Making the Green Transition Work for People and the Economy 2025

Socioeconomic impacts can be considered across multiple dimensions. Across each dimension, businesses should be aware of the potential impact the implementation of the climate transition strategy could have on workers and wider stakeholders. It should be noted that while this report focuses specifically on the potential for corporate climate action to drive socioeconomic impacts for different stakeholder groups, such impacts may also be driven by business decisions outside the pursuit of climate goals. For more insight on framework approaches to considering the socioeconomic impacts of climate action, see publications by the World Economic Forum’s Equitable Transition Initiative and McKinsey Sustainability’s Climate Transition Impact Framework. 45 Affordability of goods and services: As economic growth slows, inflation rises, and the cost of capital increases, consumers may become less able to afford goods and services. Furthermore, geoeconomic diversification may shift supply chains and create near-term price shocks for businesses, which, if passed on to consumers (given market inefficiencies or inadequate regulation), could weaken customer bases or create reputational issues. Regarding the green transition, affordability concerns may reduce customers’ willingness or ability to pay green premiums on low-emission alternatives to conventional goods, potentially undermining business models for transitioning companies. Corporate climate action could impact the affordability of goods and services for stakeholders if, for example, an integrated agricultural company were begin deploying low-emission agricultural practices to offer green products. Today, thanks to increasing understanding of climate technology cost and impacts, the company will be able to prioritize decarbonization actions that come with the lowest actual marginal cost when implemented, thus creating minimum additional costs for consumers and enabling a larger number of consumers to participate in the green transition. Furthermore, by making early-stage, strategic investments in innovative mitigation options for the future, the company could help ensure longer-term affordability of its green products. Access to goods and services: As trends of globalization are disrupted and the world further diversifies geoeconomically, some stakeholders may face challenges accessing previously imported goods and services. Businesses risk reinforcing access challenges for communities in which they operate if, for example, exiting markets or decommissioning high-emission assets leads to restricted access to essential products or services in the region. Such activity could also pose reputational risks to the business itself, if perceived to be transitioning in a manner which undermines local access to goods and services. In addition, the accessibility of goods may impact the business’s operating model if key inputs are not available in upstream supply chain processes, further disrupting both the end consumer and day-to-day operations. Corporate climate action could impact access to goods and services for stakeholders if, for example, a power infrastructure company expands into electric vehicle charging stations in a new market. While the company may first introduce its new technology to population dense areas where it is more likely to gain Making the Green Transition Work for People and the Economy 39