Making the Green Transition Work for People and the Economy 2025

traction, they could conduct early-stage research and planning into the extension of these services into less population dense areas as EV uptake increases. This could help support broader participation in the green transition in the medium to longer term. Alternatively, in the event a company decommissions a large, high-emissions asset that provides electricity to a community, the company might plan for to build out of renewable capacity in the area, providing continuity of service in the region. Access to capacity: As the global geoeconomic context changes, impacting supply chains, trade, and the movement of people and ideas, knowledge and capabilities may become concentrated in a small number of areas. 46 This could weaken the competitiveness of small businesses across the corporate supply chain in regions with limited access to capabilities. Multinational corporations should be aware of the impact that constrained dissemination of knowledge and skills could have on the capabilities of small businesses in their supply chain to adapt to and limit such issues. Corporate climate action could impact access to capacity of stakeholders if, for example, a biofuels player expands into a new market where it builds a bioethanol facility. The biofuels player can rely on local businesses to support the construction of the facility. Furthermore, they can help take global capabilities to the local ecosystem, building knowledge and capacity among local stakeholders involved in operating the facility. Access to financing: Macroeconomic challenges driven by the changing context are already making access to finance more difficult, with reduced fiscal headroom and rising inflation driving a higher cost of capital, making it harder for businesses and individuals to access credit. Changes to business strategies may disrupt the business models of suppliers, downstream companies or communities, requiring greater rates of return from financial institutions for investment. Given the limited pool of available capital, multinational corporations with stronger balance sheets and capabilities may crowd out financing available to small businesses, leading to potential indirect economic impacts throughout the value chain. Such issues may be particularly pertinent in developing economies, where less mature capital markets already make it harder to access finance in many cases. An example of corporate climate action impacting access to financing for stakeholders could be a large automotive manufacturer implementing green supply chain requirements in a region. As a result, local lenders introduce sustainability linked financing for SMEs, given the strong demand signal from the automotive manufacturer for green inputs. Employment and job transitions: The changing global context may reinforce existing challenges in access to basic services, such as education and healthcare, in places where competing needs already exist. Businesses risk further reinforcing such challenges by offering (or being perceived to offer) low-pay or low-quality jobs as a result of transition-related activities. Businesses could face further reputational risks should they make redundancies – for example, as a result of portfolio decarbonization when exiting a region or market – without exploring labour transition possibilities, such as reskilling programmes. Corporate climate action could impact employment for stakeholders if, for example, a power generation company divests from coal to expand into renewable energy generation. Renewable generation requires a different skill profile to coal generation, and the jobs may emerge in a different location. Appropriate transition planning by this company could ensure employees are offered sufficient support for reskilling and relocation, such that a meaningful share of the original workforce may be retained. Growth and competitiveness: Whether the green transition will have an overall positive or negative effect on economic growth (i.e. the direction and relative impact of physical and transition effects of climate action) is a complex topic. As the changing global context places pressure on economic growth and competitiveness through multiple channels, it is increasingly critical to ensure that climate action supports economic goals for households, businesses and countries. If seen as responsible for further challenges to economic growth and competitiveness, societal support for climate action may be further undermined, slowing the pace of change and challenging the business models of companies committed to transitioning. Making the Green Transition Work for People and the Economy 40