Transition plans are a vital tool to demonstrate to investors and stakeholders that an organization is committed to achieving a 1.5-degree pathway, and that its business model will remain relevant (i.e., profitable) in a net-zero carbon economy.
CDP has produced a discussion paper for organizations to ensure their business model aligns with a net-zero economy. The high-level summary reviews and reflects the thinking drawn from other existing frameworks and related benchmarks, such as the Assessing the Low-Carbon Transition (ACT) framework, Science-Based Targets Initiative, Transition Pathways Initiative (TPI), CA100+ and the Climate Safe Lending Network.
Transition plans enable an organization to outline how it will deliver on its strategy to align with the latest and most ambitious climate science recommendations and keep themselves in line or ahead of relevant policy goals for the organization
A climate transition plan is a time-bound action plan that clearly outlines how an organization will pivot its existing assets, operations, and entire business model towards a trajectory that aligns with the latest and most ambitious climate science recommendations. i.e., halving greenhouse gas (GHG) emissions by 2030 and reaching net-zero by 2050 at the latest, thereby limiting global warming to 1.5°C.
Transition plans will be fundamental in catalyzing action needed to achieve a sustainable economy and are therefore at the heart of CDP's strategy. We want to do more to encourage and support companies to establish credible transition plans, underpinned by science-based targets - CDP is continually working to refine and develop guidance on transition plans, as well as measure performance against them.
CDP have created a technical note to provide guidance on how organizations disclosing through CDP can demonstrate that they have a credible climate transition plan in place.
CDP's 2021 report shines a spotlight on how far along organizations are on their journey to developing climate transition plans and what key elements are being reported on. The report homes in on disclosure trends to targets and financial planning, and looks at industry and geographical trends across all climate transition plan elements.
Financial services, power, and, fossil fuels were the top-performing industries with the highest rates of climate transition plan disclosure. 5% of organizations in each of these sectors reported to all the key climate transition plan indicators. Whereas, the transportation services (0.3%) and apparel (0.2%) industries had the lowest disclosure rates, to these key indicators.
The report analyzes data from over 117 countries whose companies disclosed in 2021, Spain, France, and Japan had the highest proportion of organizations disclosing to all the key indicators, yet at only 4%, 3%, and 2% respectively. The country with the worst-performing organizations are Indonesia, Saudi Arabia, Argentina and China.
During COP26 The UK Government became the first to announce mandatory transition plan disclosure for listed companies and financial institutions by 2023. This reflects the growing interest from investors, customers, and employees in how organizations plan on tackling the climate crisis and transitioning their business model to one that aligns with a 1.5°C world.
CDP is here to help; our discussion paper as well as workshops, and Reporter Services available for companies in the UK are all useful tools to be utilized when developing and disclosing credible climate transition plans.
On the 25th of April 2022, the UK Government launched its Transition Plan Taskforce which CDP is proudly a part of the aim is to develop a gold standard for climate transition plans. Being part of the task force will help ensure that CDP’s disclosure platform remains in line with regulatory changes within the UK and will continue to provide UK companies with a platform to disclose elements of their climate transition plans.
Organizations 2021 UK climate transition plan disclosure
In partnership with Say on Climate.
Thursday, 31 March, 09:00 GMT, 16:00 GMT
Reporting on your climate transition plan
This webinar builds on the technical note that provides guidance on how organizations disclosing through CDP can demonstrate that they have a credible climate transition plan in place. CDP's technical experts will cover the concept of corporate climate transition plans, and outline questions in the 2022 CDP Climate change questionnaire that relate to credible climate transition plans.
Wednesday, 08 December, 14:00 - 15:00 GMT
Climate transition plans: Critical to keep companies accountable for net-zero
Watch this webinar to find out more information on how companies can create a credible climate transition plan.
Climate transition plans are a vital mechanism for organizations to demonstrate to investors and other stakeholders that they have developed a strategy that will keep their business on the pathway to 1.5 oC, and remain profitable in a net-zero economy. With increased stakeholder interest, investor awareness, and an evolving regulatory landscape, climate transition plans enable organizations to manoeuvre through these developments and stay ahead of the curve.
Climate transition plan disclosure is vital as you cannot manage what you don’t measure. The TCFD’s consultation on its guidance “Climate-Related Metrics, Targets, and Transition Plans” found that ‘96% of users agree that disclosure of transition plans is useful and yields many benefits1.
Disclosure will also help capital markets to understand whether an organization is taking the action required to align with ambitious climate science recommendations. Therefore, climate transition plans and reporting on forward-looking indicators and metrics will increase investor confidence in organizations' forward-looking climate-related planning and ability to stay relevant (i.e., profitable) in a net-zero carbon economy.
On this page you will find guidance materials on developing and disclosing credible climate transition plans.
Although there will be differences in the climate transition plan journey across various industies our current definition and guiding principles are broad and aim to apply to most organizations. If disclosing organisations require more in-depth climate transition plan principles and methodologies that are also sectoral, we would encourage them to contact ACT.
For SMEs and emerging markets certain elements of a climate transition plan may be more difficult to realise and disclose on. We have still attempted where possible to make the guiding principles and elements of climate transition plans as accessible to all.
CDP has teamed up with accredited external solution providers that offer a range of support to companies on their journey to environmental leadership. We would recommend reaching out to our Partnerships team to find out which external solutions providers can offer you the best guidance. Please email [email protected] to find the most suitable provider for your business’s journey to environmental leadership.
Our current position is that publishing a climate transition plan is not required, what is required is that the plan is integrated into a business’ mainstream fillings and overall business strategy. That being said, publishing a climate transition plan may be looked on positively by stakeholders, investors, and shareholders and the Say on Climate Initiative requires that at the very least companies publish an annual update for shareholders to review.
In order to be aligned with t he TCFD recommendations, organizations should review their climate transition plans every five years for continuous relevancy and efficacy. The TCFD also notes that progress against the plans should be reported annually, alongside any material, substantive changes to the plan be reported annually (if required).