This crucial change for the planet must be inclusive, equitable, and participatory to mitigate social costs.
Imagine a couple, Lucía and Juan, living in a small rural community whose primary source of income is a coal mine.
Juan has worked in the mine for nearly 15 years. Lucía, on the other hand, runs a small business, and her main customers are local women.
However, their lives change drastically when the mine closes due to the country’s efforts to decarbonize and promote a greener economy.
Juan loses his job, losing customers’ purchasing power impacts Lucía’s business, and the community experiences severe economic uncertainty.
This story, although fictional, reflects the reality of many communities worldwide that depend on industries transitioning towards a more sustainable future.
Global Context
Combating climate change and reducing greenhouse gas emissions is crucial; transitioning to a net-zero economy is more necessary than ever.
However, it presents significant challenges for workers, communities, and countries, especially those dependent on fossil fuels and other emission-intensive sectors.
Failing to consider these challenges can lead to delays and additional costs for the transition, as seen with the ‘yellow vests’ in France, a protest by sectors affected by fossil fuel taxes, which cost the government €10 billion.
The priority is to ensure that any economic transition is environmentally respectful but also sustainable, resilient, and equitable, leaving no one behind. The just transition framework takes into consideration:
- those individuals or groups that are at risk of being pushed aside or left behind by the reduction or abandonment of fossil fuels;
- individuals and groups already left behind, including women, Afro-descendants, Indigenous peoples, people with disabilities, and the LGBTQ+ community, and whose situation could worsen; and
- communities disproportionately affected by the impacts of climate change that are often the least responsible for the problem.
Beyond Energy
According to the ILO and IDB projections, the transition could create 22.5 million green jobs in Latin America and the Caribbean.
At the same time, it could generate the loss of 7.5 million existing jobs in sectors such as energy extraction and generation, as well as animal-based food production.
For instance, the switch to electric vehicles will significantly impact Mexico’s automotive industry, which contributes 4% of the country’s GDP and supports nearly a million jobs.
Strategies will be needed to understand the skills required in this transition, retrain and upskill the workforce in new processes and technologies, and create new inclusive jobs.
Unequal Opportunities
The agricultural sector is on the front line of climate change impacts.
However, small farmers contribute approximately 40% of agricultural production and need more access to finance or climate-smart technology.
Without adequate support, their participation in greener value chains is at risk, increasing opportunity inequity.
Moreover, between 50% and 80% of the minerals needed for climate-smart infrastructure and technology are on or near indigenous peoples’ lands.
The expansion of the mining sector presents unique risks to these communities and exacerbates tensions.
Companies must foster respectful relationships and generate mutual benefits with host communities.
This will prevent them from being left in positions of increased vulnerability and open opportunities for their prosperity.
Leadership and Action
Besides considering social challenges and opportunities, it is imperative to integrate a just transition lens as a reference framework for business strategy and any economic activity or investment toward a green economy.
Companies should not see this as a cost but as an investment opportunity to:
- foster better relationships with communities and employees, generating a more motivated workforce, and gaining the support of local communities;
- build greater resilience to regulatory and market changes; and
- anticipate and mitigate environmental and social risks in their operations.
This transition also presents an excellent opportunity to dismantle structural and systematic barriers that have created inequities in our region.
It is necessary to work systemically, understanding and simultaneously addressing the links between economic, social, and environmental dimensions.
The green economy will allow new opportunities for leadership, green jobs, products, and services, opening space to generate more significant gender equity and diversity in workforces and value chains.
And this will only happen if each party assumes its responsibilities, has the necessary conversations, and makes proactive decisions and actions.