ILO Promotes Market Systems Approach to Support a Just Transition

The International Labour Organization (ILO) highlights the potential of a market systems development (MSD) approach to address the root causes of decent work deficits and environmental challenges, supporting a just transition toward sustainable economies. The proposal was presented during a two-day learning event held on Oct. 30–31, 2025, in Geneva, organized in collaboration with the Swedish International Development Cooperation Agency (SIDA).

“By 2030, it is estimated that 2% of global labor productivity will be lost due to heat stress. A just transition is not optional. We cannot move forward on the environmental agenda if it does not generate economic and social benefits,” says Moustapha Kamal Gueye, Director of The Just Transition Priority Action Programme, ILO.  “Enterprises play a key role in this transformation, and the MSD approach has a critical role in ensuring their sustainable development.”

The ILO emphasizes that developing economies bear most of the consequences of the climate crisis despite contributing the least to it. The MSD approach can help these economies transition toward environmentally sustainable models that enable inclusive growth and decent employment. The strategy seeks to strengthen small enterprises, reduce sectoral environmental impacts, and facilitate regulatory changes with broad economic and social effects.

The event gathered over 100 policymakers, donors, UN agencies, governments, and experts to discuss ways to accelerate climate action and private sector development. Participants reviewed evidence from more than 25 projects worldwide and drew lessons from over 30 organizations that have implemented market systems strategies. These experiences demonstrated how linking market innovation with policy reform can create long-term mechanisms for green and decent job creation, particularly for SMEs.

The MSD approach can help adapt to a changing development finance landscape by promoting efficiency and competitiveness among SMEs, says Dragan Radic, Head of the Small and Medium Enterprises Section, ILO. “By working closely with the ILO’s social partners — employers’ and workers’ organizations — the MSD approach can ensure that interventions are grounded in the interests of both sides,” he adds.

Discussions during the event underscored that achieving a sustainable just transition requires a systemic understanding of how economies function. Participants called for stronger collaboration and coordinated action among donors, as well as more flexible indicators that consider people and nature, not only quantifiable metrics.

The partnership between the ILO and SIDA, which will continue until at least 2027, establishes a foundation for developing and implementing market-driven strategies in collaboration with governments, employers, and workers. The initiative aims to ensure that environmental transition efforts remain inclusive, equitable, and centered on human well-being.