Social Sustainability and Renewable Energy
Joost Notenboom
In this video, Joost explores the social impacts of renewable energy projects, focusing on supply chain vulnerabilities, operational challenges, and the steps investors can take to address human rights concerns and ensure sustainable development.
In this video, Joost explores the social impacts of renewable energy projects, focusing on supply chain vulnerabilities, operational challenges, and the steps investors can take to address human rights concerns and ensure sustainable development.
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Social Sustainability and Renewable Energy
13 mins 28 secs
Key learning objectives:
Understand the social risks and impacts associated with renewable energy supply chains, including human rights concerns
Identify the importance of engaging local communities and stakeholders in the planning and operation of renewable energy projects
Understand the initiatives and innovations that address social and environmental risks, creating value for investors
Outline investor’s role in promoting responsible business practices in the green economy
Overview:
Renewable energy projects, while crucial for the global energy transition, bring significant social impacts that need addressing. This video covers key issues such as human rights abuses linked to raw material sourcing in regions with weak governance, the importance of community engagement in project development, and the need for transparency in local stakeholder participation. Additionally, it highlights the role of investors in guiding companies to mitigate these risks through responsible business practices, innovative solutions in the supply chain, and the development of circular economy strategies. By acting proactively, investors can support the sustainable growth of the green economy and help ensure that renewable energy initiatives are both environmentally and socially responsible.
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Summary
How can these risks be addressed?
What is the role of local communities and stakeholders in renewable energy projects?
Investors should encourage their portfolio companies to engage in local stakeholder participation, especially when it comes to land rights and project approval. For example, practices like Free, Prior and Informed Consent (FPIC) give indigenous communities the right to approve or reject projects that affect their land, helping ensure that their rights are respected. Furthermore, companies should focus on providing fair working conditions and career development opportunities for employees. In a sector traditionally dominated by engineers, increasing diversity and fostering career growth for workers in renewable energy is essential for the sector's long-term success.
How can the green economy be supported through responsible business practices?
What is the future of social responsibility in the renewable energy sector?
The future of social responsibility in renewable energy lies in the continued integration of sustainability and ethics into business practices. Investors have an opportunity to shape the development of the sector by focusing on companies that are proactively addressing social and environmental risks. The focus on human rights in supply chains, local community engagement, and circularity in renewable energy production will continue to be essential. The role of investors is to guide companies in adopting these practices, ensuring that the renewable energy transition is not only environmentally sustainable but also socially responsible.
What are the key social risks in renewable energy supply chains?
Supply chains in renewable energy are heavily reliant on raw materials, such as cobalt, lithium, and rare earth metals, which are often sourced from regions with weak governance and poor human rights practices. For example, cobalt mining in the Democratic Republic of Congo has raised concerns about child labour and unsafe working conditions. Additionally, polysilicon production in China's Xinjiang region has been linked to human rights abuses. These supply chain risks are exacerbated by the global push for decarbonisation, which increases demand for these materials.
Supply chains in renewable energy are heavily reliant on raw materials, such as cobalt, lithium, and rare earth metals, which are often sourced from regions with weak governance and poor human rights practices. For example, cobalt mining in the Democratic Republic of Congo has raised concerns about child labour and unsafe working conditions. Additionally, polysilicon production in China's Xinjiang region has been linked to human rights abuses. These supply chain risks are exacerbated by the global push for decarbonisation, which increases demand for these materials.
How can these risks be addressed?
To mitigate these risks, companies must conduct thorough due diligence on their supply chains, ensuring that they meet human rights standards. Legislation like the Uyghur Forced Labor Prevention Act and the EU’s Conflict Minerals Regulation requires companies to scrutinise their supply chains for human rights violations, particularly in high-risk areas. As a responsible investor, it's important to direct your portfolio companies to adopt these regulations, even before they are legally required to do so. Tools like Bloomberg’s Tier 1 Solar Module Maker ranking can help identify suppliers with strong sustainability practices.
What is the role of local communities and stakeholders in renewable energy projects?
One significant social impact of renewable energy projects is the effect on local communities. Solar and wind farms, in particular, can face resistance due to the ‘Not In My Backyard’ (NIMBY) phenomenon, where communities oppose projects that they believe may affect their local environment or property values. To address this, it is crucial for investors to guide their portfolio companies in engaging local communities early in the planning process. Offering opportunities for community ownership of projects and ensuring transparency can help build trust and reduce resistance. In some cases, such as in the Netherlands, community-owned solar and wind farms have proven to be successful in mitigating local opposition.
How can investors support responsible operational practices?
Investors should encourage their portfolio companies to engage in local stakeholder participation, especially when it comes to land rights and project approval. For example, practices like Free, Prior and Informed Consent (FPIC) give indigenous communities the right to approve or reject projects that affect their land, helping ensure that their rights are respected. Furthermore, companies should focus on providing fair working conditions and career development opportunities for employees. In a sector traditionally dominated by engineers, increasing diversity and fostering career growth for workers in renewable energy is essential for the sector's long-term success.
What are some initiatives and innovations that address social risks?
There are several industry initiatives aimed at addressing social risks in the renewable energy sector. The Solar Stewardship Initiative, for example, promotes supply chain integrity and sustainable business practices. Additionally, innovative approaches in supply chain management, such as recycling minerals like copper and lithium, can help reduce the environmental and social impacts of mining. Circular economy initiatives are also gaining traction, with companies developing recyclable wind turbine blades and reusable solar panels. By investing in such innovations, investors can support the green economy while mitigating supply chain risks.
How can the green economy be supported through responsible business practices?
Investors play a critical role in shaping the green economy by prioritising companies that are committed to responsible business practices. As renewable energy projects face increasing social scrutiny, investors can help direct capital towards companies that are actively addressing human rights, environmental concerns, and social impacts. Initiatives like the EU’s Battery Regulation, which requires proof of recycling efficiency and use of recycled content in batteries, are examples of legislation that push for better practices. By supporting such initiatives, investors can contribute to the success of the energy transition while ensuring that it benefits both people and the planet.
What is the future of social responsibility in the renewable energy sector?
The future of social responsibility in renewable energy lies in the continued integration of sustainability and ethics into business practices. Investors have an opportunity to shape the development of the sector by focusing on companies that are proactively addressing social and environmental risks. The focus on human rights in supply chains, local community engagement, and circularity in renewable energy production will continue to be essential. The role of investors is to guide companies in adopting these practices, ensuring that the renewable energy transition is not only environmentally sustainable but also socially responsible.
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Joost Notenboom
Joost Notenboom, a seasoned professional with experience in professional services, banking, investment, and funds management, is currently the Head of ESG & Sustainability at Omnes Capital, a French private equity firm focusing on energy transition and innovation, aiming to combine positive societal impact with attractive financial returns.
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