Posted in GreenBiz
March 30, 2022

Will just transition agendas reshape supply chain sustainability goals?

The concept of supporting a “just transition” is becoming more visible in sustainability circles, and if it gains ground, it could become part of corporate pledges akin to those that commit companies to net-zero operations by a certain year. Such an outcome has significant implications for supply chain sustainability.

Is just transition another short-lived buzzword that will have minimal impact on supply chain operations or is it something more substantial?

Will just transition’s star fade after it rises?

There are various interpretations of just transition. The European Bank for Reconstruction and Development frames it this way: “A just transition seeks to ensure that the substantial benefits of a green economy transition are shared widely, while also supporting those who stand to lose economically — be they countries, regions, industries, communities, workers or consumers.”

In deciding whether just transition will endure, it is worth considering it in the context of how such concepts evolve and take root. Joel Makower, chairman and co-founder of GreenBiz, lays out the evolutionary path of buzz phrases and the prospects for just transition in a recent opinion piece.

According to Makower, the path starts when a new term or concept becomes “table stakes inside companies.” Eventually it is “widely used, overused and possibly abused” and applied indiscriminately, he wrote. Next, a backlash is triggered that draws the term’s credibility into question, followed by a revival as professionals in organizations such as consultancies step in to benchmark the term and enshrine it in best practices. “We’ve seen this movie before,” Makower wrote, notably with the “net zero” idea.

Just transition is in the momentum-gaining phase, Makower argued. For example, a Just Transition Declaration was signed by 16 governments in October 2020 at the COP26 conference in Glasgow, Scotland. Which means, he suggested, “We’re setting it up for a fall” and possibly a revival and ultimate acceptance.

If this prediction turns out to be true, what are the implications for supply chain sustainability?

Just transition permeates the supply chain space

There are signs that just transition is entering the supply chain sustainability space. For example, at the COP26 event, United Nations organizations and the shipping industry launched a Just Transition Maritime Taskforce to “drive decarbonization of the industry and support millions of seafarers through shipping’s green transition.”

There are multiple ways in which just transition could have an impact on other areas of supply chain sustainability.

One example is the transition to green freight transportation, and more specifically, how the adoption of fuel-efficient vehicles and practices could have negative outcomes for labor. For instance, it is argued that regulations in California that require trucking companies to convert to fuel-efficient engines impose extra costs on owner/operators that could force many of them out of business. A just transition to more sustainable vehicles could level the playing field and make the cost of fuel-efficient diesel engines less onerous for small operators.

Another example in the freight transportation space is Carbon Offsets for Freight Transport Decarbonization, proposed by our colleagues Suzanne Greene and Cristian Façanha in 2019. The idea is that rather than investing in their own green fleets where the environmental gains are minimal, transportation operators in Western countries could make fleets in developing countries greener through the purchase of carbon offsets. The environmental improvements achieved would be significantly greater, and they would help carriers in developing countries transition to greener freight operations: in effect, a just transition to low-emission transportation.

MIT Center for Transportation & Logistics (MIT CTL) researchers have also looked at how innovations in freight transportation can improve the environmental performance of operators in developing countries. Chris Caplice and Jarrod Goentzel have developed a framework for assessing the potential impact of adopting various technologies within freight transportation, which will appear in a forthcoming World Bank book, “Transformative Technologies in Transport.”

Outside of the movement of freight, companies in developed economies are putting pressure on small- to medium-sized suppliers to comply with tighter environmental and labor requirements in their supply chains. How can these requirements be enforced without threatening the viability of vendor businesses and/or forcing them to lay off workers?

Also, what supply chain skills will be needed to support the transition to circular supply chains and sustainable sourcing and procurement? How will today’s workforces acquire these skills?

Food for thought

The above examples are by no means exhaustive, but they illustrate how the idea of just transition could impinge on supply chain sustainability. It is notable that 27 major companies recently signed a Pledge for a Just Transition to Decent Jobs.

The rise of just transition also comes at a time when the sustainability of supply chains is coming under increasing scrutiny. As the 2021 State of Sustainability report underlines, various stakeholders — notably consumers and investors — are pressuring companies to improve their supply chain sustainability performance. Moreover, the 2021 report found addressing labor rights issues to be a top concern in the 2021 report.

To some extent, supply chain professionals already take account of the wider ramifications of their sustainability efforts. However, if just transition goals become as significant as net-zero ones in the corporate sector, practitioners will need to pay more attention to how they support such goals.

This article was originally published by the MIT Center for Transportation & Logistics.

March 30, 2022 at 02:30PM

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