In this week’s newsletter we will explore the social sustainability challenges and opportunities that lay ahead in the green transition toward a net zero world. At the 2023 SHE Conference workshop facilitated by EY, some of EY’s leading experts and partners shared their insights on how we can leverage the social risks and opportunities that arise out of the road to net zero.
The panellists included:
Kristofer Gravning – Nordic Lead for EY Strategy and Transformation
Cathrine Halsaa - Human Rights and Social Sustainability Manager, EY Norway
Hanne Thornam - Nordic Head of Climate Change and Sustainability Services, EY Norway
Tobias Thorleifsson – Co-founder and Chief Impact Officer, ClimatePoint
Hildegunn Sandal – Nordic CFO Sustainability, Risk and Governance Lead, EY Norway
This is a complex topic, and we are happy to be able to share some of the main questions and takeaways from the workshop with you.
The world is rapidly making the move from a qualitative to a quantitative approach to climate impact. Our ClimatePoint Impact Software is helping investors, banks and businesses to do just that, measure and quantify the impact of climate tech investments, green loans and climate strategies. By doing this we are helping to channel more capital towards the solutions that could generate the most efficient carbon reductions, in time and in line with the relevant pathways, says Tobias.
Our system is based on a dynamic LCA (Live Cycle Analysis) that maps out the entire value chain of a product or technology. By doing this we are also exposing and identifying other challenges or opportunities associated with a number of metrics such as water usage, production emissions of hazardous chemicals or human rights. Follow the carbon and we can measure the just transition beyond avoided emissions.
In the green transition we typically see business activities that require vast areas of land, such as wind farming, solar power plants and hydropower plants. All these activities take place in areas where they affect people and surrounding communities.
The Norwegian Transparency Act and other upcoming EU directives require that enterprises carry out due diligence in accordance with the OECD guidelines. This entails that enterprises shall identify and handle potential negative effects on human rights through their activities, both in their own operations and supply chain. Due diligence processes are best informed by involving the people, workers and societies that are potentially affected by an enterprise’s operations. The aim is to ensure that companies avoid causing harm and remediate harm that has already occurred.
Meaningful stakeholder dialogue can also be a business advantage. A good process can contribute to:
· A social license to operate
· Facilitate ongoing and future projects
· Early mapping of potential risk for negative impact of the project on people and the environment
· Reduce or avoid costs of conflict and project delays
· Handle challenges before project start, avoid costly process to rebuild trust after negative impact
The public should have a say in decisions about actions that affect their lives and affected parties should be able to influence decisions. This way, enterprises can contribute to a just transition without negative effect on human rights or be able to mitigate or remediate negative impact if it occurs.
New EU sustainability reporting requirements, CSRD and ESRS, have clear expectations that companies make the transition to a just net zero world.
Companies will need to report on their net zero transition plans in comprehensive detail, including whether the plan is science based, what short, medium and long-term targets are set, key actions to be implemented and financial resources/governance mechanisms to back up the plan.
The new norm of a relevant and resilient business will presuppose a strong and credible net zero plan. And the effectiveness and credibility of this plan will in turn impact access to capital, ability to attract and retain top talent, customer attractiveness and long-term value creation.
Every company will be impacted by the green transition, regardless their size, and will face their own opportunities and risks on their journey to net zero.
Say an SME retail operator with a handful of sites and less than 50 staff in their portfolio want to contribute toward a just transition; how is it relevant for them and where should they start? First, they should think about their context, and what’s relevant for their business.
Ideally, they should undertake a materiality assessment to understand what sustainability aspects the company should focus on. Let’s assume that the company believes its customers, investors and stakeholders expect that they should offer carbon neutral products in the future. In this case, the green and just transition is a key sustainability topic for the company.
There could be several topics that are relevant from a Just Transition perspective for the smaller company. Will the workers be impacted by the new green services being provided? Do they have a living working wage already? How about the apparel it is sourcing – are you supplying from countries with high labor standards or lower?
Most likely, the largest contribution a smaller company can make to the just transition is to ensure it is already treating all its employees fairly and decently, and that it is protecting people’s human rights in how it is sourcing its products.
However, if the company has already sorted all of this out and considers itself mature and ready to take the next step, it can start thinking about the role it plays in its local communities. How will the communities in which the shop operates be impacted by a warming and changing world? Is there a major homelessness or poverty problem? Or are you in an isolated village inside a fjord with high risks of landslides, avalanches, mudslides or flooding cutting access to the wider world? Either of these risks could negatively impact the company directly or indirectly through increased inequality in its local communities, or through cutting links to its supply chain.
Depending on the context the company finds itself in, the opportunities and risks it is exposed to, it could decide to help address either issue above by for example offering programs to provide clothing to homeless people in its communities or engaging with local councils to invest in climate resilience to reduce the impact on both the local communities and its own company.
In short, there are many reasons why a small company should care about not only a green, but just future. Because it may create risks and opportunities for even the smallest company. And based on the nature of the SME, its biggest contribution to a just transition may be to simply be to ensure its own employees have access to green and decent jobs in the future.
Get started with a materiality analysis. Understand your company’s role in the future through assessing your sustainability impacts, risks and opportunities.
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