Rising temperatures due to climate change are increasingly causing extreme weather conditions. The human, economic and environmental damage caused by this weather has made tackling climate change a top priority for governments and businesses around the world. With a climate transition plan, companies can easily explain to their stakeholders what exactly they are doing, say PwC experts Gerrit Ledderhof and Roel Drost.
More and more companies are doing their best to understand and reduce their impact on climate change. At the same time, investors, regulators and consumers are demanding greater clarity from companies on how they reduce their climate impact and remain relevant in economies moving towards net zero. The way to do this is to draw up a so-called climate transition plan.
The idea of creating a plan to manage a company's climate transition can be daunting, and it can be hard to know where to start. But it doesn't have to be. This article will outline what a climate transition plan is, why having one is important, and which steps can be taken to kickstart its development.
What is a climate transition plan?
A climate transition plan is an action plan that describes how an organization's activities become aligned with a net zero economy, in line with the latest climate science recommendations. It includes topics such as the governance, targets, actions and resources necessary to achieve the transition.
Why develop a climate transition plan?
Developing a transition plan is not only the responsible thing to do, but also strategically important in today's business landscape. These are four key reasons every organization should develop a climate transition plan:
- Maintaining access to finance: investors and banks are putting a growing emphasis on organizations’ environmental records, commitments and risks when deciding how to deploy capital. A solid climate transition plan showcases a proactive approach to climate challenges and enables long-term viability in a changing climate.
- Building credibility and engagement with key stakeholder groups: consumers, suppliers and employees are increasingly holding entities accountable for their environmental impacts and making choices based on their environmental records. Laying out a credible transition plan shows stakeholders that an organization is serious about climate change action.
- Speeding up decarbonisation: decarbonisation requires a business transformation beyond the sustainability function, and alignment across departments alongside buy-in from key decision-makers is crucial to ensure success. By helping organisations translate their decarbonisation ambitions into concrete, strategically aligned actions, transition plans can help build the necessary momentum to accelerate decarbonisation.
- Preparing for regulation and disclosure: existing and proposed regulations and requirements such as the EU's Corporate Sustainability Reporting Directive (CSRD) and Corporate Sustainability Due Diligence Directive (CSDDD), the UK's Transition Plan Taskforce (TPT), and SEC’s climate-related disclosure rules all underscore the importance of sound transition plans.
What are the key elements of a climate transition plan?
A good transition plan includes these key elements:
How to level-up a climate transition plan?
Climate transition planning is not a stand-alone, one-time project. It is important that it is integrated into the organisation’s broader business strategy and planning cycle. As the climate changes and stakeholder expectations evolve, transition plans should be continuously refined. With clear governance, ambitious targets, strategic actions, and appropriate resource allocation, organisations can create a transparent plan to navigate the journey to a net zero future.
Interested to discuss a climate transition plan for your organisation?
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