In October 2023, the Transition Plan Taskforce (TPT) published its final disclosure framework, which sets the standard for disclosing climate transition plans. The framework builds on the existing requirements to disclose transition plans under the Task Force on Climate-related Financial Disclosures (TCFD) recommendations and IFRS Sustainability Disclosure Standards. The aim is to help organisations meet their climate goals and support the Government’s pledge to achieve net-zero greenhouse gas emissions by 2050.
Climate change is a key issue for governments, investors, employees and customers, and any elements of 'greenwashing' could damage your business's reputation. Hence, as organisations make commitments and plans to reach net zero, there's a growing need to ensure the credibility and assess the financial impact of these transition plans.
The TPT aims to drive good practice based on the following three key principles:
Transition plans are much more than a compliance requirement. While the foundations of transition plans lie in the climate risk facing our planet, the approach is steeped in ensuring a transition to a just and sustainable business model. Ultimately, if done in the right way, robust transition plans will benefit people and profit too.
Focusing on your environmental impact can be a powerful tool in employee attraction and retention. Research from Great Place to Work (2019) found that people who feel their employers make a positive impact on the world are:
Research by IBM (2022) also found that 67% of people are more willing to apply for jobs with environmentally sustainable companies. From the same study, roughly one in three people who had changed jobs in the past year, had accepted a lower salary to work for a socially responsible or sustainable organisation.
Environmental, social and governance (ESG), in its broadest sense, is becoming a consumer expectation. A 2022 consumer study by the IBM Institute for Business Value and the National Retail Federation found that purpose-driven consumers – those who choose products and brands based on their alignment to their values – represent the largest segment of consumers, at 44%.
Companies will need to align to this consumer shift. Thinking about greenhouse gas emission reduction is a key part of transition planning. Scope 3 emissions across the company’s value chain are more challenging to measure and control versus scope 1 emissions (direct) or scope 2 (indirect, energy-linked). In the current context, managing these will be essential to engage with the purpose-driven consumer, as well as deliver the economy-wide transition that the Transition Plan Taskforce envisages.
Case study: global apparel retailerWe led a UK-headquartered, globally trading apparel retailer through development of holistic climate strategy and transition plans. This involved challenging the company’s climate targets to ensure subsequent validation by the Science Based Targets initiative (SBTi), and alignment with best practice based on our technical and practical expertise. We delivered a detailed gap analysis between the client's current state and their vision for the future. Through our collaborative approach a detailed transition plan was produced with stakeholders. Finally we supported the company with public commitments on the plans. Collectively, these initiatives improved investor confidence and strengthened the brand reputation. The value of this approach was seen through stakeholder engagement levels as well as efficient, cost effective and timely operationalisation. |
Certain ‘pathway to net zero’ decisions can lead to efficiencies that can reduce your cost base or be reinvested for future growth – preparing your organisation to operate successfully in a net zero world. Transition plans can drive diversification, or alternative ways of doing business, which can positively impact your bottom line.
As you go through the transition planning cycle under the TPT framework, you need to consider your organisation's objectives, and what this means for your operating model. It involves looking at the business model implications, for example, impacts on products or services caused by resourcing, cost and material independencies, to name a few. As with any transformation plan the rigorous management of risks, opportunities, and key milestones is vital to progress and, when possible, acceleration of the transition.
Case study: real estate conglomerateA group of companies, with an extensive property portfolio and global operations, asked us to develop a robust energy strategy aligned with carbon- and cost-reduction objectives. We assessed the current energy position, baselined scope 1 and 2 emissions, and helped them prepare for compliance with TCFD and other EU reporting standards​. The client now has visibility of emissions hotspots across its portfolio, and a climate risk management plan. There were also commercial benefits with energy cost mitigations identified and delivered meaning a below-inflation cost increase and medium-term cost security. |
A robust transition plan can drive cost reduction, support talent attraction and retention, and positively impact your brand reputation while helping you keep a competitive edge. Some practical steps you can take when developing a credible transition plan and an execution strategy for reaching net zero:
