ESG, Natural Resource Management & the “Just Transition”

Citation: Devereux, E.J.,(2023), “ESG, Natural Resource Management & the “Just Transition””, EcoFoodDev, esg-natural-resource-management-amp-the-just-transition

Featured image: UN Sustainable Development Goals https://www.cso.ie/en/unsdgs/

In the previous post (“Traditional Ecological Knowledge: Indigenous Wisdom & Global Climate Change“ http://www.ecofooddev.com/traditional-ecological-knowledge-indigenous-wisdom-global-climate-change/) I looked at TEK, what it is, and what it means. TEK can be employed to develop sustainable environmental management systems in the face of climate change. It should be noted that the use of the word “traditional” is undergoing some debate, and going forward the term “Ecological Knowledge” might be best used. However, for the sake of consistency in this instance, TEK will be the employed term.

Here we will look at the need for Indigenous knowledge and voices in sustainable development, its application in global decarbonization strategies, and the concept of the “Just Transition”.

The Just Transition

An emergent and key area in environmental social governance and sustainable development is the idea of the ‘Just Transition’. This term can have many meanings. Essentially, the Just Transition is a framework for transitioning to a low-carbon economy in a way that is fair and equitable for workers, communities, and regions that are currently dependent on high-carbon industries. It is underpinned by the idea of needing to attain a low-carbon society for all- including those currently without access to reliable energy supplies, who are living in energy poverty, and those whose livelihoods are affected by (and dependent upon) a fossil fuel economy.

Fundamentally – we must transition away from fossil fuels and other high-carbon activities, but this transition can have significant social and economic impacts. The EU Commission states:

“The Just Transition Mechanism (JTM) is a key tool to ensure that the transition towards a climate-neutral economy happens in a fair way, leaving no one behind. It provides targeted support to help mobilise around €55 billion over the period 2021-2027 in the most affected regions, to alleviate the socio-economic impact of the transition.”

The Just Transition can be defined using the headings of climate, energy, and environmental justice.

1. Climate justice: sharing the benefits and burdens of climate change from a human rights perspective.
2. Energy justice: the application of human rights across the entirety of the energy life cycle.
3. Environmental justice: treating all citizens equally and involving them in the development, implementation, and enforcement of environmental laws, regulations, and policies (Heffron & McCauley, 2018).

The idea of a ‘Just Transition’ features more and more in policy and political discourse. However, it is a complex issue that requires the consideration and buy-in of all parties- investors, developers, researchers, and most importantly indigenous stakeholders, as well as care to ensure that indigenous ancestral lands do not risk becoming, as Zografos and Robbins (2020) call them, “green sacrifice zones”.

Just Transition: Aims

The aims of the Just Transition can be defined as:

• creating good job opportunities for workers in carbon-intensive industries,
• creating opportunities for indigenous peoples and local communities,
• achieving a net zero economy.

Justice is vital, as there is no meaningful transition to a low carbon economy without the concept of “just”.

Why do we need the Just Transition?

The reasons behind the concept of the Just Transition are many. Our world is rapidly experiencing more and more events caused by climate change- Arctic ice melting, prolonged heatwaves, major increases in carbon dioxide levels, the destruction of the Great Barrier Reef, huge biodiversity loss, and much more. These events are primarily caused by our dependence on fossil fuel. Therefore, in the move to a sustainable future we must move away first from fossil fuels- but this process is prolonged, difficult, and slow. For example, over 80% of the UK energy sector is still dependent on fossil fuels. Concerningly still, in developing countries, coal plant development is on the increase (the ability of the global south to utilise its resources will be discussed in a later article). What does this mean? It means that not only do we need the transition from fossil fuels- but we also need to do it fast. 

From a human rights perspective, it is vital to consider indigenous rights in business operations. Indigenous peoples often have a strong connection to their traditional lands, territories, and resources, and any activities that interfere with their access to or use of these resources can have serious consequences for their livelihoods, cultures, and ways of life.

Nuance in Natural Resource Exploitation

The energy transition presents a complex and ever-evolving landscape. A crucial aspect of this transition is not only the inclusion of indigenous voices in discussions on the exploitation of natural resources but also their own rights to utilize these resources and achieve economic development. These discussions involve multiple facets and scales, encompassing diverse and conflicting interests and values. Indigenous communities have relied on and thrived upon the resources found in their landscapes for generations. The landscapes themselves, along with their abundant resources, hold deep cultural significance for many, if not most, indigenous groups. Consequently, preserving their lands becomes a matter of utmost importance to them, both now and for future generations. Furthermore, indigenous groups possess a wealth of sophisticated knowledge about their landscapes and how to manage them (Traditional Ecological Knowledge – TEK), making them well-suited to lead conservation efforts addressing climate change and biodiversity loss.

However, historically, valuable commodities within their lands have attracted economic interest from those who could exploit them. As a result of colonialism and industrialization, indigenous communities have experienced dispossession and marginalization, leading to significant and often irreversible damage to their cultures and ways of life. Indigenous peoples have endured historical and ongoing injustices related to the extraction of natural resources, including forced displacement, loss of ancestral territories, and environmental degradation. Today, the pressure and threat from private industries and governments to exploit natural resources on indigenous lands persist, particularly in extractive sectors such as mining. Debates and misunderstandings surrounding the rights of indigenous peoples to exploit natural resources continue, often stemming from different interpretations of property rights, sovereignty, and environmental stewardship.

The debate on indigenous rights to exploit natural resources often revolves around questions of ownership, control, and benefit-sharing. Some argue that indigenous peoples should have complete ownership and control over the natural resources within their lands, enabling them to make decisions regarding their use, management, and whether or not they should be exploited or marketed. Within indigenous communities themselves, there may be divergent opinions on the appropriate utilization of natural resources, with some advocating for conservation and protection, while others emphasize development and economic opportunities. On the other hand, some argue that natural resources are a common good at the national or global level, necessitating government responsibility to manage these resources in the public interest. Environmental impacts of resource extraction and the extent to which indigenous peoples bear the responsibility to balance economic needs with environmental stewardship also fuel debates. Many indigenous peoples assert that their traditional knowledge and practices offer valuable insights into sustainable resource management, demanding equal partnership in decision-making processes concerning resource use and conservation.

In recent years, there has been a growing recognition of the significance of free, prior, and informed consent (FPIC) as a framework for engaging with indigenous peoples regarding natural resource development. This framework acknowledges indigenous peoples’ right to participate in decision-making processes related to resource development, granting them the power to provide or withhold consent based on their own priorities and values.

Ultimately, the interaction between developers/companies and indigenous peoples will be a highly localized conversation. Indigenous communities are incredibly diverse, with distinct social structures, beliefs, and desires. These conversations demand careful consideration of the intricate and often conflicting values and interests at play, as well as a genuine commitment to respectful and meaningful engagement with indigenous peoples and their communities, taking place at the local level.

Organisational Need for Indigenous Inputs

From a biodiversity perspective, Indigenous lands hold ~80% of global biodiversity, and this can be contributed in part to the management practices employed on those lands by Indigenous peoples. Indigenous peoples possess the knowledge of their hyper local environments and how to manage and conserve them.

In terms of the development of projects and project resourcing, businesses are cognisant of many factors- centrally costs. For those companies whose operational areas overlap with Indigenous territories, there is an increased likelihood of indigenous risk factors and indigenous rights risk exposure. Violating indigenous rights increases industrial costs, such as legal, reputation, political, and materials costs- see some examples at https://ssir.org/articles/entry/respecting_the_rights_of_indigenous_peoples_as_renewable_energy_grows.

Developing meaningful relationships with indigenous peoples can be a key positive step to reduce operational and development costs. Social and cultural risks must be considered, measured, and integrated into project and financial planning. This helps to avoid associated and expensive disruptions.

The group First Peoples Worldwide have provided a method to assess the impact of investment that affects indigenous peoples and have highlighted powerful ways to really educate shareholders and companies about the impact of preparations on the ground. This is the ‘Indigenous Rights Risk Report’.  One of the most important elements in the process of incorporating indigenous groups is the idea of Free Prior Informed Consent (FPIC), which was mentioned previously. This is a principle that recognizes the rights of indigenous peoples to participate in decisions that affect their lives, lands, and resources. It is a key aspect of indigenous rights, recognized in the United Nations Declaration on the Rights of Indigenous Peoples (UNDRIP) and other international legal instruments. FPIC requires that indigenous peoples be given adequate information about any proposed development projects or activities that may affect them and be allowed to freely decide whether or not to consent to such activities. This means that they must be consulted in good faith, in a culturally appropriate manner (for example, in their own language), and with the necessary time and resources to enable informed decision-making.

How to integrate Indigenous groups into ESG

When transitioning away from fossil fuels in areas with indigenous cultures, it is crucial to acknowledge the complex historical contexts of these places. It is important to recognize that the process may be disruptive and challenging for the groups and cultures involved. It is necessary to consider the potential harms and benefits, the stakeholders involved (and those who are not), the distribution of “winners and losers,” and whether these experiences are connected to historical exclusions of people and worldviews.

Here are some steps to consider when incorporating indigenous voices into ESG:

• Acknowledge and respect indigenous rights: Recognize their rights to self-determination, free, prior, and informed consent (FPIC), and cultural heritage protection.
• Engage in meaningful consultation: Actively engage with indigenous communities in a meaningful and culturally appropriate manner. Involve indigenous communities early on, fostering open dialogue and shared decision-making.
• Foster partnerships and collaboration: Establish long-term partnerships based on trust, involving indigenous leaders and organizations in ESG strategies.
• Include indigenous perspectives in data collection and analysis: Incorporate indigenous perspectives when collecting and analysing data for ESG reporting. Collaborate with indigenous communities to develop culturally appropriate indicators and metrics that reflect their values, priorities, and knowledge systems.
• Respect traditional knowledge and practices: Recognize the value of indigenous traditional knowledge and practices in sustainable development. Incorporate indigenous knowledge systems and practices into ESG frameworks to promote more holistic and culturally appropriate solutions.
• Support capacity building and empowerment: Invest in capacity-building initiatives that empower indigenous communities to actively participate in ESG decision-making processes. Provide training, resources, and opportunities for indigenous individuals to develop skills and knowledge related to ESG issues.
• Ensure fair and equitable benefits: Design ESG initiatives in a way that ensures fair and equitable distribution of benefits for indigenous communities. Consider mechanisms for revenue sharing, job creation, and community development to ensure indigenous communities are not left behind.
• Promote transparency and accountability: Establish transparent mechanisms for reporting on the integration of indigenous perspectives in ESG practices. Regularly communicate progress, challenges, and lessons learned to stakeholders, including indigenous communities.
• Regularly review and improve practices: Continuously assess and improve approaches for incorporating indigenous voices into ESG. Seek feedback from indigenous communities and adapt strategies based on their input and changing needs, and establish short-, medium- and long-term goals.

Criteria & Greenwashing

In the context of the just transition, it is important to have measurable outcomes to assess the success, risk, and investment associated with actions. While justice-related changes are often measured through direct policy changes or legal judgments, evaluating qualitative changes can be complex. ESG metrics serve as key progress indicators (KPIs) to evaluate quantitatively and qualitatively the environmental, social, and governance performance of companies and investments.

Incorporating Indigenous voices into ESG metrics is crucial, particularly in areas such as human rights, labour practices, and community engagement (the “S” in ESG). Efforts to standardize and harmonize ESG metrics, led by initiatives like the Sustainability Accounting Standards Board (SASB), Global Reporting Initiative (GRI), and Task Force on Climate-related Financial Disclosures (TCFD), aim to improve comparability, transparency, and consistency in ESG reporting. This enables investors and stakeholders to analyse and compare ESG performance across companies and industries.

By setting more stringent and well-researched criteria, these initiatives contribute to more meaningful and genuine action in climate change mitigation and consideration of indigenous rights, while also limiting the possibilities of greenwashing.

To counter greenwashing, transparency, accountability, and independent verification are essential. Companies and organizations should provide clear, accurate, and comprehensive information about their ESG practices, supported by reliable data and metrics. External audits and certifications from reputable sources can validate ESG claims and ensure credibility. It is crucial for investors, consumers, and regulators to critically evaluate ESG claims, distinguishing genuine sustainability efforts from greenwashing practices.

Furthermore, ESG and sustainability criteria are being developed globally through taxonomies. These taxonomies serve as frameworks for classifying and categorizing sustainable investments based on their environmental and social impacts. This is a huge topic that will be delved into in more detail in further posts. This article aims only to introduce the idea and outline the topic. Such topics as TEK and climate change detection, sustainable development, ESG TEK and sustainable development goals, and differing ideas of governance and stewardship around the world and other relevant topics will be the subject of upcoming articles in this area.

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