What is a Climate Transition Plan?
A Climate Transition Plan is the organization’s roadmap in navigating and leading the shift towards a more sustainable, low-carbon future. This plan encompasses a comprehensive action plan, outlining the transformation of a company’s assets, operations, and business models, with an ultimate goal of achieving net-zero emissions by the year 2050. It incorporates the identification of climate risks, establishment of Paris aligned targets, and lays out specific actions for this transition. This plan is central to placing climate change at the core of a company’s strategy and operations.
The Urgency of Climate Transition Plans for Businesses
Recent data from the Carbon Disclosure Project (CDP) reveals that only a small fraction (0.4%) of the 18,600+ organizations that reported through CDP’s climate change questionnaire in 2022 had a credible climate transition plan. By formulating a credible transition plan, a company can more effectively understand and manage the risks associated with the transition to a low-carbon economy. Such planning is crucial for comprehending the extent of necessary business transformation and the financial implications of this transition. Furthermore, Climate Transition Plans are becoming increasingly linked with regulatory frameworks, particularly with the introduction of the Corporate Sustainability Reporting Directive (CSRD) in the European Union. The CSRD mandates companies to disclose their sustainability targets and the transition plans they have established to ensure their business models and strategies are compatible with the transition to a sustainable economy.
Overall, a well-conceived Climate Transition Plan not only guides internal strategy and promotes coordinated actions but also enhances the information available to investors, lenders, and policymakers, thereby facilitating more informed decision-making and supporting the integrity of climate and transition finance markets.
Key Steps of a Climate Transition Plan
- Baselining involves assessing climate-related risks, analyzing interdependencies, completing a greenhouse gas (GHG) accounting for Scopes 1, 2, and 3 and checking the status against frameworks like TCFD (Task Force on Climate-Related Financial Disclosures), SBT (Science Based Targets), and CDP.
- Setting Goals and Ambition is about defining key objectives and setting science-based targets in line with the Paris Agreement.
- Planning and Adoption entail developing a strategic roadmap and transition framework, employing scenario analysis to understand risks, and identifying interdependencies. It is about detailing decarbonization measures within operations and across the value chain, evaluating and mitigating measures, setting KPIs, and considering financial impacts and costs.
- Management and Integration focus on reporting findings and ensuring they align with the overall business strategy. It includes defining KPIs, establishing a transparent monitoring system, defining roles and responsibilities, and integrating climate action into incentive schemes.
Get support on your Climate Transition Plan from DFGE
At DFGE, we are happy to assist you in developing a comprehensive Climate Transition Plan. Additionally, we offer support for creating a CTP that is compliant with the ESRS E1 climate standard, ensuring alignment with the latest regulatory requirements. If you have any further questions, please contact us at or by phone at +49 8192-99733-20.
