The 4 steps businesses can take to demystify the just energy transition

Imagine the energy system of the future. What comes to mind? You may think of solar and wind energy, widespread electrification, smart-grid technology, upgraded transmission lines, long-duration energy storage or electric vehicles. You may also be hoping for a world where everyone has access to and can afford clean energy, a world where energy workers are employed in green and decent jobs, where homes are well insulated and energy efficient, where we breath cleaner air and where youth feel confident about what the future holds.

Our world must transform rapidly. We can’t design the energy system of tomorrow without fully considering and carefully managing the effects of change on people today. We must phase out fossil fuels and massively scale up renewables to build an energy system that is clean, flexible, reliable, secure and sustainable. And, we must change in ways that ensure that the benefits and burdens of our decarbonization efforts are shared equitably in society. This is how we bring everyone on board the energy transition and halve emissions by 2030.

Government has an important role to play. So does business. And, while companies around the world are driving economic transformation, creating jobs and investing in clean energy solutions, the role of business in building a fairer and more inclusive economy is still not well understood. Yet, companies can be actors of positive societal change towards net zero when they are strategic and intentional about how they engage with affected stakeholders.

Let’s take an example. In 2015, Enel, the Italian energy utility company, pledged to be carbon neutral by 2050. Shortly after, it launched its Future-e project to shut down and repurpose 23 fossil-fuel power plants in Italy by 2030. Through a process of direct and proactive involvement of workers, communities and local government, the company developed a sound understanding of the context in which it was operating and co-designed sustainable solutions for the decommissioned plants’ reconversion with those that would be affected. Enel agreed with trade unions on just transition agreements, ensuring workers will be retained, retrained and redeployed.

Enel’s Future-e project is not an isolated example. Many companies are taking action to manage the impacts of their low-carbon transition on their workforce, customers, local communities and society at large. This is, after all, at the core of good corporate governance and what companies have always done: looking at the future and trying to adapt to ensure long-term resilience and profitability. But not all companies have grasped the value of a holistic and integrated approach to just energy transition planning. At the We Mean Business Coalition we have laid down four steps to help companies get started:

Make your commitment to a just transition to net zero understood and approved at the most senior level of your company. Communicate your commitment internally and externally as a first step to embedding a just energy transition into your company’s strategy and operations.

Build a sound understanding of the societal context in which your company operates, including how your climate transition action plan may contribute to the economic development of regions where your company has business operations, and commit to co-developing solutions with affected stakeholders.

For example, 27 major companies from across the energy and industrial sectors have signed The B Team Just Transition and Decent Jobs pledge, committing to build decent green jobs in every country they operate in and supporting the just energy transition of the global economy.

Participate in social dialogue to ensure workers are well informed and consulted about your company’s transition plans and initiatives on an ongoing basis. They can then benefit from opportunities brought by your company’s net-zero transition, such as access to new skills, training programmes and job opportunities.

Identify and consult external stakeholders to listen to and capture the needs of groups who may be affected by your company’s transition plan.

Develop and implement a time-bound plan with interim milestones to advance a just energy transition. Establish good corporate governance by defining clear roles and responsibilities for a just energy transition in your company and train employees in relevant functions.

Prepare your workforce through reskilling, upskilling and support for redeployment.

For example, in Spain the closure of Iberdrola’s last two coal plants was coupled with significant investments by the company in renewable energy projects to revitalize industrial activity in affected regions. Under the Exiom-Iberdrola Alliance, the first photovoltaic module manufacturing plant in Spain and one of the first ones on an industrial scale in Europe, should be operational in 2023, creating more than 100 direct jobs, enhancing the security of supply for the renewable energy value chain and acting as a driver for local industrial development.

Ensure that your commitment to a just transition is upheld internally, including by your executive leadership. Publish your commitment and review your processes for advocacy and lobbying to ensure your company engages responsibly with policymakers to create a pro-climate policy environment that is aligned with the objectives of a just energy transition.

Publicly advocate mobilizing your network and your employer and business membership organizations. Make use of the collective reach of advocacy organizations, such as the We Mean Business Coalition, to support enabling policies at national and international levels.

Enel is a vocal supporter of a just transition towards a renewable energy future. In its just transition plan, the company outlines the four key policy areas it promotes through advocacy activities: safeguarding industrial competitiveness, safeguarding employment, managing impacts on utility bills and customer empowerment.

Investors and other stakeholders increasingly expect companies to disclose the actions they take to achieve a just energy transition in climate transition action plans. Explain how your company’s transition plan contributes to the economic development of regions where it is operating and to other development issues, such as inequality, gender and energy access. You may also choose to develop and publish a dedicated ‘just transition plan’ to ensure greater transparency, accountability and to facilitate peer learning.

Following the publication of its Just Transition Strategy in late 2020, SSE recently shared a progress report, taking stock of actions and reporting against the company’s just transition commitments. The report was welcomed by investors and viewed as a good example of how companies can ensure greater corporate accountability for a just transition.

A just energy transition is good for people and the planet and it’s also good for business. To help companies on this journey, BSR, the B Team and the We Mean Business Coalition have recently published the Just Transition Resource Platform. Please use this toolkit's step-by-step guidance to get your company started on its just transition journey.