What is a Climate Transition Plan (CTP)?

A Climate Transition Plan (CTP) is a comprehensive roadmap that helps companies navigate and lead the transition to a more sustainable, low-carbon future. This plan includes detailed actions to transform company values, operations and models with the ultimate goal of achieving net zero emissions by 2050. A CTP identifies climate-related risks, addresses the goals of the Paris Climate Agreement and sets out concrete steps for this transition. This makes climate change a central component of corporate strategy and operations.

The role and importance of Climate Transition Plans

The urgency and importance of CTPs is illustrated by recent data from the Carbon Disclosure Project (CDP), which found that only a small fraction (0.4%) of the over 18,600 organizations that reported on the CDP climate change questionnaire in 2022 had a credible CTP. Creating a credible CTP enables organizations to better understand and manage the risks associated with the transition to a low-carbon economy. A well-designed CTP not only supports internal strategy and promotes coordinated action, but also improves information for investors, lenders and policy makers, contributing to more informed decisions and the integrity of climate and transition finance markets.

Requirements for effective climate transition plans

Effective Climate Transition Plans are characterized by five key features:

1. Integration into a resilient business strategy: Resilient organizations anticipate significant changes in the operating environment, systematically develop and test strategic plans in the context of such changes, and allocate resources that enable success in multiple potential futures. By focusing on resilience, companies develop and implement transformative CTPs that drive significant progress towards climate goals and create long-term business value. This may require a restructuring of business models, long-term values and growth strategies.
2. Board and management oversight: The board and senior management ensure that governance, strategy and internal processes are aligned with climate goals and building resilience. It is crucial that managers make decisions that are in line with the company's purpose and the generation of long-term value to avoid short-term thinking that can lead to missed targets. Governance, accountability and the integration of stakeholder feedback are essential to keep companies on the right track.
3. Allocating resources for decarbonization programs: The transition to net zero emissions will require most companies to radically transform their operations and their product and service portfolios. This will require significant investment in sustainable practices and the restructuring of resources. Financial resources should be prioritized and allocated according to climate targets.
4. Integrate climate action into skills development and corporate culture: Business models will evolve and climate and sustainability responsibilities will be embedded in different business roles, requiring cross-functional collaboration. Companies should invest in skills development, for example by retraining employees from emissions-intensive business areas or providing company-wide training on climate change fundamentals. Open communication about climate plans and the involvement of employees in decision-making processes are crucial.
5. Closer collaboration with value chains: To achieve Scope 3 targets, companies need to invest dramatically in responsible sourcing strategies. By working with business partners along the value chain who have similar priorities, companies can jointly develop solutions. This includes providing financing, technology and training to suppliers.

These characteristics ensure that companies achieve their climate targets and pursue a comprehensive business strategy that promotes short-term measures and emission reductions.

Consistency with CSRD and CSDDD

Achieving the 1.5°C targets is firmly anchored in European regulations. The EU Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD) are driving the implementation of Climate Transition Plans:

• CSRD: This directive makes climate a material topic unless a company can prove otherwise. The European Sustainability Reporting Standards (ESRS) of CSRD require disclosure of Scope 1, 2 and 3 greenhouse gas emissions, absolute emission reduction targets and reporting on a transition plan to a 1.5°C future.
• CSDDD: This directive requires companies to develop a Climate Transition Plan, including a time-bound target for 2030 and in 5-year steps until 2050.

Developing CTPs with Five Glaciers Consulting

Continuous reporting via CDP has shown that companies that regularly disclose their climate data are more successful in developing sound climate transition plans and thus establishing a comprehensive climate strategy. This not only supports compliance with regulatory requirements such as the CSRD, but also promotes sustainable and future-oriented business practices.

At Five Glaciers Consulting, we support companies at every stage of the development and implementation of their Climate Transition Plans. Our consulting services include the creation of comprehensive CTPs that are compliant with the ESRS E1 climate standard and other regulatory requirements. We help you create credible plans that represent a holistic climate strategy and guide companies on their path to net zero emissions. If you need support in developing your Climate Transition Plan, contact our team.