How Stakeholder Engagement Drives Sustainable Growth and Equitable Transitions
At the 2024 Climate & Sustainability Leadership Summit, Leonardo Mazzei, Head of Sustainability Engagement and Partnerships at IDB Invest, shares insights on how businesses can drive a just transition to net zero by prioritizing inclusive stakeholder engagement. Drawing from his extensive experience in Latin America and the Caribbean, Mazzei emphasizes the moral imperative of addressing the climate crisis while ensuring that vulnerable communities and workers are not left behind.
Mazzei begins by contextualizing the urgent need for climate action, highlighting the socioeconomic challenges that arise during transitions away from fossil fuels. He illustrates real-world examples, such as coal-dependent communities facing uncertainty as mines close due to national decarbonization efforts. This underscores the importance of carefully designed transitions that address the needs of workers and communities impacted by shifts toward greener economies.
What is a Just Transition?
Mazzei defines a just transition as one that is both environmentally sustainable and socially equitable. He stresses that without inclusive approaches, the transition to a net-zero economy risks creating winners and losers, with vulnerable communities—those already experiencing socioeconomic disadvantages—being disproportionately affected.
He outlines the core elements of a just transition, emphasizing the need for it to respect the environment, foster equality, and ensure inclusivity. This approach parallels the widely accepted definition of sustainability, which seeks to meet present needs without compromising future generations.
The Human Cost of Transition
Mazzei illustrates the human cost of the green transition by sharing the story of Juan and Lucia, a couple living in a rural community in Latin America dependent on a coal mine for their livelihoods. As their local mine shuts down, they face financial uncertainty, with limited job prospects in their area. This story reflects a broader, global challenge: how to ensure that workers in traditional, high-emission industries can transition into new, sustainable sectors without being left behind.
Through this lens, Mazzei argues that the success of the net-zero transition hinges on addressing the needs of communities and industries dependent on carbon-intensive jobs. If not managed properly, the transition can lead to social conflicts, political protests, and increased costs for businesses due to delays, reputational damage, and operational challenges.
The Business Case for Just Transition
One of Mazzei's key messages is that businesses must take the lead in ensuring that no one is left behind in the transition to a net-zero economy. He makes the case that stakeholder engagement is essential not only from a social responsibility perspective but also from a business continuity and profitability standpoint.
He points out that businesses that fail to engage local stakeholders risk facing protests, project delays, and reputational damage. Conversely, those that actively include stakeholders in their transition plans stand to benefit from smoother operations, enhanced community trust, and improved long-term outcomes.
Mazzei notes that companies prioritizing sustainability and inclusivity in their operations are more likely to attract investors, access finance, and enhance their brand reputation. He provides examples from IDB Invest's projects, such as financing a cooperative for indigenous women in Ecuador, which helps create sustainable livelihoods in vulnerable communities.
The Importance of Stakeholder Engagement
Mazzei highlights the importance of engaging with a wide array of stakeholders, including employees, communities, and regulators. He explains that effective stakeholder engagement requires businesses to understand the social context in which they operate, identify those most impacted by the transition, and develop strategies to mitigate adverse effects.
A successful stakeholder engagement strategy, according to Mazzei, must go beyond mere consultation. It should involve co-creation, where affected communities are given a voice in shaping projects and initiatives. He emphasizes that businesses should view stakeholder engagement as a long-term investment rather than a cost.
Examples of Successful Engagement
Mazzei shares several success stories from IDB Invest’s portfolio. One involves an infrastructure project in Guatemala, where indigenous communities are given equity in the project, enabling them to directly benefit from its success. This approach fosters community buy-in and creates economic opportunities for traditionally marginalized groups.
In another case, IDB Invest works with a telecommunications company in Argentina to issue a sustainability-linked bond aimed at expanding internet access to low-income neighborhoods. This project not only improves connectivity but also aligns with environmental goals by reducing carbon emissions through increased use of renewable energy.
Building Trust for a Sustainable Future
Mazzei concludes by reiterating that a just transition to net zero requires a deep commitment to stakeholder engagement. Businesses, he argues, must foster trust with local communities, demonstrate their commitment to inclusivity, and ensure that their strategies are aligned with the broader goals of sustainability.
He emphasizes that businesses successfully navigating the complexities of a just transition will be better positioned to thrive in a net-zero economy. These companies will not only reduce their environmental impact but also create new economic opportunities, strengthen their reputations, and secure long-term business success.
For Mazzei, the path forward is clear: a just transition is not just a moral imperative—it is a business imperative. Businesses that proactively engage stakeholders, address social risks, and embrace inclusivity will lead in the new sustainable economy.
