Principles for an accountable private sector in a just energy transition

Christian Aid’s new report, Getting Down to Business, examines the role of the private sector in delivering a just and equitable energy transition, and the need to ensure business both respects human rights and contributes to their fulfilment.

Our report analyses the risks and opportunities for the realisation of human rights presented by the renewable energy transition. While it’s critical that we deliver renewable energy on the scale needed to address the climate crisis, our report examines: 

• How to ensure the rush to invest in renewable energy doesn’t result in human rights violations and environmental degradation
• How renewable energy technologies can be produced and deployed in ways that respect human rights and maximise the benefits for poorer countries and people living in poverty
• What needs to be done to ensure the substantial economic benefits of decarbonisation are equitably shared

Energy transition must encompass more than just technological change. We call for a just and equitable energy transition, one that centres human rights, transforms power relationships and decolonises development.

An energy transition in which businesses not only respect human rights, but also contribute to their realisation, by ensuring the substantial benefits of decarbonisation are equitably shared, and communities who stand to lose out are supported.

States have primary responsibility for taking action, but international financial institutions, intergovernmental organisations and businesses must also play their part to ensure energy investment results in a just and equitable transition.

Our new report sets out 10 principles for an accountable private sector in a just energy transition. Of these principles, the following five are particularly relevant to business practice:

Principle 1: champion the participation of rights holders in policymaking on the renewable energy transition.

To be coherent with a human rights-based approach and sustainable development imperatives, decision making on the design and implementation of policies and projects, investment flows and research and development on the renewable energy transition must be informed and influenced by public participation and the needs and priorities of people who are most marginalised or at risk of adverse human rights impacts.

Important aspects to ensure participation of rights holders in the design and implementation of policies and actions relating to energy and other sectors involved in the renewable energy transition include respect for the right to give (or deny) free, prior and informed consent (FPIC) for any mining or large-scale renewable energy operations on ancestral lands of indigenous peoples in line with international human rights standards; and effective mechanisms such as tripartite social dialogue and devolved decision-making structures, as well as dialogue and negotiation between companies and local communities, including women leaders, throughout the life cycle of projects.

Principle 2: make it mandatory for businesses to respect human rights.

Christian Aid research demonstrates that voluntary standards and private sector-led frameworks for business are wholly inadequate to prevent, mitigate and remedy adverse business impacts on human rights and the environment. States should adopt mandatory requirements including:

• A corporate duty to conduct human rights and environmental due diligence encompassing the entire value chain and the company’s entire corporate structure 
• A corporate duty to report sufficient information on company supply chains, covering each link in the supply chains
• A corporate duty to ensure effective, accessible remedy for historic, ongoing and other impacts, with a particular focus on addressing the experiences of women and other marginalised groups
• A corporate duty to engage effectively with all stakeholders.  

Binding regulation at the international level is also needed, notably through the proposed UN Binding Treaty.

Principle 3: Build institutional capacity to ensure businesses comply with laws and regulations

Protective legislation is often poorly enforced. States should develop and implement strong and effective agencies at national and subnational levels to regulate and ensure compliance in key areas such as granting of permits, land rights and land and water use, environmental and human rights impact assessment, waste management, taxation, revenue and benefits sharing, and decommissioning and ecosystems restoration.

Principle 7: Enhance transparency in all types of business entities and at all levels of government.

Citizens have a right to transparency in relation to the energy transition and its distributional impacts. States should improve access to information in key areas such as subsidies, taxation, price setting, and the use of public funds to leverage private investment.

Companies should be required to be more transparent, particularly regarding value chains and tax payments.

Existing standards for public country-by-country and project-by project reporting should be mainstreamed across countries and sectors through binding regulations and complemented by a requirement for companies to publish their beneficial owners in publicly accessible registers.

Principle 8: Effectively tax corporations to mobilise critical climate and development financing

Progressive taxation is essential for states to raise resources to fulfil their human rights obligations and finance a just and equitable transition. Key elements include ending the ‘race-to-the-bottom’ on corporate taxation by establishing a global corporate tax rate of at least 25%, multilateral action to tackle corporate tax evasion and avoidance and taxing polluting companies to pay for loss and damage.

States should apply the UN Guiding Principles for Human Rights Impact Assessments for Economic Reform Policies when considering tax reforms and put in place effective and transparent processes for publicly discussing tax exemptions in the context of the green transition.