by: Garrett Keraga | August 21, 2024
In 2024, it’s harder than ever to distinguish sustainability innovators from climate bandwagoners, indecisive greenwashers, and progress procrastinators. The advent of Net Zero Standards has added another wrinkle to the already overcrowded space of medium—to long-term climate commitments. When a company announces a 2050 goal, it’s often quick to advertise its commitment, share across social media, or even tie it to its products. But many find themselves asking: How can I trust these promises when 2050 is a quarter-century away?
Driven by the Paris Agreement, a particular urgency pushes companies to take immediate action to supplement their long-term commitments. Greenhouse Gas (GHG) emissions would have to peak before next year and decrease 43% by 2030 to limit warming to 1.5°C.[1] It’s imperative that companies with long-term commitments follow through with their intentions by taking both immediate and sustained action.
This is where climate transition plans come in. By developing and publishing climate transition plans, organizations can prove to stakeholders that they are prepared to take action to reach a low-carbon economy and stay accountable for their sustainability goals.
Hesitance in Climate Transition Plan Development
Until 2023, climate transition plans were diverse and lacked the structure provided by standards such as the Greenhouse Gas Protocol or ESG reporting frameworks (such as the Global Reporting Initiative and SASB Standards). Despite this, there has been a positive trend in the development of climate transition plans in recent years, albeit with a degree of hesitancy. A 2024 CDP State of Play report showed that there has been an annual uptick in the number of disclosing organizations that have a climate transition plan in place but a decrease in the overall percentage of CDP respondents with a plan.[2] The overall percentage of companies disclosing “credible” climate transition plans, according to CDP’s 21 key indicators, rose from only 0.4% in 2022 to 0.6% in 2023. Developing a plan has historically been intimidating due to uncertainties in forecasting future regulations, market conditions, technological advancements, and securing necessary capital and buy-in.
Introduction to the Transition Plan Taskforce
In 2023, however, the Transition Plan Taskforce (TPT) shared its final version of the TPT Disclosure Framework, which aims to be a “gold standard” disclosure framework for climate transition plans.[3] The TPT formed in April 2022 and has engaged with a diverse set of stakeholders over the last two years to develop the framework, plus sectoral guidance, mapping to the International Financial Reporting Standards (IFRS) and Task Force on Climate-Related Financial Disclosures (TCFD) standards, and other useful materials for the development of climate transition plans.[4] The TPT focuses on creating guidance for climate transition plans for the private sector and informing regulatory requirements both in the UK and globally.
The Disclosure Framework is aimed to be a sector-neutral tool to use for voluntary or mandatory disclosures and builds off efforts made by IFRS S1, IFRS S2, and the Glasgow Financial Alliance for Net Zero (GFANZ). The image below summarizes the five key components of a climate transition plan according to the Disclosure Framework, and the sub-elements for each component. Sector-specific guidance, published in April 2024, covers established decarbonization measures, metrics, targets, and useful resources for 30 sectors and sub-sectors to aid in the development of TPT Disclosure Framework-aligned climate transition plans.[5]
The Right Time to Develop a Climate Transition Plan
Development of a climate transition plan can lead to numerous benefits, such as increased access to capital through investors, a clear action plan for organizational transformation, and reputational advantages from backing up sustainability goals and claims. Publishing a climate action plan can also help policymakers make informed decisions by observing the plans and projections put forward by leading organizations. As regulations emerge that may require the development and publication of climate transition plans, such as the UK’s Sustainability Disclosure Requirements (SDR), organizations are starting to prepare early for disclosure. The final Security and Exchange Commission rules on The Enhancement and Standardization of Climate-Related Disclosures also require organizations to divulge the use of climate transition plans, which strengthen their disclosures of organizational activities that mitigate climate-related risk.
It’s more evident than ever what elements comprise a robust and credible climate transition plan, thanks to alignment between TPT, IFRS, GFANZ, and other initiatives, making it an ideal time to address the urgent call for action. CDP’s 2024 report shows the emerging convergence between the various climate transition plan initiatives and their requirements, underscoring the familiar building blocks of a comprehensive plan.[6]
Actions to Prepare for Disclosure
Organizations developing a climate transition plan in alignment with TPT’s Disclosure Framework will need to begin with several foundational projects, including Scope 1-3 GHG emissions inventories, target development, risk analysis, governance practices review, and development of a decarbonization strategy. Organizations that have completed the required elements should then develop and publish their personalized plan according to the indices in the Disclosure Framework.
Before developing a climate transition plan, you’ll need to complete these building blocks:
- Greenhouse gas accounting: Understanding your organization’s impact is imperative before exploring options for reduction. Both Scope 1&2 (operational) and Scope 3 (value chain) footprints should be completed to give your organization a full picture of your GHG emissions contributions.
- Target-setting: Companies will need to explore goals that demonstrate their commitment to low-carbon pathways. Although the TPT does not require net-zero targets, GFANZ emphasizes them, and many countries globally have committed to them as well. Near-term targets are required for TPT alignment.
- Decarbonization planning: The cornerstone of a climate transition plan is detailed, effective, and actionable measures for transitioning to a low-carbon economy. Assessments of abatement levers and their potential for emissions reductions and cost-benefit analyses like marginal abatement cost curves will be crucial in understanding the best possible decarbonization pathway. The TPT also requires financial planning, relevant organizational policies, and extensive engagement strategies.
- Governance practices: Organizations will need to engage with leadership to establish best practices around board sustainability oversight, company-wide incentives, accountability, and more. Companies that engage with voluntary reporting through CDP or ESG reports will have a good starting point.
- Risk and opportunity assessment: To align with strategic ambition requirements, companies should conduct a scenario analysis to identify and plan for climate-related risks and opportunities. This is most easily built off TCFD-aligned disclosures.
Once the above efforts have been completed, companies will be ready to develop and publish a climate transition plan that fully aligns with TPT’s Disclosure Framework. The report itself will involve copywriting, stakeholder engagement, and design.
ClimeCo is a trusted source for helping develop your organization’s first climate transition plan aligned with TPT’s Disclosure Framework. Our team has extensive report writing and stakeholder engagement experience, as well as deep knowledge of the plan components.
Contact us today to get started or learn more!
Works Cited
[1] UNFCCC – The Paris Agreement
[2] CDP – The State of Play 2023
[3] Transition Task Force – The TPT Disclosure Framework
[4] Transition Task Force – About The TPT Disclosure Framework
[5] Transition Task Force – Sector Summary
[6] CDP – Climate Transition Plan Disclosure
About the Author
Garrett Keraga is a Director on ClimeCo’s Sustainability, Policy, and Advisory team. His career in corporate sustainability has included comprehensive goal and strategy setting, carbon abatement pathway identification and implementation, and disclosure advisory. Garrett’s worked with various industries, both consumer-facing and industrial clients. He holds a Bachelor of Science in Mechanical Engineering from the University of Vermont.
