Just value chains: how corporate decarbonisation activities can impact communities

Overview

The transition to a low-carbon economy can create significant social impacts if it is not managed fairly. As companies implement decarbonisation strategies to meet climate targets, the technologies, activities and investments they deploy can affect local communities across their value chains. Understanding and managing these risks is essential to achieving a just transition that supports both climate goals and social outcomes.

This insight brief examines the social impacts of corporate decarbonisation activities and introduces an evidence-based framework to help investors and companies identify, assess and manage just transition risks. Combining academic research with corporate disclosure data, the framework highlights how different decarbonisation levers can create sector-specific social challenges and opportunities for investor engagement.

Key findings

The authors adopt three broad categories of social impacts on local communities: land-use conflicts, unequal distribution of costs and benefits, and regional economic decline.

The analysis shows that:

• Decarbonisation strategies vary widely across companies and sectors, as do the social risks they can generate.
• Effective management of these risks requires companies and investors to develop a shared, sector-specific understanding of the social impacts that are most material for specific levers.
• For companies, this means integrating lever-specific social impact assessments into transition planning from the outset rather than treating the just transition as a separate work stream layered on top of existing decarbonisation commitments.
• For investors, it means moving beyond broad portfolio-level assessment towards sector-specific engagement that is informed by the decarbonisation levers a company plans to use.
• Sector-focused frameworks, such as the Net Zero Strategies Framework for Diversified Mining, can help companies and investors better identify and address just transition risks.

Why it matters for investors

The framework helps investors understand how corporate decarbonisation strategies may generate social risks across value chains, supporting more informed stewardship, shareholder engagement and assessment of transition plans. By identifying sector-specific just transition challenges, investors can better evaluate the resilience and credibility of companies' climate strategies.