How new guidance can help put people at the heart of climate transition plans
The International Sustainability Standards Board, Global Reporting Initiative and UK government have made new announcements that offer opportunities to make the just transition a core part of corporate climate planning, writes Nick Robins.
Transition plans have become a key mechanism for setting out credible business actions to achieve net zero. These plans are also crucial to the governance of the just transition, making sure that people are placed at the heart of the process of corporate climate commitments, implementation and accountability.
From the perspective of narrow financial materiality, the just transition can be highly relevant in terms of minimising social risks and developing the capabilities a company needs to thrive as it moves to net zero (for example, in terms of community relations and workforce skills). From a broader double materiality perspective, the just transition means fully respecting human rights to avoid and mitigate harm in the shift, as well as seizing the social opportunities that net zero offers (for example, by contributing to ending poverty and cutting inequalities).
What companies and financial institutions need is a way of answering a simple but revealing question: What just transition priorities must our climate plan include for it to be inclusive and effective? Different elements that could provide the answers are included in a range of operational and assessment frameworks, including from the likes of the Impact Investing Institute, World Benchmarking Alliance and Climate Action 100+. Among them are the deployment of well-known but far from universally implemented measures such as human rights due diligence, decent work standards, stakeholder dialogue and participation, place-based action and adequate allocation of investment. There is little need (or time) to reinvent the wheel when it comes to just transition in climate planning.
Last year, the need to address this imperative was recognised in the guidance prepared by the UK’s Transition Plan Taskforce (TPT), in both the core disclosure framework and in the dedicated advice on the just transition. The TPT defined the just transition as “anticipating, assessing, and addressing the social risks and opportunities of the transition to a low-GHG [greenhouse gas] emissions and climate-resilient development, as well as ensuring meaningful dialogue and participation for impacted groups (including workers, communities, supply chains, and consumers)”.
Three new announcements
One year on from the TPT’s recommendations, three new announcements show how the ‘just’ dimension of transition plans is being taken forward across the world.
The first comes from the International Sustainability Standards Board (ISSB), which has released its reporting guidance on transition plans. The ISSB is focused on investor-relevant reporting and the ‘just’ dimension of the transition is certainly present, but it is generally indicative and not prescriptive. The ISSB does not require companies to have a plan or to publish one, but it does lay out how entities can be transparent, including in places on the just transition. In the ‘Governance’ section, for example, it states that organisations “might” wish to disclose upskilling efforts for their workers and suggests that the oil and gas sector “might” wish to report on the changing composition of its workforce as the transition progresses. The just transition dimensions are more pronounced in the ‘Strategy’ section, where the guidance suggests that firms could disclose on how the goal of the transition plan is dependent on workforce issues as well as macroeconomic factors such as labour availability.
Drawing on the TPT framework, the ISSB also proposes that a company could frame its transition plan in the context of policies on human rights, labour standards and the advancement of social equity (or mitigation of potential adverse social impacts). And it recommends that companies “might also consider including metrics and targets related to a just transition” (for example, on the percentage of at-risk workers being offered retraining, or the evidence of social dialogue in client transition plans). All of this will be highly relevant for the 30-plus countries that are adopting or preparing to adopt the ISSB’s S1 and S2 standards (with transition plans being part of the S2 framework).
The second announcement comes from the Global Reporting Initiative (GRI), the pioneer of voluntary sustainability disclosure standards, which are geared towards what is material for both financial and stakeholder audiences. Its latest climate change ‘topic guide’ (GRI 102) updates what companies and others need to do to meet rising expectations. This includes a clear recommendation for companies and others to report the key features of their net zero transition plans, including two specific expectations on the social front drawing from rights-based approaches. First, organisations “shall” describe “how the transition plan aligns with just transition principles and how engagement with stakeholders informs its development and implementation”; and second, organisations have to set out “the impacts on people and the environment from implementing the transition plan and the actions taken to manage them, including: workers, local communities, and Indigenous Peoples”. (Similar provisions are included for an organisation’s climate adaptation plan.)
To bring some quantification, the GRI outlines a whole set of just transition metrics a company could use, such as reporting “the total number of employees who received training for up- and re-skilling, and a breakdown of this total by gender and employee type”. All in all, these are perhaps the most detailed recommendations for just transition reporting yet adopted by a major standard setter. However, at a time of concern about the alleged burden of sustainability reporting, there is an inevitable question about how far companies will go in implementing this guidance when it comes into force in January 2027. Making the twin materiality case will be key to getting traction.
The third announcement is the consultation from the UK government on how to implement its commitment to make the publication of 1.5° Celsius-aligned transition plans a mandatory requirement for major corporate and financial institutions. The consultation, which runs until 17 September, builds on the TPT framework from last year and focuses on how to turn this into law.
The consultation is certainly framed in the potential for net zero to boost job creation. But although it calls for responses on whether transition plan reporting should extend from net zero to include adaptation and nature, the consultation does not explicitly mention the social dimension of climate action. This could be remedied by incorporating the imperative of the just transition into the UK’s final requirements, pointing to the new ISSB and GRI provisions as well as those prepared earlier by the TPT.
UK investors and others who are prioritising the just transition as a key enabler of climate action should certainly highlight in their responses the need for material disclosures on the social dimension of climate action. Equally, a growing number of UK asset owners have been emphasising the just transition in their own climate strategies, and it will be important to include this in the development of the voluntary transition plan template for occupational pension funds, which is being led by the UK regulator.
Moving from guidance to action
The new announcements from the ISSB and the GRI go some way to embedding the just transition into key reporting regimes for transition plans. Their approaches are different but potentially complementary and continued close cooperation between the two would help to improve efficiency and uptake of the social dimension of climate action. Equally, the UK transition plan reporting requirements – as well as other national initiatives – could also foreground the implications for workers, communities and consumers in ways that are both material and meaningful.
Of course, transition plan guidance is only as good as its delivery by companies operating in specific places, working with actual people, and then closing the circle by reporting on performance and outcomes. What is needed now is thoughtful and determined implementation of the new guidance that can generate a growing evidence base on where, when, how and for whom the just transition really matters in corporate climate action. This inevitably brings in the pressing issue of measurement and metrics, which is addressed by both GRI and ISSB. As a Just Transition Finance Lab investigation recently concluded, “more effective just transition data, metrics and indicators are needed to support investment decisions and reflect the perspectives of rightsholders”. Looking ahead, the Task Force on Inequality and Social-related Disclosures (TISFD) is examining how to improve accountability on the linkages between climate, nature and inequality with specific attention to just transition reporting and metrics.
The author would like to thank Rowan Conway, Rob Macquarie and Sangeeth Selvaraju for feedback on a draft of this commentary.