Successful transition plans are about both the ‘why’ and the ‘how’
- Post Date
- 18 April 2024
- Read Time
- 5 minutes
Today’s environmental reporting landscape can appear to be a melting pot of jargon and acronyms, with the devil in the detail. The recent additions of the European Sustainability Reporting Standards (ESRS) – under the EU Corporate Sustainability Reporting Directive - and the International Sustainability Standards Board’s IFRS S1 and S2 standards – to add to the Taskforce for Climate-related Financial Disclosure (TCFD) and the Taskforce for Nature-related Financial Disclosures (TNFD) – only goes to highlight this congestion in reporting requirements. The fact there are now so many frameworks and individual disclosure elements to consider can detract from clear strategic thinking about what really matters and for busy sustainability managers, it can sometimes be difficult to see the ‘wood for the trees’.
That is to say that it can be easy to lose sight of the true purpose of environmental reporting, the ‘macro’ picture (i.e. reducing emissions and becoming more resilient), and instead we run the risk of fixating on the ‘micro’ details (i.e. perfecting GHG calculations from 95% to 96% accuracy).
The detail is naturally part and parcel of developing a comprehensive report and often is the distinguishing factor in separating the good from the average: details matter, but they should not be the primary driver when building a sustainability strategy. Overly focusing on specifics can narrow the perspective and mean we overlook other more important objectives. A successful sustainability strategy should ideally be guided by a ‘macro’ strategic ambition that is holistic and acts on multiple fronts.
What is a transition plan?
‘Transition planning’ is the latest hot topic to be introduced to sustainable reporting and offers the opportunity to consider the strategic ‘macro’ ambition of an organisation’s sustainability strategy. Indeed, this makes it a valuable tool, allowing businesses to establish an overarching ambition for their climate strategy. It does this by asking an organisation to explain how it is planning to adapt its business to achieve its decarbonisation targets and align itself with a low-carbon economy.
In October 2023, the Transition Plan Taskforce (TPT)[1] released its ‘gold standard’ framework for creating a transition plan, which provided much-needed guidance on what a climate transition plan should contain and a method by which to get there. Fully aligning with the extensive guidance may seem like a daunting task, but getting too caught up with the details might actually be hindering how you commence your transition plan journey. Below, we have provided the initial phases to get you started.
Where to start with your transition plan?
- Understand your drivers. The TPT consistently references the strategic ambitions being the underpinnings of a transition plan. Take the time to understand why you are pursuing a transition plan and set your ambition. This ambition can serve as a motivating force when setting objectives and cascading actions throughout the organisation.
- Assess where you are by understanding how your current strategy marries up with the TPT guidance and where there are information gaps. Some actions will take longer than others to implement and it is important to prioritise effectively. Building a solid foundation that sets a precedent for subsequent action (e.g. developing a climate-integrated risk analysis) is more important than actioning small details (e.g. niche reporting metrics). Transition plans are expected to be iterative and will develop overtime, these details will come.
- Set an action plan. Engage internally with your key business functions (finance, procurement, sustainability) and ask for their input on the priority areas. Transition plans are holistic and require a multi-disciplinary effort to be successful. Engaging these functions early on will set a good precedent going forward.
‘Transition planning’ may feel like just another added facet of sustainable reporting to consider and part of an uphill battle to stay on top of the requirements. However, the TPT’s guidance offers an opportunity to consolidate prior progress and have a clear future path making it easier to create a good sustainable strategy. Despite the guidance being highly detailed, the TPT is clear that plans are supposed to be iterative and develop in maturity over time. Start with the basics, ensure you have a solid foundation, and importantly, don’t lose sight of the ‘why’ behind your climate ambitions.
On 9th April 2024, the TPT launched its final set of transition plan resources [2] to help businesses unlock finance for Net-Zero including:
- sector-specific transition plan guidance for asset owners, asset managers, banks, electric utilities and power generators, food and beverage, metals and mining, and oil & gas.
- sector summary guidance, with high level guidance for 30 sectors of the global economy.
- guidance on how to undertake a transition planning cycle.
- a paper on the opportunities and challenges of transition plans in emerging markets and developing economies.
- advice from TPT Working Groups on Adaptation, Nature, Just Transition and SMEs, exploring how transition planning can extend beyond realising Net-Zero.
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