Transition plans are the latest trend in climate action

Companies have a new tool for climate action: transition plans.

These strategic plans, which outline how a company plans to reorganize its operations in the short term to be on track to deliver on its climate promises, are the latest must-haves for businesses, much like the 2021 trend of making a promise of carbon neutrality.

Companies are under increasing pressure from investors, financial institutions, customers and other stakeholders to demonstrate how they plan to deliver on their long-term decarbonization promises. Some companies, like Mars and Allianz, recently released transition plans. More companies are expected to do so ahead of this year’s UN climate summit in Dubai, much like what happened with net-zero emissions pledges in the lead-up to the summit of the United Nations on climate two years ago.

“2023 is the year of the transition plan,” said Mary Schapiro, vice chair of the Glasgow Financial Alliance for Net Zero and former chair of the U.S. Securities and Exchange Commission.

The UK’s Transition Plan Taskforce published its framework on Monday, offering a template for businesses looking to create transition plans. The working group sets out best practice disclosures and provides implementation and sector guidance that aligns with the International Sustainability Standards Board’s recently published climate standards and builds on GFANZ’s guidance for financial companies released last summer.

The UK Task Force’s voluntary guidance examines a company’s strategic ambition, business model, value chain and central assumptions. It also covers a company’s implementation strategy, engagement strategy as well as its governance, metrics and objectives. Next month, the group will also publish for consultation sectoral guidance in seven sectors: banks, asset owners, asset managers, utilities, food, mining and oil and gas.

“We’re all in this together and the framework we’ve all worked hard for today helps us get there: it doesn’t give us the answers, but it gives us a clear and consistent process to try to resolve them. ” said Amandine Blanc, co-chair of the transition plan task force and CEO of global insurer Aviva Group. “The (transition) plan is essential to moving forward, it’s your way of tackling these delicate decisions head-on, finding balance and communicating that to others.”

While more than two-thirds of companies in the UK FTSE index have published net zero emissions targets, less than 20% have detailed transition plans, said David SchwimmerCEO of London Stock Exchange Group.

Although disclosure requirements are currently voluntary, transition plans are a current issue for many companies and can help them shift the conversation towards how they can achieve their net-zero targets. “(There’s been) a shift away from asking, ‘Why do I do this?’ to really engage with the question “How can we do this?” » What are the practical approaches to achieve this? said Sue Lloyd, Vice President of the ISSB.

Write to Rochelle Toplensky at rochelle.toplensky@wsj.com