As we near the middle of this decade, CEOs continue to face critical choices such as prioritising eco-friendly practices or risk falling behind. Manufacturing CEOs must adopt a holistic and integrated approach that balances climate risk management with environmental justice to tackle climate change head-on. Environmental justice means ensuring equal protection from environmental hazards and decision-making access for all people, addressing pollution and access to clean air and water, regardless of race, colour, origin, or income.
As the world’s largest polluting sector, responsible for one-fifth of global carbon emissions, manufacturing plays a critical role in advancing the sustainability agenda by addressing environmental justice and climate transition together.
Unfortunately, climate change disproportionately affects marginalised communities, further deepening social and economic inequalities. Today’s leaders are responsible for addressing the link between climate risk and environmental justice and developing equitable solutions that are good for the environment, communities, and businesses. As discussed in a previous article, the consequences of not doing so can be catastrophic.
Climate transitions present both opportunities and challenges
On the one hand, manufacturers need to urgently reduce emissions and transition to cleaner technologies—like cleantech or end-of-pipe technologies—which can reduce a manufacturer’s carbon footprint, improve competitiveness and reduce cost. However, transitioning to “greener” business practices and technologies may also disrupt existing labour markets and supply chains, making it tricky to balance managing climate risk and environmental justice.
The United States Environmental Protection Agency (EPA) refers to the disruption as “creative destruction” and argues that as new systems and technologies replace old ones to be greener, there will be winners and losers.
For instance, shifting away from fossil fuels could affect communities reliant on traditional industries, leading to job losses and economic instability. Transition to renewable energy may impact rural areas where energy production jobs are concentrated, potentially leading to an outmigration of skilled labour and a decline in economies if local governments and policymakers do not provide adequate retraining and support.
It’s a balancing act
There is no such thing as a straightforward or smooth transition during such disruptive change. Some argue that the idea of a “just transition” is a myth. The concept of “just transitions” first appeared in North America in the 1980s—used by labour unions—and has become integral to discussions around climate transition risks and environmental justice. It’s an aspirational concept but difficult to execute. Any transition separates the industry leaders from the bottom contenders —businesses and policymakers can try mitigating the impact, but avoiding any negative influence is impossible.
This complexity of balancing climate action and environmental justice is not just theoretical but evident in the real world. For example, a recent study found that 54 per cent of all energy transition mineral mining projects in Australia overlap with Indigenous Peoples Lands. Specific minerals are needed for a sustainable transition—such as lithium for electric vehicle batteries—but the question of how to mine these minerals while considering the well-being of local communities is tricky.
Manufacturers must proactively identify climate risks while developing plans to mitigate climate transition impacts on marginalised communities. The burning question for leaders is how? How can companies ensure that climate risk transition is carefully handled to minimise the impact on marginalised populations?
Navigating climate transition and environmental justice: strategies for manufacturers
Climate transitions may lead to factory and mine closures, as evidenced by Australia’s plans to shut down its coal-fired power plants. The writing is on the wall, and policymakers are drawing lessons from the relatively recent closure of its automotive industry. Though unrelated to climate transition, the closure offers useful learnings on how to marry the goals of a transition and the well-being of communities.
Between 2013 and 2017, major manufacturers like Ford, Holden, and Toyota stopped local production in South Australia, primarily due to rising costs, global competition, and a shift towards more fuel-efficient and electric vehicles. Around 100,000 people lost jobs, impacting supply chains and communities that relied heavily on the automotive sector. Manufacturers must stand up and take notice to navigate similar transitions more effectively. Below, we explore strategies offering support:
Create transition planning committees
Form local committees that include community leaders, workers, and businesses to collaboratively develop and oversee transition plans, ensuring local perspectives are integrated.
Phase the transition carefully
The extended timeline of the closures allowed workers, families, and businesses to brace for the impending restructuring. Supply chain businesses were able to strategise, diversify their offerings, and seek new clients.
Keep people central
Holden’s “transition centre,” established in 2014, offered support during a challenging time. The centre provided information on healthy living, mental health and financial literacy resources, extending its services to the entire supply chain in response to broader community needs.
Retrain and upskill employees
Toyota allocated a significant budget for training and transitional support over four years, extending six months beyond the closure. All 4,000 employees were surveyed to determine if they wished to stay or leave and encouraged to create personal transition plans actively.
Transition challenges are imminent but must be managed
Both climate transition and environmental justice are essential for creating a sustainable future. Manufacturers have a crucial role in balancing these goals, and while challenges exist, proactive planning and community engagement can make a significant difference.
ManuVate offers a powerful solution for manufacturers striving to achieve environmental justice, especially in the face of complex challenges. As a crowdsourcing platform, ManuVate facilitates the generating and compiling of ideas internally and externally. This approach allows large manufacturing enterprises, with their extensive networks and diverse employee bases, to tap into insights and innovative solutions. Learn more about how we can help at ManuVate.
