Climate change has been the buzzword of the past decade, but actual complexity lies in tackling it which needs nuanced sector-specific solutions. To help companies begin their journey of climate action to meet the goals of the Paris Agreement, the idea of Climate Transition Plans (CTPs) was introduced in 2021. Also in 2021, the UK Government became the first country to announce plans to mandate climate transition plans for listed companies and financial institutions by 2023.
According to the World Business Council on Sustainable Development (WBCSD), a CTP is an action plan where an organization describes its strategy to transition all its processes, operations, and business model to meet its public climate-related commitments within a specified timeframe. This is to help companies mitigate climate risks and make the most of climate-related opportunities, such as changes in technology. In fact, the Transition Plan Taskforce (TPT), recently launched guidance for private companies on how to create a CTP, with the final report of the TPT being published in October 2024.
A CTP will be informed by several hypothetical climate scenarios to discuss potential risks, opportunities, and responses, related to different climate change forecasts and their effect on the business. A CTP should also use a double materiality approach to understand how the business would affect, contribute to, or mitigate against each climate scenario. Commonly there are three scenarios used: 1-A smooth orderly transition that limits temperature rises to about 1.5ºC above pre-industrial levels this century. 2-A volatile, disorderly transition that eventually limits rises to approximately 1.5C, and 3- A failed, ‘hot house’ scenario. This would happen if temperatures rose by around 3ºC. Climate scenarios can ultimately assist organizations with planning ahead, enabling them to transform their business and even their sectors, by setting realistic targets that can help catalyse transition-related action. Let’s now quickly explore what we mean by the Climate Transition:
The Climate Transition represents an all-encompassing period of time where the world adapts to and tackles climate change, by changing or evolving business strategies and operational practices to enable a net zero future. The Transition includes the managing and mitigation of climate-related risks, as suggested by The Task Force for Climate-Related Financial Disclosures (TCFD). The TCFD divides climate-related risks into two major categories: (1) risks related to the transition to a lower-carbon economy and (2) risks related to the physical impacts of climate change. Transition risks include policy & legal risks, market risks, reputational risks, and technology risks. Physical risks include event driven risks (acute), such as severe weather events, or longer-term (chronic) risks such as changes in climate over time. The TCFD has now been subsumed by the IFRS and is incorporated into the International Sustainability Standards Board (ISSB). Specifically, IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 Climate-related Disclosures. Understanding your position within the climate transition is crucial both from a commercial perspective and a regulatory one. However, to properly disclose your climate risk exposure, you must first analyse it, and then create a plan to manage the process of getting to Net Zero.
Guidelines for a ‘Just Transition’, have been around since 2016. The concept of a ‘Just Transition’ emphasises that as we tackle climate transition challenges, we also ensure that we address social challenges that are tied up with climate change. For instance, this could include the social effects of increased natural disasters, such as lack of access to jobs and basic services, or equity and inclusion challenges due to rapid changes in technology. A Just Transition is also a central concept within the Paris Agreement ratified in 2015, in its role of helping meet the 2030 Sustainable Development Goals. A Just Transition further ensures countries can meet their Nationally Defined Contributions (NDCs) ethically and equitably and with less social risk exposure. To create a plan that aligns with an NDC, organisations must start mapping the value chain, to engage, act, and amplify climate-related actions both upstream and downstream. Below are just some of the tools and guidance for organizations to start their Just Transition journey:
| Organisation | Tool/ Instrument | What’s Involved? |
|---|---|---|
| Climate Action 100+ | A Corporate level indicator (see Disclosure Indicator 9 on Just Transition) to assess companies | Helps to create a plan using a benchmark, indicators and metrics for:
|
| ILO and LSE Grantham Research Institute on Climate Change and the Environment | Just Transition Finance Tool for banking and investing activities | The Just Transition Finance Tool provides financial institutions with practical advice on how to embed just transition throughout their operations in their alignment with the goals of the Paris Agreement. The Tool includes some real cases and examples of best practice for financial institutions and banks. Though taxonomies defining transition sectors are still under development, it offers guidance on integrating social considerations into low-carbon activities, hard-to-abate sectors, and adaptation and resilience activities. |
| Transition Pathway Initiative (TPI) Centre | Indicator to assess banks (see Indicator 9.1 on Just Transition) as part of the Net Zero Banking Assessment Framework | Helps banks assess the quality of their companies’ governance and management of carbon emissions and of risks and opportunities related to the low-carbon transition via a decarbonization strategy. The framework covers 10 areas: net-zero commitments; targets; exposure and emissions disclosure; historical emissions performance; decarbonisation strategy; climate solutions; climate policy engagement; climate governance; Just Transition; and annual reporting, accounting and audits. |
| World Benchmarking Alliance | Corporate level Indicators to assess companies | The WBA Just Transition Assessment covers 180 companies across three sectors: 100 oil and gas companies, 50 electric utilities, and 30 automotive manufacturers. These assessments look at the social elements such as human rights aspects of a companies’ transition to a low-carbon future. Results are based on the companies’ publicly available disclosures, which are assessed against core social indicators and the WBA just transition indicators. |
| International Labour Organization (ILO) | Guidelines at National level, to help countries’ Just Transition to low-carbon economies | These Guidelines are both a policy framework and a practical tool to help countries at all levels of development manage the transition to low-carbon economies and can also help them achieve their Intended Nationally Determined Contributions (INDC) and the 2030 Sustainable Development Goals. |
| Climate Investment Funds (CIF) | A Just Transition Planning Toolbox for various levels and different kinds of stakeholders | Consists of five modules, focusing on stakeholder engagement, partnerships as well as vision, objectives, impacts, and opportunities. The Toolbox provides a practical guide to planning climate and/or sustainability transitions that are equitable and inclusive. |
| Stockholm Environment Institute | International level guidance via Seven Principles for a Just Transition | Guides companies on how to operationalise a Just Transition in line with the seven principles:
|
Transition planning is on everybody’s minds, especially as the goals of both COP28 and COP29 swing into tangible action. In fact, according to the Climate Disclosure Project (CDP), the number of companies globally with 1.5°C-Aligned Climate Transition Plans has jumped 44% in the last twelve months. It also finds that 60% of reporting companies indicated that they have or plan to have such a plan in place within the next two years. These are clear signals of the growing importance of climate-related Metrics & Targets to the redefining of business as usual. Conversely, given the growing cacophony of commitments, only a very small minority – less than 1% – of companies are reporting across all of the key climate transition plan indicators. This presents a clear opportunity for leadership by forward thinking organizations.
With regulations and mandates such as the Corporate Sustainability Reporting Framework (CSRD), the UK Sustainable Disclosures Requirements (SDR), and the SEC Climate Disclosure Rule, all demanding thorough details with regard to transition planning (mostly in line with the Transition Plan Taskforce’s new Transition Plan Framework), getting Transition Plans right, has never been more important. Indeed, WeForum neatly sums what’s required of a CTP as being built on three pillars: Ambition, Action, and Accountability.
In hard to abate sectors CTPs are crucial for long term business resilience. In the UAE with a long tradition of fossil fuel dependence, CTPs are therefore a necessity for building a resilient economy. As part of the UAE’s Global Goal on Adaptation (GGA), which in turn forms part of the UAE Framework for Global Climate Resilience), enhancing adaptive capacity, strengthening resilience and reducing vulnerability to climate change are necessary to the UAEs climate transition. The CGA is a crucial implementation tool for realising the UAE National Climate Plan, overseen by the UAE Council on Climate Change and the Environment (CC&EC). In terms of transition planning there are also a number of sector based initiatives that form part of the UAE Net Zero by 2050 strategic initiative. The UAE also mandates the use of accepted Paris Aligned Benchmarks (PABs) or climate transition benchmarks in the finance sector. This mandate will surely trickle down to other sectors very soon, catalysed by the GCA.
As part of the UAE Global Goal on Adaptation, a number of key sectors have been identified as crucial for the success of the Climate Transition at a national level:
The UAE Food Security Strategy, states that the UAE recognizes the importance of maintaining food security as it tackles the effects of climate change. The UAE has been making extensive efforts to build a sustainable agricultural and animal wealth industry that is better able to contribute to its food security as part of its National System for Sustainable Agriculture, all part of the Ministry of Climate Change & Environment (MoCCaE). Yet with CTP’s being a nascent part of the UAE’s sustainability agenda, we can still learn from global companies about how to create a great CTP. Below is an excellent example from Danone:
| Danone | What’s in their CTP? |
|---|---|
| Danone ‘Climate Transition Plan 2023’: Assesses its business against Physical and Transition risks, and is adapting its business strategy with reference to likely climate scenarios to inform its strategic ‘Roadmap.’ | In its own operations and supply chains, Danone are committed to both near-term 1.5°C targets and long-term Net-Zero targets. Its 2030 1.5°C targets were approved by the Science Based Targets initiative (SBTi). This includes commitments to reduce the carbon intensity of its products and portfolios. |
| ‘We have an opportunity to transform our food systems, increasing access to healthy and nutritious food for a growing population, all the while reducing our environmental impact.’ Climate Transition Report 2023, Page 5 | Danone emphasises stakeholder engagement within its value chain. Collectively, with its partners – farmers, suppliers, customers, but also NGOs and communities – Danone have committed to specific objectives and milestones in the short- and long-term, related to clear priorities and KPIs where Danone has a material impact and can lead. |
Read more about Food Security in Just Transition Planning: LINK
Read more about Scenario analysis in the Food, Agriculture and Forest Products sector: LINK
In a hard to abate sector like Manufacturing, KPMG states that both downstream and upstream activities are crucial to a successful CTP, especially with regards to tackling Scope 3 emissions. In an interview with MIT, Her Excellency, Sarah Bint Yousif Al Amiri, Minister of State for Public Education and Advanced Technology for the United Arab Emirates, agreed with this sentiment. Her Excellency also emphasised the role of Carbon Capture and Storage (CC&S) in transitioning heavy industries to cleaner impacts. To catalyse decarbonisation across heavy-emitting sectors, including energy, industry, and transportation, the recent COP28 announced a New Industrial Transition Accelerator (ITA) for Heavy-Emitting Industries. For inspiration, below is a best practice example from Essentra, a sustainability leader in CTPs in the manufacturing sector:
| Essentra | What’s in their CTP? |
|---|---|
| Essentra’s ‘Climate Transition Plan 2023’: Provides a strategic ‘Roadmap’ that embodies its commitment to mitigating environmental impact…across its value chain. | With Science Based Targets initiative (SBTi) approved targets, it plans to decarbonise by:
|
| ‘We are committed to regular reporting on our progress, to maintain transparency and foster trust with all our stakeholders. Our Climate Transition Plan also emphasises the importance of collaboration. We cannot achieve our goals alone. We will work closely with our suppliers, customers, and industry partners to drive change throughout our supply chain and beyond.’ Page 3 | To grow in line with its CTP, its approach to sustainable manufacturing includes:
This all aligns with its Sustainability Policy, which sets out its Metrics and Targets, including for its CTP. |
Read more about how Heavy Industry can harness Transition Plans: LINK
In the UAE, the built environment represents an opportunity for emissions reduction of 56% by 2030, making it a critical sector for enabling the UAE to meet its 2050 Net Zero targets under the Paris Agreement. To help propel the sector forward the UEA Sustainability Built Environment Blueprint offers insights and best practice guidance. This includes details such as building codes, financing and other mechanisms the sector can leverage for transition planning. One international example of CTP excellence in the Real Estate sector is summarised below:
| Legal & General | What’s in their CTP? |
|---|---|
| Legal & General’s ‘Climate Report 2022’, includes a focus on Real Estate in its ‘Real Estate roadmap to Net Zero.’ This roadmap outlines Legal & General Investment Management’s (LGIM’s) strategy to transition its real estate portfolio to net-zero carbon. | Its Climate Transition Plan is measured through a three-pillar strategy of Invest, Influence, and Operate:
As it relates to real estate, this includes:
|
Climate change has been the buzzword of the past decade, but actual complexity lies in tackling it which needs nuanced sector-specific solutions. To help companies begin their journey of climate action to meet the goals of the Paris Agreement, the idea of Climate Transition Plans (CTPs) was introduced in 2021. Also in 2021, the UK Government became the first country to announce plans to mandate climate transition plans for listed companies and financial institutions by 2023.
According to the World Business Council on Sustainable Development (WBCSD), a CTP is an action plan where an organization describes its strategy to transition all its processes, operations, and business model to meet its public climate-related commitments within a specified timeframe. This is to help companies mitigate climate risks and make the most of climate-related opportunities, such as changes in technology. In fact, the Transition Plan Taskforce (TPT), recently launched guidance for private companies on how to create a CTP, with the final report of the TPT being published in October 2024.
A CTP will be informed by several hypothetical climate scenarios to discuss potential risks, opportunities, and responses, related to different climate change forecasts and their effect on the business. A CTP should also use a double materiality approach to understand how the business would affect, contribute to, or mitigate against each climate scenario. Commonly there are three scenarios used: 1-A smooth orderly transition that limits temperature rises to about 1.5ºC above pre-industrial levels this century. 2-A volatile, disorderly transition that eventually limits rises to approximately 1.5C, and 3- A failed, ‘hot house’ scenario. This would happen if temperatures rose by around 3ºC. Climate scenarios can ultimately assist organizations with planning ahead, enabling them to transform their business and even their sectors, by setting realistic targets that can help catalyse transition-related action. Let’s now quickly explore what we mean by the Climate Transition:
The Climate Transition represents an all-encompassing period of time where the world adapts to and tackles climate change, by changing or evolving business strategies and operational practices to enable a net zero future. The Transition includes the managing and mitigation of climate-related risks, as suggested by The Task Force for Climate-Related Financial Disclosures (TCFD). The TCFD divides climate-related risks into two major categories: (1) risks related to the transition to a lower-carbon economy and (2) risks related to the physical impacts of climate change. Transition risks include policy & legal risks, market risks, reputational risks, and technology risks. Physical risks include event driven risks (acute), such as severe weather events, or longer-term (chronic) risks such as changes in climate over time. The TCFD has now been subsumed by the IFRS and is incorporated into the International Sustainability Standards Board (ISSB). Specifically, IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 Climate-related Disclosures. Understanding your position within the climate transition is crucial both from a commercial perspective and a regulatory one. However, to properly disclose your climate risk exposure, you must first analyse it, and then create a plan to manage the process of getting to Net Zero.
Guidelines for a ‘Just Transition’, have been around since 2016. The concept of a ‘Just Transition’ emphasises that as we tackle climate transition challenges, we also ensure that we address social challenges that are tied up with climate change. For instance, this could include the social effects of increased natural disasters, such as lack of access to jobs and basic services, or equity and inclusion challenges due to rapid changes in technology. A Just Transition is also a central concept within the Paris Agreement ratified in 2015, in its role of helping meet the 2030 Sustainable Development Goals. A Just Transition further ensures countries can meet their Nationally Defined Contributions (NDCs) ethically and equitably and with less social risk exposure. To create a plan that aligns with an NDC, organisations must start mapping the value chain, to engage, act, and amplify climate-related actions both upstream and downstream. Below are just some of the tools and guidance for organizations to start their Just Transition journey:
| Organisation | Tool/ Instrument | What’s Involved? |
|---|---|---|
| Climate Action 100+ | A Corporate level indicator (see Disclosure Indicator 9 on Just Transition) to assess companies | Helps to create a plan using a benchmark, indicators and metrics for:
|
| ILO and LSE Grantham Research Institute on Climate Change and the Environment | Just Transition Finance Tool for banking and investing activities | The Just Transition Finance Tool provides financial institutions with practical advice on how to embed just transition throughout their operations in their alignment with the goals of the Paris Agreement. The Tool includes some real cases and examples of best practice for financial institutions and banks. Though taxonomies defining transition sectors are still under development, it offers guidance on integrating social considerations into low-carbon activities, hard-to-abate sectors, and adaptation and resilience activities. |
| Transition Pathway Initiative (TPI) Centre | Indicator to assess banks (see Indicator 9.1 on Just Transition) as part of the Net Zero Banking Assessment Framework | Helps banks assess the quality of their companies’ governance and management of carbon emissions and of risks and opportunities related to the low-carbon transition via a decarbonization strategy. The framework covers 10 areas: net-zero commitments; targets; exposure and emissions disclosure; historical emissions performance; decarbonisation strategy; climate solutions; climate policy engagement; climate governance; Just Transition; and annual reporting, accounting and audits. |
| World Benchmarking Alliance | Corporate level Indicators to assess companies | The WBA Just Transition Assessment covers 180 companies across three sectors: 100 oil and gas companies, 50 electric utilities, and 30 automotive manufacturers. These assessments look at the social elements such as human rights aspects of a companies’ transition to a low-carbon future. Results are based on the companies’ publicly available disclosures, which are assessed against core social indicators and the WBA just transition indicators. |
| International Labour Organization (ILO) | Guidelines at National level, to help countries’ Just Transition to low-carbon economies | These Guidelines are both a policy framework and a practical tool to help countries at all levels of development manage the transition to low-carbon economies and can also help them achieve their Intended Nationally Determined Contributions (INDC) and the 2030 Sustainable Development Goals. |
| Climate Investment Funds (CIF) | A Just Transition Planning Toolbox for various levels and different kinds of stakeholders | Consists of five modules, focusing on stakeholder engagement, partnerships as well as vision, objectives, impacts, and opportunities. The Toolbox provides a practical guide to planning climate and/or sustainability transitions that are equitable and inclusive. |
| Stockholm Environment Institute | International level guidance via Seven Principles for a Just Transition | Guides companies on how to operationalise a Just Transition in line with the seven principles:
|
Transition planning is on everybody’s minds, especially as the goals of both COP28 and COP29 swing into tangible action. In fact, according to the Climate Disclosure Project (CDP), the number of companies globally with 1.5°C-Aligned Climate Transition Plans has jumped 44% in the last twelve months. It also finds that 60% of reporting companies indicated that they have or plan to have such a plan in place within the next two years. These are clear signals of the growing importance of climate-related Metrics & Targets to the redefining of business as usual. Conversely, given the growing cacophony of commitments, only a very small minority – less than 1% – of companies are reporting across all of the key climate transition plan indicators. This presents a clear opportunity for leadership by forward thinking organizations.
With regulations and mandates such as the Corporate Sustainability Reporting Framework (CSRD), the UK Sustainable Disclosures Requirements (SDR), and the SEC Climate Disclosure Rule, all demanding thorough details with regard to transition planning (mostly in line with the Transition Plan Taskforce’s new Transition Plan Framework), getting Transition Plans right, has never been more important. Indeed, WeForum neatly sums what’s required of a CTP as being built on three pillars: Ambition, Action, and Accountability.
In hard to abate sectors CTPs are crucial for long term business resilience. In the UAE with a long tradition of fossil fuel dependence, CTPs are therefore a necessity for building a resilient economy. As part of the UAE’s Global Goal on Adaptation (GGA), which in turn forms part of the UAE Framework for Global Climate Resilience), enhancing adaptive capacity, strengthening resilience and reducing vulnerability to climate change are necessary to the UAEs climate transition. The CGA is a crucial implementation tool for realising the UAE National Climate Plan, overseen by the UAE Council on Climate Change and the Environment (CC&EC). In terms of transition planning there are also a number of sector based initiatives that form part of the UAE Net Zero by 2050 strategic initiative. The UAE also mandates the use of accepted Paris Aligned Benchmarks (PABs) or climate transition benchmarks in the finance sector. This mandate will surely trickle down to other sectors very soon, catalysed by the GCA.
As part of the UAE Global Goal on Adaptation, a number of key sectors have been identified as crucial for the success of the Climate Transition at a national level:
The UAE Food Security Strategy, states that the UAE recognizes the importance of maintaining food security as it tackles the effects of climate change. The UAE has been making extensive efforts to build a sustainable agricultural and animal wealth industry that is better able to contribute to its food security as part of its National System for Sustainable Agriculture, all part of the Ministry of Climate Change & Environment (MoCCaE). Yet with CTP’s being a nascent part of the UAE’s sustainability agenda, we can still learn from global companies about how to create a great CTP. Below is an excellent example from Danone:
| Danone | What’s in their CTP? |
|---|---|
| Danone ‘Climate Transition Plan 2023’: Assesses its business against Physical and Transition risks, and is adapting its business strategy with reference to likely climate scenarios to inform its strategic ‘Roadmap.’ | In its own operations and supply chains, Danone are committed to both near-term 1.5°C targets and long-term Net-Zero targets. Its 2030 1.5°C targets were approved by the Science Based Targets initiative (SBTi). This includes commitments to reduce the carbon intensity of its products and portfolios. |
| ‘We have an opportunity to transform our food systems, increasing access to healthy and nutritious food for a growing population, all the while reducing our environmental impact.’ Climate Transition Report 2023, Page 5 | Danone emphasises stakeholder engagement within its value chain. Collectively, with its partners – farmers, suppliers, customers, but also NGOs and communities – Danone have committed to specific objectives and milestones in the short- and long-term, related to clear priorities and KPIs where Danone has a material impact and can lead. |
Read more about Food Security in Just Transition Planning: LINK
Read more about Scenario analysis in the Food, Agriculture and Forest Products sector: LINK
In a hard to abate sector like Manufacturing, KPMG states that both downstream and upstream activities are crucial to a successful CTP, especially with regards to tackling Scope 3 emissions. In an interview with MIT, Her Excellency, Sarah Bint Yousif Al Amiri, Minister of State for Public Education and Advanced Technology for the United Arab Emirates, agreed with this sentiment. Her Excellency also emphasised the role of Carbon Capture and Storage (CC&S) in transitioning heavy industries to cleaner impacts. To catalyse decarbonisation across heavy-emitting sectors, including energy, industry, and transportation, the recent COP28 announced a New Industrial Transition Accelerator (ITA) for Heavy-Emitting Industries. For inspiration, below is a best practice example from Essentra, a sustainability leader in CTPs in the manufacturing sector:
| Essentra | What’s in their CTP? |
|---|---|
| Essentra’s ‘Climate Transition Plan 2023’: Provides a strategic ‘Roadmap’ that embodies its commitment to mitigating environmental impact…across its value chain. | With Science Based Targets initiative (SBTi) approved targets, it plans to decarbonise by:
|
| ‘We are committed to regular reporting on our progress, to maintain transparency and foster trust with all our stakeholders. Our Climate Transition Plan also emphasises the importance of collaboration. We cannot achieve our goals alone. We will work closely with our suppliers, customers, and industry partners to drive change throughout our supply chain and beyond.’ Page 3 | To grow in line with its CTP, its approach to sustainable manufacturing includes:
This all aligns with its Sustainability Policy, which sets out its Metrics and Targets, including for its CTP. |
Read more about how Heavy Industry can harness Transition Plans: LINK
In the UAE, the built environment represents an opportunity for emissions reduction of 56% by 2030, making it a critical sector for enabling the UAE to meet its 2050 Net Zero targets under the Paris Agreement. To help propel the sector forward the UEA Sustainability Built Environment Blueprint offers insights and best practice guidance. This includes details such as building codes, financing and other mechanisms the sector can leverage for transition planning. One international example of CTP excellence in the Real Estate sector is summarised below:
| Legal & General | What’s in their CTP? |
|---|---|
| Legal & General’s ‘Climate Report 2022’, includes a focus on Real Estate in its ‘Real Estate roadmap to Net Zero.’ This roadmap outlines Legal & General Investment Management’s (LGIM’s) strategy to transition its real estate portfolio to net-zero carbon. | Its Climate Transition Plan is measured through a three-pillar strategy of Invest, Influence, and Operate:
As it relates to real estate, this includes:
|
