Just transition throws supply chains into the spotlight

May 13, 2022

The just transition movement has firmly stepped into the corporate spotlight. A “just transition” is the move away from fossil fuels to a green economy, but, crucially, this move ensures that everyone benefits, economically, socially and environmentally. This fundamentally means that supply chains can no longer be overlooked. In fact, supply chains are at the heart of a just transition towards decarbonisation.

COP26 stressed how supply chains are a crucial piece of the just transition puzzle. The UN specifically committed to supporting international organisations in “considering the wider environmental, health, social and employment impacts of the operation of global supply chains, including the importance of building climate resilience into supply chains across all industries”. So for companies that are beginning to consider their role within the just transition, what does this mean in practice? There are a handful of examples of corporations that are taking innovative approaches to creating and evidencing upstream change.

Realistically, a successful just transition will mean an overall of how we currently engage with supply chains. Unsurprisingly, technological advancements are playing a huge role in this.

Specifically, blockchain is cited as a tool that can assist corporations in enhancing their social and environmental practices. A recent scheme saw Unilever and Sainsbury’s trial such technology within their tea production supply chains in Malawi. In return for financial compensation, farmers uploaded social and ecological data for company use. Such advancements can help smallholders receive funding directly, giving them readily available capital with which they can improve their agricultural practices. Princes has taken a similar action; pledging to utilise the blockchain to improve supply chain transparency and ultimately improve workers’ rights. Similarly, farmers will be offered guaranteed three-year supply contracts and access to a ring-fenced grant scheme, if they agree to work in line with expectations.

This data-for-capital exchange, allows companies to collect environmental data, reduce their footprint, and simultaneously benefit vulnerable stakeholders. The financial incentive has proved to lead to an increase in data submission about workers’ experiences, social demographic and environmental practices. The data-for-capital exchange benefits both parties and a just transition.

While data is important in evidencing upstream change, companies should not overlook the need to incentive change in supply chains. In 2020, Nestlé pledged to invest CHF1.2 billion in smallholder farmers and regenerative agriculture, helping finance a just transition. Funding of this kind can create systemic change, by investing in larger-scale operations that directly contribute to a just transition.

Firms should take a two-pronged approach, using technology and capital to incentivise and evidence their companies’ just transitions. Ultimately, companies must be able to create change and evidence it.

Author: Emily Williams