Need for adaptation in promoting green business

The challenges to creating decent work and increasing social inclusion in environmentally sustainable development can be grouped in three areas: (1) economic restructuring; (2) climate change and its threat to jobs and livelihoods and (3) adverse income distribution effects originating from energy poverty.

The labour market challenges of economic restructuring are smaller than those triggered by globalisation resource-intensive industries in industrialised countries and some emerging economies are most directly concerned, but employment in these industries is actually rather limited, at 10-12 per cent of the total workforce in most countries. Thus far, greening has been a relatively minor factor in employment losses.

In reality, the prime causes of declining employment in industries such as mining, fossil fuel-based energy or iron and steel are the increasing automation and rising labour productivity that have been going on over several decades. This could change if green house gas emissions were cut as strongly as called for by climate science. In this case, many additional jobs would be likely to disappear in the fossil energy industries.

Modeling simulations by the Organisation for Economic Co-operation and Development (OECD) show that a well-designed emissions trading system could achieve sharp reductions in greenhouse gas (GHG) emissions while only moderately slowing gross development (GDP) growth in the coming decades.

The main labour market impacts of the mitigation policies would be to alter the sectoral composition of employment. But such shifts would be considerably smaller than those that have taken place over the last two decades as a result of globalisation. Both OECD and ILO (International Labour Organisation) models have also shown that the pursuing sustainable development, decent work and green jobs, which uses revenue on energy bills or emissions to reduce the cost of labour, can lead to a net increase in employment.

Improving the productivity of energy and materials is, therefore, an important means of securing the future viability of resource-intensive industries. One area with great potential is recycling the large amount of heat generated in basic industries as a by-product. The use of combined heat and power (CHP) worldwide could create around 2 million jobs at new CHP facilities.

Successful drives to green resource-intensive industries have been made by individual companies as well as by entire sectors, and the social partners have often played an important role. The global manufacturer 3M and LG Electronics are two examples of companies that have involved their workforces to make great strides in cutting emissions. Japan's Top Runner Programme, which involves manufacturers, unions, consumers and universities, has pushed the electronics sector to vastly increase the efficiency of electronic products.

Collectively, the small and medium enterprises (SMEs) represent over two-thirds of global permanent employment and create most new jobs, but are also significant polluters and consumers of resources. They are generally disadvantaged compared to large firms with regard to access to information about green markets and skills development programmes, new technologies and finance, and they have far greater difficulties in compensating for rising energy and raw material costs.

Policies that enable SMEs to successfully navigate the shift to a greener economy and seize the opportunities will be critical, and a number of countries, including EU countries, Malaysia, Philippines and United States, among others, have already explicitly addressed SME needs in their environmental policies. Since a green transformation can be anticipated to a certain extent, governments, business and labour can work together to identify potential adjustment pressures early.

Mapping of likely impacts is critical for timely and targeted measures. Lessons learned to date from major restructurings, such as sugar industry in Brazil, forest industry in China, commercial fishing in Norway, coalmining industry in Poland and the steel industry in the United Kingdom point to social security and skill development as well as diversification and creation of alternative employment as keys to success.

Climate change will impact communities, enterprises and workers in locations exposed to storms, floods, droughts and fires. Some of the world's largest cities are in coastal areas and flood plains. In developing countries, 14 per cent of the population and 21 per cent of urban dwellers live in exposed low-elevation coastal zones.

The poorer segments of the population in developing countries are particularly vulnerable because they have the least adaptive capacity. Environmental degradation is a known driver for migration as well. In 2002, the United Nations High Commissioner for Refugees (UNHCR) estimated that 24 million people around the world became refugees because of floods, famine and other environmental factors, exceeding the number of all other refugees including armed conflicts.

Adaptation will be essential to protect enterprises, workplaces and communities. As of November 2012, all except one of the 48 least developed countries (LDCs) prepared National Adaptation Programmes of Action (NAPAs). While it is widely recognised that the approaches conducive to successful adaptation to climate change are similar to those for sustainable development more broadly, existing policies and strategies such as the NAPAs still pay little attention to the employment and income dimensions.

Examples of national assessments from Bangladesh and Namibia on the employment and social impacts of climate change show that such assessments are necessary to inform adaptation measures. Data about the labour market, employment, and income of households and enterprises are indispensable in order to design appropriate adaptation strategies.

Higher energy prices due to scarcity, regulatory changes or taxes can have strong adverse effects on poor households. Poor households spend a much higher proportion of their incomes on energy and energy-related goods such as food and are less able to reduce this expenditure when prices rise.

According to the International Institute for Labour Studies (IILS), in nearly half the countries for which data exist, the share of food expenditure in household income among the poorest population is over 60 per cent - ranging from 38 per cent in Latin America to 70 per cent in Asia and 78 per cent in Africa.

It is, therefore, important to keep distributional impacts in mind when considering policies to promote a transition to a low-carbon economy. For example, carbon trading schemes and feed-in tariffs levied on electricity consumers tend to have stronger regressive effects than broader carbon taxes.

Social protection floors can help, but given the high variability in domestic use among groups and localities, compensation can be complex. A radical expansion of eco-social investment into access to energy and energy-efficient housing and transport infrastructure is widely seen as an effective complement or even alternative. Brazil's Programa Minha Casa, Minha Vida (My Home, My Life) is an example of such investments.

The formation of energy cooperatives in Bangladesh under home solar power programme are other means of expanding access for the 1.3 billion people still without affordable clean energy, opening up countless opportunities for enterprise development.

Macroeconomic fiscal and monetary policies can redirect demand and investment by enterprises, consumers and investors through price signals and incentives created by taxes, price guarantees, subsidies, regulation, finance and public investment.

Eco-taxes which raise the price of energy consumption and pollution and reduce the cost of labour, coupled with clear and stable targets and timelines for greening and emission reductions, can be a powerful driver of green investment and net job creation.

This is particularly true in times of economic crisis. China, for example, has created over 5.0 million jobs through its green economic stimulus package. Current fiscal austerity in the European Union (EU) and other parts of the world, on the other hand, could hinder green growth.

Most public investment for environmental sustainability is aimed at key sectors such as energy, buildings, transport, land and water management. Numerous countries have successfully used industrial policy to support greening of the economy, including Brazil (ethanol and biodiesel), China (all renewables), Denmark (wind), Germany (green buildings among others), Japan (green transport) and Spain (wind and solar).

Social and labour policies for a green transition ideally combine social protection, employment, skills development and active and passive labour market policies. Social protection measures such as Ethiopia's Productive Safety Net Programme and India's Mahatma Gandhi National Rural Employment Guarantee Scheme strengthen the adaptive capacities of the poor and provide opportunities to adopt sustainable practices.

Social protection also affords the poor and relocated workers income security, the possibility for skills acquisition and increased mobility. Remuneration of environmental services can link targeted access to employment opportunities to major investments in productive infrastructure.

Shortages of qualified workers are already hampering the shift to a greener economy in most countries and sectors, as shown by the ILO's 2011 study "Skills for green jobs: A global view" recommends for pursuing Active Skills Policies which are important vis a vis the main lessons pointing at the need to anticipate future skills requirements and make adjustments in education and training systems.

Therefore, policies will increasingly need to focus on enabling regulatory and fiscal measures conducive to green products and services, particularly for SMEs, including green entrepreneurship training, greening of workplaces and value chains, and improved business resilience to adaptation through climate-proof infrastructure, disaster preparedness, and skills development and insurance.

ILO standards promote universal principles which are pertinent to any type of economic system or workplace, but some are also directly related to the protection of environment. The need for participation of workers and employers in governance received even greater emphasis in the Rio+20 outcome document. It is encouraging that a growing number of national governments are pursuing environmental sustainability and green economy or green growth initiatives, often with the support of employers and trade unions.

ILO constituents have expressed strong demand for capacity-building, advisory services and projects on the ground to assist national policy formulation and implementation from the launch of the joint Green Jobs Initiative by the ILO, UNEP, IOE and ITUC and the inception of the ILO's Green Jobs Programme in 2008. The priorities of the Programme have served 27 member States to date and were updated in November 2012 in the light of the outcomes of the Rio+20 Conference to give greater focus to capacity building for social dialogue, employment assessments, linking environmental protection to social protection floors, and research and knowledge management.

In recent years, a rapidly growing number of countries have embarked on strategies and policies for environmental sustainability, green economy or green growth. In the context of Rio+20, UN agencies, other international organisations and development banks have launched or expanded initiatives to share knowledge and provide advisory services and financial support.

Creating institutions and governance mechanisms for environmentally sustainable development at all levels, including ministries of labour and social development, employers' organisations and trade unions, will be essential to achieve the necessary integration and coherence.

While it is clear that relevant guidelines already exist in international labour standards and major ILO policy statements, it has never been articulated in ways that national and international policy-makers, the private sector or indeed the ILO constituents themselves can act on.

The Rio+20 outcome document, the UNFCCC Cancun Agreements on climate change and a growing number of national policy statements call for decent work for all and a just transition to low-carbon economies to be central goals as well as drivers for sustainable development. Many governments and stakeholders are looking to the ILO for guidance and support.

The writer is Secretary & CEO, India-Bangladesh Chamber of Commerce and Industry.

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