Good, bad or indifferent?
What it takes to make a successful Climate Transition Plan.
These days, many companies are required to have a Climate Transition Plan (CTP). That’s partly because of new regulations – both the EU’s Corporate Sustainability Reporting Directive (CSRD) and its Corporate Sustainability Due Diligence Directive (CSDDD) expect companies to publish CTPs.
CTPs work by bringing businesses into line with a +1.5°C rise in global temperatures by 2050 – the goal set out in the 2015 Paris Climate Agreement. By doing that, companies will reduce their risk, and show they can adapt to a new, more sustainable, low-carbon economy.
When it comes to developing a CTP, there are plenty of ‘frameworks’ available. The European Sustainability Reporting Standards (ESRS) – part of the CSRD – set out specific disclosure requirements, as does the International Sustainability Standards Board (ISSB). Arguably, the most complete are those published by the We Mean Business Coalition – and the UK’s Transition Plan Taskforce (TPT). The CDP – formerly the Carbon Disclosure Project – has also issued its own technical note.
Of course, companies may have no choice on which framework to apply – depending on the reporting regulations in force where they operate. By and large, however, these frameworks contain the same requirements – from climate governance and emission targets to investment plans.
What makes a successful Climate Transition Plan?
We’ve put together five tips that will help make your Climate Transition Plan a winner:
- Get the basics right. That may sound obvious. But make sure your CTP is embedded in your strategy and public policy approach – and that it has buy-in from executives. Do the hard graft. Work with stakeholders to understand the risks and opportunities. Above all, get the data right – a CTP stands or falls by the quality or reliability of the data you use.
- Think about what it takes to ensure a just transition – an important concept in the We Mean Business Coalition (WMBC) framework. Remember, adapting your business will have consequences for your most important stakeholders. Employees may lose jobs – if factories have to close, for example. Products may change, or suppliers switch to cleaner materials. Address these impacts in your plan. Explain the measures you’re taking to support these stakeholders, and the resources you’re committing to ensure the transition is as fair as possible to everyone.
- Don’t blind your readers with science. A CTP can be a very technical document. Be plain in your use of language. Use visuals to support your message. The CTP should be regarded, in effect, as a recruiting document. It’s a way of demonstrating to others that you have a clear, credible plan for the climate transition – so they can also get behind it.
- Be clear about your dependencies. Most companies – at least to some extent – will rely on outside parties to achieve their climate goals. You may need governments to pass the right legislation, for example, or consumers to switch to new, cleaner or more energy-efficient products. You may also need to work closely with your suppliers – to help reduce emissions upstream. If you’re in a sector like retail, technology or finance, the vast majority of your emissions will come from outside your own business operations.
- Lastly, be honest about your challenges and failures. As you implement your CTP, report on your progress. At the same time, be clear if you miss targets or don’t make the progress you were expecting. Be analytical. Explain why that may be the case – and what measures you’re taking to make sure that, next time, you do meet your targets. If something has changed, either internally or, more broadly, in your industry, say so. To be successful, you need stakeholder support – and that starts with a clear, upfront analysis.
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