Transition Plans that can support climate change action

It’s clear that there’s still some way to go to get on track to net zero but there are measures in place that could be transformative if properly adopted. Dr James Davey, the Private Sector Climate Risk and Resilience Lead at Ricardo, and part of the Secretariat of the Government’s Transition Finance Market Review, provides further insights. 

The adoption, by the IFRS Foundation, of the outputs of the UK’s Transition Plan Taskforce (TPT), seems unlikely – certainly in the short term – to generate the sort of excitement or optimism that the Kyoto Protocol (1997) and Paris Agreement (2015) generated.  However it represents an extremely significant event in supporting ongoing work to streamline and consolidate frameworks and standards for disclosures about transition plans. In short, the world of climate disclosures will be simpler.  If there is sufficient appetite from Governments and the private sector to realise and grasp the opportunity Transition Plans offer, the global economy could move into a new phase, where action on climate change – both emissions reduction and resilience building – is aligned across the public and private sector and rapid scale up can be achieved. 

So what is a Transition Plan? 

Put simply, a Transition Plan is a comprehensive blueprint that sets out the steps a particular entity will take to transition to a low-carbon, climate-resilient future. There are three crucial elements that make Transition Plans particularly powerful. 

1. They can be aligned with broader regional and global goals. Some companies are already setting Transition Plans that align with the 1.5-degree Paris target. But Transition Plans aren’t just for big companies pushing the envelope. In the UK and across the EU the target is for economies to be net-zero by 2050. Developing a Transition Plan that aligns with this target will mean you aren’t decarbonising faster than you can afford to but can also avoid locking-in to costly investments that are incompatible with net-zero goals.
2. Transition Plans integrate decarbonisation and climate risk. As someone who leads on climate risk, this is critically important. Decarbonisation is important but unfortunately insufficient. You need to invest in resilience as the climate is going to change and the impacts of that change pose risks to businesses and people that need to be understood and addressed.
3. Most importantly, Transition Plans are about actions – not just words. 

I attended my first UN Climate meeting in 2001, when things looked very gloomy indeed – and whilst there’s always a need to do more, there’s also been a lot of progress made. 

We live in a world where the global energy sector is transformed, with record volumes of solar, wind and storage being installed each year. The global energy transition has built momentum and future fuels for a variety of mobility applications are now either being used much more effectively or are being developed to meet policy and net zero targets that are fast approaching. 

Engineers have achieved things with clean technology that up until very recently seemed implausible. The UK has halved its GHG emissions and now generates more power from renewables than fossil fuels. Electric vehicle sales hit a record high last year and continue to grow, and UK houses, despite policy reversals, are more efficient than they have ever been. There is much to celebrate, and it is essential that we recognise what has been achieved. The transition is underway – however more needs to be done. 

It is particularly important for companies to maintain and accelerate their transition to clean energy and clean transportation. Companies need to align business models and supply chains with net-zero if they are to capture the opportunities and avoid damaging lock-in to redundant technology. In the world of climate risk, particularly physical risk, there is a lot of catching up to do. A significant gap has opened up between what is needed to invest in resilience and what is actually invested. Uncertainty – and hope that somehow climate change won’t be too bad for ‘my’ company – is slowing action just as we need it most. 2023 was the hottest year on record by a massive margin and the impacts of that heat are being seen globally in the shape of extreme weather. Doing nothing to prepare is not an option. 

This is where Transition Plans can support. They create – in a single document – an integrated climate plan that includes resilience. By setting out measurable, achievable actions that can be taken in the short-term, companies provide investors and other stakeholders with clarity on what they are really doing to tackle climate change and address climate risks.

But how can such an obvious step lead to global change? By amalgamating Transition Plans across companies in key sectors, and by Governments working with business to establish sector Transition Plans, real, economy wide pathways to decarbonisation and resilience can be established and achieved. This in turn, generates market confidence, driving innovation and investment in the technologies and services needed to build a truly global, resilient net-zero economy. 

In short, the adoption by the IFRS of Transition Plan guidance means that a new partnership of Governments and the private sector will drive the transition establishing and setting a truly global standard to enable this ambition to be articulated and performance measured over time. This could be a pivotal point in climate change. 

Ricardo is leading the response, supporting customers to develop their own strategy to tackle climate change and providing the tools to facilitate this strategy. We have developed a ‘Transition Plan Readiness’ tool which assesses the degree to which an organisation has the elements in place to develop a Transition Plan. We have capabilities on all Transition Plan elements, whether it’s helping customers to understand the implications of climate change on their organisation, conducting risk assessments and scenario analysis, implementing decarbonisation strategies, or taking stock of the current situation and what can be done next. Across our key markets we have developed tailored climate change solutions for business. So if you are ready to take the next step and create a Transition Plan, or need help with preparatory work, such as scenario analysis, or just want to find out more, please contact us using the enquiry form.