Climate Transition Plan FAQs

Climate transition plans are quickly becoming an industry standard – according to CDP, from 2022 to 2023 there was a 44% increase in companies reporting a climate transition plan that aligned with a 1.5-degree goal.

As climate action intensifies globally, climate transition plans have become a top priority for businesses. These plans are more than sustainability buzzwords —they’re critical for future-proofing your company, maintaining investor confidence and ensuring compliance with emerging regulations. 

Our handy FAQ will help you understand the significance of a climate transition plan for your business both now and for long term viability.

What is a climate transition plan?

Why is a climate transition plan important for my business?

Are climate transition plans the same across the world?

What are the core components of a climate transition plan?

Who should create a climate transition plan?

What regulations require a climate transition plan?

I don’t yet fall under any of the regulations that require a climate transition plan so do I need one?

What timelines should businesses follow?

How do transition plans fit around other decarbonisation efforts?

How do I support my climate transition plan with the correct governance structure?

What if I don’t have all the data required for a robust climate transition plan?

Do climate transition plans have to be publicly disclosed?

What is the Transition Plan Taskforce (TPT)?

What is the International Transition Plan Network (ITPN)?

How will climate transition plans evolve in the future?

I already have a transition plan but how can I check it’s credible and will deliver results?

How do I access support to develop a robust and credible transition plan?

What is a climate transition plan?

A climate transition plan is your roadmap for adopting, and thriving in, a low carbon or net zero economy. It is a demonstration of your ambition, a strategic tool for action and evidence of your accountability.

It mobilises progress against your commitments, detailing specific actions, targets, and timelines for reducing greenhouse gas emissions while addressing your organisation’s climate-related risks and opportunities.

Why is a climate transition plan important for my business?

Transition plans are essential for several reasons:

• Regulatory compliance: you need to meet the growing demands from governments and financial regulators around the world. Climate transition plans are now mandatory under regulations such as the Corporate Sustainability Due Diligence Directive (CSDDD).e (.and must be disclosed under the Corporate Sustainability Reporting Directive (CSRD) and the ISSB climate related standard, IFRS2.
• Competitive advantage: with a credible plan, your company will be more attractive to investors and customers. The planning process can help identify new revenue streams linked to a low carbon economy.
• Risk management: your plan will help you identify and mitigate financial, operational, and reputational risks associated with climate change.
• Operational efficiency: you can identify opportunities for cost savings through decarbonisation, energy efficiency and innovation.
• Accessing investment: investors are increasingly using climate transition plans to inform ESG-driven investing decisions.
• Driving innovation: your plan can be a catalyst for transforming your business, products and services as well as driving adoption of new technology. 
• Building resilience: your plan will enable your company to be prepared for future regulations and market demands as well as climate challenges.
• Build reputation: your plan can strengthen stakeholder trust giving confidence to eco-conscious investors, customers and employees that you are both strategically adapting to, and minimising your impacts on, the changing climate.

Are climate transition plans the same across the world?

Details can vary based on industry, geography, and regulatory context. For example:

• EU: Companies face stringent reporting requirements under the Corporate Sustainability Reporting Directive (CSRD) and Corporate Sustainability Due Diligence Directive (CSDDD). This is not only applicable to EU organisations, but also to global organisations with large subsidiaries in the EU.
• Asia: Many companies are aligning with national decarbonisation goals, especially in sectors like manufacturing and energy. However, mandatory uptake of climate transition plans is slower.
• U.S.: SEC proposals may soon mandate climate risk disclosures, increasing the need for robust transition planning.
• Australia: As of 1st January, 2025 large Australian companies will be required to disclose climate transition plans as part of their sustainability reports. Companies will need to disclose information on their climate risks and opportunities, including their climate strategy, Scope 1, 2 and 3 emissions, and governance.

Climate transition plans have slightly different definitions in different regulatory contexts:

 However, all climate transition plans should have the same focus on driving progress to a low carbon economy.

What are the core components of a climate transition plan?

The Transition Plan Task (TPT) force framework sets the gold standard for what you should disclose including:

Information about your current situation

• Baseline assessment of current emissions and energy use.
• Qualitative assessment of locked-in GHG emissions  (estimates of future GHG emissions that are likely to be caused by an undertaking’s key assets or products sold within their operating lifetime.).
• If applicable, CapEx invested related to coal, oil and gas activities.

A statement of your goals

• Including clear GHG emission reduction targets aligned with limiting global warming to 1.5˚C.

Details of how you will achieve your goals

• Identified decarbonisation levers for Scopes 1 and 2 (under your direct control) and for Scope 3 (in your upstream and downstream value chain).
• Details of your governance structure and processes along with accountability and incentive mechanisms.
• What actions you will take to mitigate climate change across your product and/or service portfolio. 
• How you will employ new technology.
• Climate scenario analysis to understand the impacts of risks and opportunities over time, which could influence your transition plan.

Financial considerations

• Quantification of investments and funding to support implementation.
• Taxonomy-aligned CapEx, OpEx, turnover KPIs.
• Quantification of risks and opportunities (leveraging scenario analysis timelines).

Business integration and progress

• Alignment with the overall business strategy and financial planning.
• EU Taxonomy alignment plans, if eligible (the EU Taxonomy is a classification tool with disclosure requirements for those in scope. It clarifies what economic activities can be considered sustainable to facilitate sustainable investment and counteract greenwashing).
• Metrics to track progress and reporting cadence.

To see the further detail on what should be disclosed in a ‘gold standard’ transition plan see the TPT disclosure framework document.

The European Financial Reporting Advisory Group (EFRAG) is currently developing the draft implementation guidance for transition plans for climate change mitigation, which is due for publication in 2025.

Who should create a climate transition plan?

All businesses, regardless of size or sector, should develop a climate transition plan. However, it’s especially critical for:

• Carbon-intensive industries: energy, manufacturing, and transportation sectors.
• Financial institutions: banks and investors must manage climate risks in their portfolios.
• Consumer-facing brands: meeting customer demand for sustainability and transparency.

What regulations require a climate transition plan?

Global regulations are evolving rapidly with a growing trend towards mandating transition plans for an increasingly wide scope of companies.

• EU CSRD: requires many companies doing business in the EU to disclose their climate transition strategies against standard ESRS E1.
• EU CSDDD: mandates a transition plan for EU companies with more than 1,000 employees or an annual net turnover of more than €450 million. It also applies to non-EU companies that generate the required turnover within the EU.
• UK TCFD (listed companies) and the Climate-related Financial Disclosure (CFD) regulations: mandates climate-related financial disclosures for companies. The UK Government has stated its intention to introduce mandatory transition plans but this is not yet law.
• US SEC Proposal: Aims to require climate-related risk reporting and transition plans for publicly traded companies.
• In Asia: countries such as Japan, India and Singapore are starting to require certain companies to produce a transition plan
• Australia: transition plans are mandatory for large corporations from January 1st 2025 under the Treasury Laws Amendment bill. 

Staying ahead of these regulations ensures compliance and avoids penalties.

I don’t yet fall under any of the regulations that require a climate transition plan so do I need one?

Even if you are not mandated to produce a climate transition plan, we recommend either producing a full plan or starting the journey to align your processes and reporting towards a future plan, depending on how far you are along your sustainability journey. Regulations will tighten and bring more companies into scope over time and starting early will ensure you are a strong position to respond to new regulation. Aside from the regulatory side, a climate transition plan will bring multiple strategic benefits to your business. See question on Why is a climate transition plan important for my business?   

What timelines should businesses follow?

Start or upgrade your plan now to ensure compliance if you are mandated to disclose. If you are not currently mandated to provide a transition plan, you should make a plan now to align your business for future requirements and to start reaping the benefits of a robust future-facing strategy.

Your plan will span many years, but quick progress is vital:

• Short-term (2024-2030): Create and refine your business strategy and financial plan. Implement quick wins, like energy efficiency improvements.
• Medium-term (2030-2040): Fully integrate sustainable practices across operations and supply chains.
• Long-term (2040-2050 years): Achieve net zero targets, ideally aligned with 2050 global goals.

You should build in regular reviews to ensure your plan remains relevant as technology, markets and regulations evolve.

How do transition plans fit around other decarbonisation efforts?

Globally, sustainability regulations standards and frameworks (such as CSRD’s ESRSs, CDP, GRI, IFRS, TCFD, TNFD, ISO, SBTi) are increasing their level of standardisation and interoperability enabling companies to increase efficiency with their data and disclosures. 

Your climate transition plan should build on reporting already being carried out and should help provide an organisation’s narrative around their planned decarbonisation journey.

Many countries, sectors and industries have set specific decarbonisation goals and guidelines, your plan should align with these goals.

Collaboration is key to maximise impact (and non-negotiable when it comes to Scope 3 decarbonisation) so engage your suppliers, customers and investors as well as participating in industry-wide or trade association initiatives.

Within your business ensure your transition plan complements your overall sustainability strategy and aligns with corporate goals and broader environmental, social, and governance (ESG) initiatives.

How do I support my climate transition plan with the correct governance structure?

Effective governance is key to a successful plan:

• Leadership commitment: ensure the C-suite drives climate initiatives.
• Involve stakeholders from across the business: finance for expenditure planning and growth forecasting, procurement for green sourcing and supplier liaison, marketing for communicating plans and successes (internally and externally), HR for resourcing and upskilling your workforce, operations to implement new processes, legal and risk for robust planning.
• Clear accountability: assign roles and responsibilities so individuals can drive key areas of progress.
• Monitor progress: establish KPIs and instigate internal reviews of successes and challenges. Determine a strategy for external reporting.
• Third-party support: consider an experienced partner to ensure your company is set up for success, to advise on effective plans, to provide expert insights and to validate data and methodologies for robust disclosures.

What if I don’t have all the data required for a robust climate transition plan?

Your transition plan development is an iterative process that should be regularly reviewed as more data and information becomes available. Start with the information you do have, where there are gaps use estimates and industry average data, then refine over time. 

Consider expert support to ensure you are basing your plan on the best available data with robust models that can be updated as information is collated.

Do climate transition plans have to be publicly disclosed?

Where you fall under regulatory scope for mandatory disclosure such as CSRD, yes you should publish your plan with your annual report or as a separate report on your website.

If you are not required to publish, you may choose to keep early iterations of your plan as an internal strategy tool, however, your transition plan provides essential information for investors and other stakeholders so it is in your interest to make this information available to them. 

What is the Transition Plan Taskforce (TPT)?

The Transition Plan Taskforce (TPT) was a UK initiative established in 2022 to develop a best practice framework for transition plan disclosures, it completed its work in 2024. Its guidance documents are now under the IFRS Foundation to ensure the global adoption of robust climate transition plans under the IFRS S2 standard. The global adoption of IFRS S1 and S2 Standards continues to expand, and with the IFRS Foundation now overseeing the TPT's disclosure framework, these standards will provide a consistent approach to transition planning and reporting across different jurisdictions. 

What is the International Transition Plan Network (ITPN)?

The International Transition Plan Network (ITPN) is an advisory group launched at COP29 to support the development of global norms for transition plans by the private sector and to support climate policy that makes best use of transition plans. 

How will climate transition plans evolve in the future?

We expect to see several developments in the future of climate transition plans, such as:

• Stricter regulations: governments will likely introduce more mandatory reporting requirementsand increase the number of organisations in scope.
• Increased global consistency: there is a trend towards standardisation and interoperability amongst global frameworks and regulators.
• Technological innovation: advances in carbon capture and clean energy will reshape strategies.
• Increased scrutiny: regulators, investors and customers will become more aware of what constitutes a credible plan and will expand their expectations. Financial and reputational penalties for noncompliance with regulations or failure to deliver on public promises are also likely to increase.

Within your organisation you will need to develop expertise (and/or find an expert partner) create or invest in effective tools and ensure continued integration of plans into core business strategies. Staying proactive and adaptable ensures your business remains resilient and competitive.

I already have a transition plan but how can I check it’s credible and will deliver results?

We recommend an independent expert review of your plan to check alignment to current and upcoming regulatory requirements and to analyse your plan’s methodology and trajectory towards your goals to assess if they are achievable. Our experts can support you with a review and provide recommendations to strengthen your plan. We often support clients who have set targets but are unclear on exactly how they will reach these targets.

How do I access support to develop a robust and credible transition plan?

A lot depends on getting your transition plan and execution right, including your (and the planet’s) long-term viability so working with experts that have both deep experience and industry knowledge is a key investment that can provide ongoing benefits. Choose a consultancy that has the capability to support all aspects of your transition to ensure an efficient, compliant and coordinated trajectory to net zero that factors in your climate risk considerations.

Ricardo’s consultants, economists and engineers have a wealth of experience and knowledge and can work with you as your trusted advisors throughout your transition. They provide expert advice, analysis and support across all elements of your climate transition plan development and implementation. Their advice will give you confidence in your strategic direction, decision making and investments to achieve your ambitions and enable you to accelerate progress towards your climate goals.

Our expert support includes: 

• Gap analysis against standards and requirements.
• Technical support on GHG inventories, strategies and actions plans underpinning your transition plan.
• Climate risk analysis and climate scenario modelling.
• Technical review and quality assurance of work completed in-house or by partners.
• Authoring and production of final standalone reports or integration into your annual report
• Support to implement your plan including technology feasibility studies, business cases and owner’s consultant.

Further information

Get in touch if you have a question we didn’t answer here or to start a conversation about aligning your current disclosures and how we can help you to create a credible and compliant plan that optimises and accelerates your transition.

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Acronyms and abbreviations

CDP – Formerly Carbon Disclosure Project, now known just by the initials.
CSDDD – Corporate Sustainability Due Diligence Directive
CSRD – Corporate Sustainability Reporting Directive
ESRS – European Sustainability Reporting Standards
GRI – Global Reporting Initiative
IFRS – International Financial Reporting Standards
ITPN - International Transition Plan Network
ISO - International Organization for Standardization
SBTi - Science Based Targets initiative
TCFD - Task Force on Climate-related Financial Disclosures
TNFD - Taskforce on Nature-related Financial Disclosures
TPT – Transition Plan Taskforce