A JUST TRANSITION
Ensuring that the shift to a renewable energy economy is not only green but also fair
Climate change is already harming millions worldwide, making the shift from carbon-based energy to renewables urgent. But while a greener economy cuts emissions, many businesses and policymakers overlook the social and justice impacts of renewable energy investments on workers and communities. A just transition puts people — not just green solutions — at the center of this shift.
The hidden costs of renewable energy projects
Studies show that despite their importance in combatting climate change, renewable energy projects including wind, solar, and hydropower incur negative social impacts similar to high-risk industries like mining and large-scale agribusiness. Risks of land disputes and conflicts heightens especially when projects require vast land areas affecting local livelihoods, food sources, and access to clean water.
To mitigate risks and prevent harm to local communities, businesses — including financial institutions — and state actors must apply lessons learned from other industries. This means conducting robust human rights due diligence throughout renewable energy projects and ensuring free, prior, and informed consent and meaningful consultation with affected communities.
Ensuring a just transition across industries
The green transition affects workers across many industries and beyond renewable energy projects. In the textile industry, for example, companies are taking steps to cut emissions from factories. However, these efforts often increase costs, leading some companies to cut wages or delay investments in better working conditions. At the same time, energy-saving automation in manufacturing can lead to job losses and creates challenges for reskilling vulnerable workers.
To ensure a just transition, businesses and state actors must assess how technological solutions affect local communities and workers across all industries. These groups must be actively consulted and involved in shaping solutions that protect both people and the planet.
Definition of Just Transition
A notion of a just transition originally focused on job security and energy access in the shift to a clean energy economy. Today, it reflects a broader vision of a fair, inclusive, and sustainable economy that respects human rights, reduces inequalities, and creates decent work. The International Labour Organisation (ILO) defines it as “greening the economy in a way that is as fair and inclusive as possible to everyone concerned, creating decent work opportunities and leaving no one behind”. The Paris Agreement also recognizes the importance of just transition for workers and quality jobs.
Recommendations to companies with global suppliers
What should a company do to ensure human rights are respected throughout its renewable energy supply chain?
Know your suppliers and apply a rights-based approach to risk assessment across all business relationships in the value chain. This includes understanding how suppliers source raw materials and components, and how they mitigate human rights and environmental risks in the construction, transmission, and distribution of energy.
Additionally, companies should be aware of how partners manage human rights risks in waste management and understand their plans of action for decommissioning energy infrastructure.
What should a company consider when adopting emission-reduction technologies that might affect workers?
Going green is not always fair. Companies must consider that introducing emission-reducing technologies in manufacturing should not come at the cost of lower wages or deteriorating labour conditions.
To support a just transition, companies should maintain regular dialogue with trade unions and workers to ensure social risks are effectively addressed. If the adoption of new technology leads to significant workforce changes, all employees should have access to training and reskilling opportunities.
Recommendations to investors and fund managers
What should investors do to ensure the renewable energy projects they finance align with a just transition?
Apply a value chain perspective throughout the investment cycle. Before investing, map and assess potential human rights and environmental risks across the renewable energy value chain, and adopt strategies that mitigate them.
During the investment, monitor risks continuously and clearly communicate expectations on human rights and environmental due diligence to both service providers and companies.
Engaging in meaningful dialogue with rights-holders and influencing investee companies directly — or through collective action — is also essential.
How should social risks factor into investment decisions related to the green transition?
Investors should regularly engage with investees and require transparency on how social risks in the transition are managed. These risks include job losses from automation or new technologies, and poor working conditions. Investments in emission-reducing technologies should not exacerbate inequality or push vulnerable workers deeper into poverty.
For state actors and policymakers
What should governments do to ensure renewable energy expansion is socially responsible?
Safeguard the procedural right to a clean, healthy, and sustainable environment—while striving for shared prosperity. As duty-bearers, state actors must respect and protect human rights related to the environment. This includes ensuring community access to information and meaningful participation in decision-making processes. States must also protect the right of affected communities to seek grievance and remedy, rather than marginalising them from the benefits of the energy transition.
How should policymakers address the risk of job losses or inequality in climate strategies?
State actors, including policymakers, should incentivise companies to take climate action responsibly. They must ensure that corporate efforts to reduce emissions do not come at the expense of workers’ rights or working conditions.
