.
That change did not spell disaster for every buggy whip factory, however. Some recognized the disruptive technology that was about to change their world as they knew it. Some embraced the innovation and made business models to participate in the disruption. One such company was the Studebaker Manufacturing Company, which shifted from a carriage-making company to an auto-making company. The Timken Company shifted its roller bearing company from carriage wheels to auto wheels and today is a $3 billion company.
The point is, organizations will either embrace the disruptive technology and flourish, or they will resist it and perish. The investors will be watching, and they will be looking for opportunities. Opportunities to not only mitigate risk but take advantage of the transition itself.
You can help reduce the impact of the built environment by sharing this blog with your peers. Together we can impact the 39% of greenhouse gasses attributed to the built environment. It starts with awareness, and we succeed with teamwork.
Stay well!
Chris Laughman is the ThirtyNine Blog author, a blog dedicated to reducing the impact of the built environment. When not blogging, Chris is helping the real estate industry reduce energy and water impact as the Vice President of Sustainability for Conservice, the Utility Experts. Whether Multifamily, Single Family, Student Housing, Commercial, or Military, we simplify utility billing and expense management by doing it for you. Our insight into your utility consumption provides an opportunity to identify risks. Leveraging innovation and experience, we ignite solutions with real impacts and track performance to ensure the trendline stays laser-focused on the goal. At Conservice, we have developed a true bill-to-boardroom solution to help truly make a difference. We have before us a tremendous opportunity. Standing shoulder to shoulder, we will get this done. Contact me at claughman@conservice.com for more information.
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