A new social contract: Ensuring decent work in the low-carbon economy

The case has been made for the transition to a low-carbon economy – the question is no longer ‘why’ but ‘how’. With policy momentum and a growing number of net-zero pledges, the just transition – greening the economy in a fair and inclusive way – is firmly on the investor agenda and will help us to meet the Paris Agreement Investors are also considering the social aspect of this transition.

Yet with interim investor net-zero targets on the horizon, investors are facing pressure to accelerate their plans and focus on decarbonising portfolios; in other words, transitioning out of a low-carbon economy. But how do we transition into a low-carbon economy, and one that supports decent work?

Minimum safeguards are needed

The ILO’s World Employment and Social Outlook in 2018 estimates that the transition to a low-carbon economy will lead to 6 million job losses, as well as 24 million jobs gained. These new jobs will likely be transformed, calling for reskilling and adaptation. It is also crucial that these jobs afford workers and their families a decent quality of living and social protection. Certain sectors, such as agriculture, which are prone to issues such as informal work and vulnerable to climate change impacts, will benefit from significant decent green job creation¹.

Paramount to ensuring decent work in the low-carbon economy are minimum safeguards. Stemming from the International Labour Organization’s Core Conventions and the Universal Declaration of Human Rights, the PRI supports the following as minimum standards for decent work:

• Worker voice and social dialogue;
• Access to benefits and social protection;
• Access to a living wage; and
• Equal opportunity and diversity, equity and inclusion.

These safeguards take a human-centric approach towards the future of work and constitute an important component of the social contract. They are interlinked and underpin each other i.e., a living wage is often collectively bargained.

Meeting the needs of all workers

Reinvigorating the social contract means ensuring that current and future workers’ needs, including those of the most vulnerable, are met and that all stakeholders are brought into the conversation. The workers most at risk of displacement are disproportionately located in the Global South where the just transition narrative is overshadowed by concerns such as the right to development, increasing energy demands and low shares of greenhouse gas emissions compared to developed countries.² To facilitate the transition, we have to look at routes such as formalising work, empowering micro and small to medium-sized enterprises, and getting young people into work. Investors also need to consider robust human rights due diligence processes and agree upon metrics and targets – factors discussed in the PRI’s Spotlight on infrastructure webinar.

Supporting the decent work agenda in the low-carbon sector is an extremely challenging task. The ILO’s guidelines for a just transition call for a comprehensive and expansive policy package to support decent work, underpinned by social dialogue. The recommendations towards decent work and the transition more broadly vary based on sectoral and economic characteristics and there is no single, universal approach. For example, the Just Transition Research Collaborative outlines four paths to a transition, from maintaining the status quo, to focusing on different sectors of the economy to a totally transformational path.

Aligning the jobs of tomorrow 

The risk of investors moving too fast to meet net-zero commitments may result in a lack of adequate due diligence on pre-existing decent work deficits and compromise the opportunity to achieve decent green jobs. The information around what makes a job decent is there; it is therefore essential that the jobs of tomorrow are aligned to support the decent work agenda.

Acting in concert is critical. It is paramount that investors tackle the climate crisis in conjunction with the inequality crisis. Meeting net-zero targets should not come at the expense of supporting the development of decent green jobs.

This blog is written by PRI staff members and guest contributors. Our goal is to contribute to the broader debate around topical issues and to help showcase some of our research and other work that we undertake in support of our signatories.Please note that although you can expect to find some posts here that broadly accord with the PRI’s official views, the blog authors write in their individual capacity and there is no “house view”. Nor do the views and opinions expressed on this blog constitute financial or other professional advice.If you have any questions, please contact us at [email protected].