From 2023, it will be compulsory for certain businesses to publish a net zero plan. Over 1300 UK-registered large companies and financial institutions are already required by law to do climate-related reporting, in line with the Task Force on Climate-Related Financial Disclosures (TCFD).
The first draft of a ‘gold-standard’ for climate transition plans was released by the UK Transition Plan Task Force (TPT) on 8 November. It includes a Disclosure Framework and accompanying Implementation Guidance that outlines how organisations should be planning. We explain the qualities your plan needs for you to be confident in meeting compliance requirements for reaching net zero.
Three guiding principles
Ambition – A strong transition plan should contribute to and prepare for a rapid and orderly economy-wide net zero transition. The UK government committed to reaching net zero greenhouse gas emissions by 2050, and many countries are quickly following suit – or are already well on their way.
Actionable – A good transition plan will explain the specific, actionable measures your business intends to implement on its net zero journey. This means setting out exactly what you plan to do and when, as well as what quantity of emissions will be cut through the changes.
Accountable – According to the new TPT guidelines, an accountable plan means enabling “delivery of the plan through clear governance mechanisms along with consistent, comparable and decision-useful reporting and verification.”
Who makes the decisions about your net zero transition plan? Who has responsibility for ensuring that the measures listed in it are carried out on time? What is the role of senior management? Your transition plan should explain the decision-making and approval process for net zero measures within your organisation. It should also explain who is overseeing the plan and its implementation.
TPT recommendations for what a transition plan should cover
- High level ambitions to mitigate, manage, and respond to climate change and to leverage opportunities of transition, including GHG reduction targets
Your net zero transition be ambitious enough to differentiate between emissions in Scopes 1, 2 and 3. If your business reports under the Streamlined Energy and Carbon Reporting (SECR) scheme, it will already be categorising emissions in this way. Scope 3, dealing with emissions in your company’s value chain, is by far the most difficult category of emissions. So it is a valid decision to set a later deadline for achieving net zero Scope 3 emissions than for Scopes 1 and 2. But ignoring this category is not an option; any credible net zero transition plan has to include Scope 3.
- Actionable short- and medium-term steps the entity plans to take to achieve its strategic ambition, alongside details on how those steps will be financed
As said in the TPT framework, your plan should “focus on concrete actions which emphasise the short-term and strive for resilience.” Plans need to have specific and quantifiable in their actions, not a generic statement.
| “Make our Manchester site more energy-efficient.” ❌ | “Reduce heating emissions from our Manchester site through upgrading the windows, re-insulating the boiler and installing heating timers. We plan to do this by the end of Q1 next year and estimate that it will reduce heating emissions by 30%.” ✔️ |
Being concise and clear will also be beneficial for stakeholders. Organisations should use their annual reporting as an opportunity to share progress towards their net zero goals, but it is a good idea to update stakeholders even more often than this, especially if there is positive news to share. This kind of information sharing can be good for your company’s reputation and help with strengthening relationships.
- Governance and accountability mechanisms that support delivery of the plan and robust periodic reporting.
A good net zero transition plan should be based on data to help you stay accountable. You should start with a clear and detailed picture of the current emissions of the business. This means having clarity on the boundaries of the business and mapping emissions sources within the business. However high your current total emissions are, it is essential that you take them all into account when setting your net zero target and designing your net zero transition plan.
As you progress on your net zero journey, it is also essential that you keep collecting detailed data so that you know how progress is going and can include updates in your climate reporting.
- Measures to address significant risks to, and leverage opportunities for, the natural environment and stakeholders such as the workforce, supply-chains, communities, or customers which arise as part of these actions
One of the issues with net zero transition plans at the moment is that they don’t necessarily contain enough information for stakeholders to assess their credibility. A good transition plan should be clear enough for a layperson to understand, and it should include the data the plan is based on.
Real transparency also means being honest about the limitations of your plan. Guidance from the TCFD says: “Organizations may also want to describe significant limitations, constraints, and uncertainties in the transition plan, such as challenges regarding GHG emissions reductions of hard-to-decarbonize sectors.” It is unlikely that your initial transition plan will have all the answers about getting to net zero. Being upfront about this makes your plan more, not less, credible.
By following best practice now, your business can stay ahead of the changes and show that your net zero target is backed up with a credible plan.
