How to understand and overcome the challenges of transition plan development

As the global push for sustainability intensifies, companies across the world are under growing pressure to reduce their carbon footprint and contribute to a net-zero future. Transitioning towards a low-carbon economy is no longer just a regulatory requirement—it's a fundamental shift that demands careful planning, strategy, and execution. One of the most important tools a company can develop to demonstrate its commitment to sustainability is a credible climate transition plan (CTP).

A transition plan is a forward-looking strategy that outlines how a company intends to meet its climate goals, with a specific focus on reducing greenhouse gas emissions. The key to a successful transition plan is not only setting ambitious goals but also translating them into concrete actions. In essence, a credible climate transition plan (CTP) serves as the bridge between a company’s current operations and its future, low-carbon business model.

In recent years, many companies have started to draft and disclose transition plans. However, feedback from stakeholders suggests that the credibility and integrity of these plans often leave room for improvement. While some companies have taken steps to create transition plans, the consistency and depth of these plans need significant work, and some companies have not even started.

Identifying challenges for transition plan development

Ricardo’s Jamie Pitcairn, Technical Director for Sustainability, spoke to the sustainability leaders of some of the UK’s leading companies and investors to ask them about the challenges of creating a credible plan. Some common themes emerged.

Understanding and applying guidance

Meeting individual needs: Plenty of guidance is available for the complex process of developing a plan but each company must understand how to adapt this to fit their individual circumstances and ambitions. For example, if you have a large product portfolio with significant emissions across the value chain then building a strong plan to decarbonise Scope 3 emissions and adopt circular principles would be a good approach. Make sure the transition plan reflects what is important (opportunities and risk) to your business.  

Capturing the right data

Lack of reliable data: Collecting accurate, consistent, and transparent environmental data is difficult. Companies must develop the systems to track emissions, energy use, waste, and water consumption. 

Metrics and reporting standards: There is no universal set of standards for sustainability metrics. Companies are struggling with determining the best framework to use for reporting progress, such as GHG Protocol, SASB, or TCFD.

Scope of impact:  Measuring the emissions under your control (Scope 1 and 2) is one thing but the real challenge comes in measuring emissions from your supply chain (Scope 3) which forms the majority of most companies’ carbon impact.

Determining costs

CapEx and OpEx planning: Many companies identified that it is extremely difficult to assess and quantify the financial investment (capital and operational expenditure) required for decarbonisation activities, especially in the longer-term. One of the main reasons for this is that it is a relatively new practice and there are so many assumptions and unknowns built into a decarbonisation pathway. 

Creating a business case for investment

High upfront costs: Transitioning to a more sustainable business model often requires significant capital investment in clean technology, infrastructure, or process changes. This can be a significant barrier to getting projects approved, particularly for smaller companies or those with tight budgets. The financial return on sustainability investments is often uncertain and may take years to materialise, making it hard to justify the expense, especially to shareholders who may be focused on short-term gains. 

Collaborating with supply chains

Supply chain emissions: Many companies struggle to influence or control the environmental practices of their suppliers, especially when those suppliers operate in regions with less stringent environmental laws. Acquiring accurate data from suppliers, especially product related emissions data was a challenge identified by many.

Collaborative approaches: Collaboration and trust is key when transitioning your entire supply chain toward more sustainable practices. This can be difficult to establish across a network of suppliers with diverse cultures and languages.

Managing reputation risks

Greenwashing concerns: A poorly designed transition plan without enough detail or robust data can lead to accusations of greenwashing, damaging a company’s reputation and eroding trust among stakeholders. 

Choosing the right technology pathways

Access to suitable technologies: Identifying and accessing the appropriate technologies to facilitate the necessary carbon reductions as well as meet business needs is a challenge for many companies. Forecasting how these technologies will deliver over the long term is also an issue.

Technological obsolescence: The pace of technological innovation can make it difficult to keep up with the best available solutions. It is key to invest in technologies that won’t become obsolete before they’ve been fully integrated into your operations.

Sustaining momentum

Setting governance for continuity: Transition plans require long-term commitment, but momentum can be lost in the face of external pressure or internal changes. Clear accountability structures must be established to ensure that progress continue as business environments evolve.

Market volatility

Economic downturns: during economic instability companies may have to prioritise survival over sustainability, planning and investing for the long term become increasingly difficult.

Competitive landscape

Peer pressure: companies are tracking their competitors, and some are reluctant to move forward until they see the direction others are taking. 

Balancing stakeholder interests

The interests of investors, consumers, employees, and regulators often conflict. For example, shareholders might prioritise short-term profits, while consumers may demand public-facing sustainability measures that make them feel more ethically aligned to your products or services. 

Overcoming challenges

Inaction is not an option when it comes to your climate transition plan. The climate is changing, markets are changing, regulations are changing – your company must adapt to survive and thrive in the future.  So, what strategies are companies using to overcome these challenges?

Action, not perfection

Transition planning is an emerging field, and many businesses are still in the early stages of developing their plans. It is expected that many plans will fall short when it comes to independent assessment but by sharing plans and progress you will build trust both internally and externally.  Don’t let the pursuit of perfection hinder progress.

Identify dependencies

All transition plans will require input and action for others. It is important to identify these dependencies and ‘call-out’ what they need to do to support your transition. Identification of dependencies will also inform where you can legitimately have influence and help communicate where you are taking action and where others need to take action.

Data acquisition is a journey: Keep working on the reliability of your data

A credible transition plan is data-driven, both qualitative and quantitative. By improving the accuracy of your data, you’ll be able to identify hotspots and assess reduction potential as well as accurately monitor the progress you are making to decarbonise.

Data is commonly cited as a significant challenge. The strong view from stakeholders is to use what you have and then build form this foundation. Identify the gaps and then develop a plan to fill these gaps. It is perfectly acceptable to communicate these gaps in a transition plan and then detail a data improvement strategy. Supplier data is commonly the challenge but develop a clear understanding of what data is helpful and how you will use it and focus on those strategic suppliers first. The big mistake is asking for data without a clear plan of how this will add value to the decision-making process.

Integrate sustainability into your core strategy

Transition planning is not a standalone initiative; it should be integrated into your overall business strategy, operational plans and targets. This requires strong collaboration across departments, clear communication, and a commitment to long-term investment in sustainability. Establish governance structures with clear roles at the board and management levels to oversee progress. Use the appropriate level of incentives and penalties to help drive progress.
Prioritise key functions and departments to identify actions and ensure they build in carbon into their decision-making across areas they can genuinely influence. A good example is procurement where tools like carbon pricing can be used within the supplier selection process.

Aligning transition planning and financial planning

There is growing support for the integration of transition planning into the financial planning process as it enables organisations to understand the financial implications of reaching net zero using robust processes and governance. Done in this way decarbonisation targets are more likely to be properly costed and therefore more likely to be achieved.  

Funding the transition

A credible transition plan should disclose the capital (CapEx) and operational expenditures (OpEx) required. Upfront investment costs may be high, but the cost of inaction is greater. Additional headcount and upskilling will need to be accounted for across your business. Certainly, one of the more challenging aspects of planning is understanding the investment as feasibility and installation costs come from experience so you may also wish to invest in expert consultancy advice to build confidence in your plan and investment strategy. 

Align with climate science

The CSRD requires companies to set long-term net-zero targets aligned with the Paris Agreement's 1.5°C goal. These targets must be backed by timelines, and interim milestones, and cover emissions across scope 1, 2, and 3. Compliance ensures alignment with global climate science.

Communicate with your stakeholders

 Building a successful transition plan requires the support of key stakeholders, including investors, employees, customers, and suppliers. Regular communication and transparency will build trust and ensure alignment with sustainability goals.

Be flexible

Your climate transition plan must be dynamic, regularly monitored, and adjusted as necessary. Milestones should be reviewed regularly, with adjustments made when targets are missed. Climate goals should be treated as seriously as financial ones.

As the risk of crossing critical climate tipping points increases, the urgency for businesses to act has never been greater. To avoid the worst impacts of climate change and achieve a zero-carbon economy, you must embrace transformation—"business as usual" is no longer viable.

Forward-thinking companies view transition planning not just as a regulatory requirement, but as an opportunity to reassess their business models and embed sustainability at the heart of their strategy. By embracing this challenge, you can turn compliance into a driver of innovation, resilience, and long-term success.

Further information and support

• Get in touch to understand how Ricardo’s experts can support you to develop a credible climate transition plan
• Climate transition plan FAQs
• Climate transition plan support
• Register for our webinar What makes a credible climate transition plan and what are stakeholders looking for?