What is a just transition?

What is a just transition? A short ESG training guide addressing practical problems with green initiatives. 

Many people have a problem with going green because it risks making old and established practices irrelevant. How does the board of a coal or oil company tell its workers that their entire industry will be severely impacted or even eliminated by net-zero laws? 

This is what the just transition principle is trying to solve.

A just transition is the idea that a shift to more environmental sustainability practices should be fair, inclusive, and manageable. 

The main focus is usually on workers affected by this shift at some point in their careers because, without the principles of a just transition, many risk losing their current skill sets. 

Ultimately, the goal of a just transition is to minimise the negative social impacts that could arise from going green while maximising the benefits for society at large, particularly in terms of economic equality and environmental sustainability.

It’s popular because it’s often seen as a compromise between those who want greener industries and those who fear the impact of greener industries on social justice. 

Critics of climate initiatives, net-zero targets, and moves away from fossil fuels argue that these goals would lead to job losses and economic disruption for many communities worldwide. It’s a hot topic in the EU especially, given the jurisdiction’s ambitious climate targets over the next two and half decades. 

The just translation aims to address the issues that both sides in that debate care about, so it’s a middle ground that could lead to more sustainable progress. Because of that, it resonates with businesses, governments, and civil society alike.

Germany plans to eliminate coal use in the next twenty years. While this sounds good on paper, the move creates significant risk for the many communities and workers across the country who are skilled in that area and depend on it for income. To them, the countdown is on to a point where their entire means of living becomes obsolete. 

To combat this, the German government has committed to providing financial support for coal-dependent regions, investing in job retraining programs, and developing new industries to replace coal. While these answers don’t solve the problem—because there will always be debate over the nature and extent of support—they do speak to the effort to address the knock-on effects of green transitions on the ground.

The just transition is a principled concept that affects all levels of society. A board’s job is to determine its effects on companies and industries. 

From there, the ultimate goal is to use the understanding of a just transition to shape corporate strategy. This is especially true for companies whose primary income source might be severely altered by green transitions. 

In these cases, the board needs to plan, asking questions like how long the transition might be, what training their workforce will need to adapt, what support the government will provide, and how the company will stay profitable. 

Boards should also use the opportunity to share information on their own experiences with regulators and lawmakers. This kind of dialogue is critical to ensuring the transition is as just as possible.

A just transition is a green-based transition that accounts for its own impacts on society. Where shifts in the name of the environment might threaten workers, the just transition principles aim to alleviate those concerns through supported adaptation. 

Boards can’t necessarily fight against the tide of green transitions, but they can prepare their organisations and workers so the impact is positive overall.