Key elements lacking credibility in current transition plans plus some good practice examples
Dressing up targets as actions. Many current disclosures often frame their climate targets as actions while giving little information about actual measures they plan to take to achieve them, for example, what CapEx they have reserved for technologies to decarbonize operations. This approach exposes companies to regulatory and legal risks.
Integration into financial planning or transparency in resource and/or budget allocation, including reporting any current or expected future financial impacts.
Disclosure of financial metrics and targets that measure and manage the progress of the transition plan.
Linking climate-related assessments, including potential financial impacts, to strategy resiliency actions as part of the transition plan. Uniper’s Climate Transition Plan is an example of good practice in this area.
Tackling the value chain: while there are disclosures on the critical topic of reducing Scope 3 emissions, many lack depth and/or action certainty. Unilever’s Climate Transition Action Plan value chain section meets the standard of good practice.
How the organization intends to deal with critical assumptions or dependencies in its transition plan, e.g., policy dependencies. Ball Corporation’s Climate Transition Plan handles this nicely as an example of current good practice.
Lastly, few disclosures properly address the issue of uncertainty and timing. A transition plan disclosure should emphasize actions for the short term, actions for preparedness in the medium term, and key uncertainties about the long term.
