Just Transition & Responsible Exit
Business Case
Brand reputation
Legal and regulatory compliance
Operational continuity
Stronger supplier relationships
Strategy & Planning
Assessment
Review your current practices for ending supplier relationships, including the following, and map categories with historically high supplier turnover:
- adequate notice periods
- whether outstanding obligations are honoured before exit
- whether there is any process for assessing the impact of an exit on the supplier and its workers
Conduct a review of current supplier relationships at risk of termination to identify where your sourcing decisions could create significant social or economic impacts on suppliers, workers or sourcing communities.
Conduct in-depth reviews of existing transition plans with strategic suppliers to evaluate their effectiveness, including whether milestones are being met and where plans are falling short / what is preventing progress.
Policy
Adopt a responsible exit policy with a commitment to treating termination as a last resort, avoiding abrupt termination decisions and providing adequate notice before exiting any supplier relationship, and honouring all outstanding obligations including payment for completed work.
Embed just transition principles into sourcing strategy, requiring category managers to:
- conduct social impact assessments before implementing major sourcing shifts
- to develop a structured improvement plan before proceeding to terminate the relationship when a supplier is at risk of exit due to sustainability non-compliance
- document why an improvement plan is not feasible before recommending exit
Require strategic suppliers to adopt their own responsible exit policies covering their relationships within their own supply chain.
Targets
Set a target for all supplier contracts to include defined notice periods and exit provisions and establish a baseline for the percentage of supplier exits that comply with the responsible exit policy.
Set targets for number of suppliers at risk of exit with transition plans and social impact assessments.
Set targets for the percentage of sustainability non-compliance cases resolved through improvement rather than termination.
Supplier Selection
Screening
Include questions in supplier pre-qualification to assess commitment to a collaborative relationship, such as:
- willingness to engage in a structured improvement
- current sustainability initiatives
Ask suppliers in the RFP process about their own practices for ending subcontractor relationships, such as:
- commitment to just transition
- notice periods
- outstanding obligation management
- transition plan practices
Require strategic suppliers to provide evidence of their own responsible exit policies as a condition of RFP eligibility.
Selection
Favour suppliers that demonstrate long-term relationship orientation, including investment in sustainability improvements.
Allocate points for responsible exit and just transition practices, assessing whether suppliers have documented policies for managing exits responsibly within their own supply chains.
Assess the maturity of strategic suppliers' responsible exit and just transition practices as a weighted criterion in tender evaluations.
Contracts
Ensure all supplier contracts include clearly defined notice periods for termination, clear termination clauses and provisions for payment of all outstanding obligations before exit.
Include clauses requiring both parties to engage in good-faith dialogue and a structured improvement process before any termination is initiated for sustainability reasons.
Require strategic suppliers to cascade responsible exit and just transition requirements to their own key suppliers, with evidence of compliance provided to the buyer on request.
Supplier Engagement
Goal Setting
Work with suppliers to agree on a shared understanding of what responsible exit looks like in practice, including notice periods, obligations and the process for raising and resolving performance concerns before escalating to exit.
Work with suppliers in high-risk or transitioning categories to set joint improvement goals before any exit decision is finalised, including timelines for addressing sustainability non-compliance, performance gaps or capability shortfalls.
Co-develop detailed just transition roadmaps for strategic suppliers to implement throughout their own supply chains, covering workforce transition, community impact and cascading requirements.
Capacity Building
Provide training to procurement staff and suppliers on the social and economic impacts of abrupt supplier exits on workers and communities, and on the buyer's responsible exit policy.
Provide targeted training to suppliers on just transition principles and responsible exit practices for their own supplier relationships, including how to conduct worker impact assessments, develop transition plans and manage workforce changes in a way that minimises harm.
Provide advanced training on workforce transition planning and supplier improvement roadmap best practices.
Advisory
Provide suppliers facing potential exit with advisory services on how to improve on sustainability metrics and address issues that are leading to the potential exit.
Provide advisory support to suppliers on designing and implementing responsible exit and just transition policies for their own supply chains, including contract clauses, impact assessment tools and guidance on engaging suppliers in improvement plans.
Provide dedicated advisory support to strategic suppliers on developing and refining their just transition programs.
Financial Support
Provide financial compensation to suppliers for contract changes or exits, including covering cancellation costs and settling outstanding payments in a timely manner.
Plan and implement structured financial support during transitions, such as phased volume reductions, transition periods with continued revenue and agreed coverage of adjustment costs.
Co-invest with suppliers on just transition initiatives within the supply chain, including shared funding for sustainability compliance support and capability development.
Audits
Include responsible exit compliance in internal procurement audits, reviewing whether notice periods are being respected, outstanding obligations are being honoured and exit decisions are being documented in accordance with policy.
Include just transition and responsible exit practices in supplier audits, asking suppliers to complete self-assessment on managing exits from their own supplier relationships, including notice periods, outstanding obligations and worker impact considerations.
Require evidence of just transition and responsible exit policy and practices for suppliers as part of supplier audit program.
Project Partnerships & Innovation
Engage with industry peers to share good practice on responsible exit and just transition.
Partner with industry peers, suppliers, trade unions and civil society to develop common standards for notice periods, impact assessment, worker protection and transition plans in supplier exits.
Convene or participate in multi-stakeholder just transition initiatives, bringing together buyers, suppliers, trade unions, governments and civil society to develop collective responses to the social and economic impacts of sustainability-driven sourcing transitions.
Continuous Improvement
Metrics
Track the following:
- percentage of supplier contracts with defined notice periods and exit provisions
- number of supplier exits complying with the responsible exit policy
- number of supplier improvement processes initiated before exit decisions
Track the following:
- percentage of sustainability non-compliance cases resolved through improvement rather than termination
- percentage of planned supplier exits covered by a documented transition plan
- number of suppliers supported through structured improvement processes
Require strategic suppliers to report on just transition and responsible exit performance across their own supply chain tiers, including notice periods applied, worker impact assessments conducted and outcomes of supplier improvement processes.
Scorecards
Include just transition and responsible exit policies and practices as a component in supplier scorecards.
Rate suppliers on the quality and consistency of their just transition and responsible exit practices, including whether improvement processes are being followed before exits are initiated, whether transition plans are being implemented as agreed and whether suppliers are progressing against previously identified gaps or goals.
Weigh just transition and responsible exit performance in strategic supplier scorecards, with top performers receiving preferential weighting in tenders and bottom performers required to submit improvement plans with defined timelines and escalation consequences.
Impact Verification
Gather feedback from exited suppliers on whether the buyer's exit process was transparent, fair and consistent with the responsible exit policy.
Assess whether supplier improvement and transition support programs are successfully reducing the number of exits due to sustainability non-compliance and improving sustainability outcomes among at-risk suppliers.
Measure the social and economic impact of just transition and responsible exit programs on affected workers and communities, including employment retention rates, wage stability and community economic resilience attributable to the buyer's transition support and collective action contributions.
Sources consulted
- https://www.sei.org/perspectives/building-the-business-case-for-a-just-transiti…
- https://www.ilo.org/publications/guidelines-just-transition-towards-environment…
- https://actonlivingwages.com/app/uploads/2022/06/ACT_Fact-Sheets_ACT-Responsibl…
- https://www.ituc-csi.org/IMG/pdf/just_transition_-_a_business_guide.pdf