EFRAG recently published the new guidelines on the implementation of climate transition plans under the European Sustainability Reporting Standards (ESRS). For companies facing the challenges of climate reporting and sustainability compliance, this guide provides non-binding guidance. The guide sets out the requirements of the ESRS by detailing in particular those disclosure requirements that are linked to key EU regulations such as the Corporate Sustainability Due Diligence Directive (CSDDD) and the EU Taxonomy. This alignment is intended to ensure that climate transition activities and sustainability reporting are in line with broader European compliance standards and to reinforce the commitment to responsible and sustainable action in line with EU legislation.

1. purpose of the EFRAG Guide

The aim of the guide is to provide practical support to help companies develop effective transition plans to mitigate climate change. These plans should be clearly integrated into the overarching corporate strategy so that climate targets are not viewed in isolation but are treated as part of long-term corporate planning. This ensures that climate measures are not just seen as "green initiatives", but as necessary steps to ensure the company's competitiveness in a low-carbon future. Integrating the transition plans into the corporate strategy also helps to overcome internal resistance and promote a concerted effort across all departments.

2. compliance and harmonization with EU regulations

The guide details how the ESRS are linked to EU regulations such as the Corporate Sustainability Due Diligence Directive (CSDDD) and the EU Taxonomy. This alignment enables companies to design their transition activities to mitigate climate change in line with existing regulations. This not only provides legal certainty, but also enables companies to demonstrate to their stakeholders that they are proactively working towards meeting European climate targets. For investors and customers in particular, this transparency is an important criterion when deciding for or against a collaboration.

3. structure of the disclosure

The ESRS set out comprehensive requirements for the disclosure of climate transition plans, ranging from corporate strategy to specific targets and investments. Companies must also address their governance structures to ensure that the transition plan is supported by the governing bodies. A clear disclosure structure enables companies to communicate their climate targets and progress in a transparent way. This strengthens the trust of investors, customers and employees and reduces the risk of greenwashing accusations, as the measures taken are comprehensible and verifiable.

4. compatibility with the Paris Agreement

Companies are obliged to disclose climate targets that are in line with the 1.5°C target of the Paris Agreement. This demonstrates commitment to global climate efforts and strengthens the credibility of the climate strategy. By aligning their targets with the science-based goals of the Paris Agreement, companies also position themselves as responsible actors in the fight against climate change. This can lead to a competitive advantage, as more and more customers and investors place value on companies that are clearly committed to meeting climate targets.

5. decarbonization measures

The guidelines require companies to describe specific measures to reduce emissions, known as "decarbonization levers". These measures can include operational changes, product adaptations or new technologies that are applied both in the company's own processes and throughout the entire value chain. A particular focus here is on the implementation of cost-efficient measures that enable a rapid reduction in emissions. Companies should also prioritize the use of renewable energies and the improvement of energy efficiency in their operations in order to ensure a sustainable and future-proof energy supply.

6. investments and financing

The disclosure on investments also includes the reporting obligations on the cost of capital (CapEx), which are in line with the EU taxonomy. This means that companies must clearly identify sustainable investments and transparently disclose the use of funds. This is crucial in order to direct funds towards projects that contribute to decarbonization. Clear labeling of sustainable investments also shows that the company is using its resources efficiently to achieve climate targets, which is perceived positively by investors and partners.

7. embedding in the corporate strategy

Another focus is on integrating the transition plan into the company's overall strategy. This ensures that climate targets are not viewed as isolated measures, but are in line with the company's overall objectives. This embedding makes it possible to exploit synergies between economic and environmental goals, which in turn promotes the company's resilience in a changing economy. Companies that integrate their climate goals into their corporate strategy are also better prepared to meet future regulatory requirements.

8. progress reports

Companies must regularly report on the implementation of their transition plans and measure the effectiveness of the measures taken with regard to the emissions targets. This aspect ensures that progress remains transparent and comprehensible. Regular reports also offer the opportunity to flexibly adapt the strategy and learn from previous successes or challenges. Continuous monitoring of progress also enables the company to react to delays or obstacles at an early stage.

9. consideration of social and environmental impacts

The guidelines also emphasize that transition plans should not only aim to reduce emissions, but must also take social and environmental aspects into account. Companies are encouraged to demonstrate how the implementation of the transition plan can impact workers, communities and biodiversity. This provides a broader view of sustainability that not only focuses on reducing emissions, but also on creating positive social and environmental impacts. This holistic view is a key factor in ensuring long-term acceptance and support from stakeholders.

Commentary from the field: Five Glaciers Consulting's experience

At Five Glaciers Consulting, we have gained a wealth of experience in developing climate transition plans, particularly based on established frameworks such as the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) and the GHG Protocol. The practical implementation of such plans often requires close collaboration between the different departments of a company to ensure that all relevant climate risks and opportunities are considered. A key success is that the targets are not only science-based, but also integrated into the corporate strategy to enable long-term change. Our experience shows that clear communication of climate targets and measures to all stakeholders is crucial to build trust and ensure successful implementation.

Support from Five Glaciers Consulting and funding opportunities

Five Glaciers Consulting supports German companies in the development and implementation of transition plans. It is possible to use the federal funding program "Module 5 - Transformation Plan" of BAFA to increase the interest and implementation power. Take advantage of our expertise to make your climate strategy sustainable and successful.

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