A just transition must ensure an orderly, inclusive and just shift to net-zero emissions and climate resilience that creates decent work opportunities and leaves no one behind. It depends upon fairness in the process as well as distribution and should build upon social dialogue, stakeholder engagement and a universal respect for fundamental labour and other human rights. When talking about climate change, especially climate adaptation, the idea of a 'just transition' is a newer addition to the ongoing discussion of climate justice. This has always been a key part of global climate talks and agreements.

Just transition for climate adaptation refers to actions taken to adjust to the risks and impacts of climate change. More specifically, it emphasises adaptation to climate risk for businesses, workers, producers, communities and supply chains. A just transition for climate adaptation is needed as the impacts of climate change are not distributed equally among everyone. The poorest and most vulnerable are unequally hit by the impacts of extreme weather and long-term changes in climatic conditions. They also have the least means to adapt and are less likely to benefit from adaptation action due to structural inequalities and limited political and economic capabilities. This is the case, for example, with heavy rainfalls washing away informal settlements and destroying the homes of the poorest, or droughts affecting small-holder farmers. Climate change exacerbates existing inequalities, including those related to gender, income, age and ethnicity. 

Background and current challenges

Historically, adaptation action has been seen as the responsibility of local or national governments. They are the ones in charge of, for example, building dams, procuring measures to safeguard critical infrastructure and adjusting city planning to allow for greener spaces. But globalisation provides daily examples of how climate adaptation is actually a broader, global concern. When floods disrupt the production of semiconductors or the export of minerals and metals, when heat waves and droughts make wheat yields shrink and prices rise, businesses are directly affected by climate impacts. Shocks and stresses in one country can be felt, and sometimes made worse, in other countries thousands of kilometres away.

Likewise, the consequences of adaptation action are not confined by national boundaries. No single actor, private or public, can effectively adopt measures to adapt to such shocks and stresses. Climate adaptation is a global challenge, as the Paris Agreement, reached under the UN Framework Convention on Climate Change (UNFCCC), recognizes. 

Historically, it was the labour unions that initiated calls for a just transition in the context of climate change, calling for a new global economy that secures sustainability through green investments and green jobs while fully protecting workers’ rights. International processes, including those of the United Nations, increasingly promote the concept of just transition as a strategy for dealing with decarbonization and adaptation action in an equitable manner.

Businesses and global investors have increasingly embraced the concept in recent years. New guidelines have been adopted by international bodies such as the International Labour Organization, in collaboration with governments and social partners. A just transition according to the ILO means greening the economy by simultaneously addressing the environmental, social and economic dimensions of sustainable development in a way that is as fair and inclusive as possible to everyone concerned, creating decent work opportunities and leaving no one behind. 

Global supply chains link companies, producers, and consumers worldwide, making everyone vulnerable to climate risks in various forms. Some of the ways climate change and ill-advised adaptation impact global supply chains include resource scarcity (such as water shortages that affect human health, hunger, crop yields, mining, and processing facilities), threats to jobs and livelihoods, and the intensification of conflicts. Therefore, just transition strategies must address both the physical risks posed by climate change and the businesses' own adaptation measures. A well-conceived just transition strategy for businesses that integrate climate adaptation can help alleviate uneven burdens and ensure no one is left behind.

Business exposure to climate risks

Businesses are increasingly seeing climate change as a significant strategic and operational risk, requiring adaptation action. Questions around climate and sustainability have shifted from being siloed in sustainability departments and targeted interventions to something that should be considered as part of the core business strategy, owned and driven across the organisation.

There is an increased awareness among businesses of exposure to risks linked to the physical impacts of climate change. This is particularly true for those risks arising from direct operations and supply chains, impacts on the health and well-being of workers, impact on local ecosystems on which businesses rely, stability of energy and water supply, availability of labour and risk to local infrastructure and communities. Identified climate risks also include procurement and financial investments through access and pricing of raw material inputs and lack of sustainable investment opportunities, credit ratings and insurance liabilities. 

In addition to the exposure to physical climate risks and impacts, multinational corporations need to consider the consequences of their adaptation actions. For example, a strategic decision to abandon or divest from vulnerable markets, or supply chains that are exposed to climate risk, may seem effective from a boardroom perspective. However, unless business adaptation strategies are closely aligned with national Government strategies, such decisions may undermine livelihoods, lead to loss of jobs and increase climate vulnerability for many communities.

Lastly, a transition to climate-resilient operations can offer both new business opportunities and can improve awareness of social equity and human rights in relation to, for example, raw material extraction and new technologies. Regulatory action can help manage disruptions to the economy from climate change impacts or events. However, at the same time, pressure from sudden changes in policy and regulation can also lead to financial and market uncertainty, which can affect business operations, reputations and profitability.