‘Sphere of Influence’: What are the fundamentals of creating a Climate Transition Plan?

The once unstoppable popularity of the net-zero movement has hit a major hurdle in recent weeks.

At the start of the month, the Science-Based Targets initiative (SBTi) named more than 280 businesses for failing to have their emissions goals verified within the requisite two-year period. While this was down to what some businesses have described as a lack of clarity on what a net-zero target should entail, it serves to highlight a key trend in the corporate sustainability space.

Thousands of firms across the globe have committed to transformational, science-based targets, but many have little idea as to how they will reach net-zero over the next 20 or 30 years. It is here where transition plans become crucial.

Climate Transition Plans are the latest – and arguably biggest – piece of the ever-growing disclosure jigsaw that UK businesses are trying to navigate.

The UK Government commissioned the creation of a Transition Plan Taskforce (TPT) – a body to determine what a credible corporate transition plan for climate should look like – in 2021.

Last October, the jewel in the crown of the TPT’s work, its pan-industry ‘gold standard’ framework, was published.

The Task Force has recommended that corporates publish plans, and then an update in 2026. In 2024 and 2025, information material to the plan should be included in financial reporting. Advice has also been provided on what, exactly, the plans should cover.

Familiarising yourself with the TPT recommendations is the starting point, but just because a sustainability professional is armed with the knowledge, doesn’t mean the rest of the business will be. At edie 24, a host of businesses discussed the key steps to building a credible plan and the benefits that it can bring to businesses.

“Transition planning is more than just target setting,” Chapter Zero’s associate Mark Manning told delegates. “It brings all the elements of strategy and sustainability together and uncovers what your sphere of influence is to drive change and cascade it through other networks.

“It’s not just about targets for the entity or business, it explores how you can support the whole economy, where the opportunities are to build solutions that others can use.”

Manning, who has been involved in the TPT working groups, adds that approaching conversations on transition plans through the scope of opportunity, rather than an additional burden and legislation, is a key step in getting boardroom support.

While that may well be the aim, many sustainability professionals view transitioning planning as another reporting and disclosure piece added to the already cumbersome pile. There is a danger that some begin to view transition planning as compliance – a tick-box exercise – rather than a holistic opportunity to get all stakeholders, both internal and external, aligned with a corporation’s climate goals.

Currently, businesses seem unprepared for the forthcoming legislation on transition plans. Just four FTSE100 companies have net-zero transition plans that would meet the ‘gold standard’ requirements of the UK’s forthcoming reporting mandate, according to CDP.

While the majority (60%) of the companies have targets to reduce emissions, less than 1% are producing transition plans to net-zero that CDP regards as credible. Key facets of a good transition plan include interim emissions targets, financial planning to deliver decarbonisation and assessment of climate-related risks.

Elsewhere, the Transition Pathway Initiative Centre (TPI Centre), based at the London School of Economics and Political Science (LSE), published the findings on assessments of more than 1,000 corporate transition plans. The TPI Centre found that of the 1,000+ assessed companies, only 20 currently quantify how they plan to meet their long-term decarbonisation targets.

Unique transitions

One of the few companies currently working on its transition plan is Vodafone. The telecoms giant’s group environment lead Andrea McCormick describes the work so far on transition planning as a “fascinating” experience that has helped align the company internally around the wider climate goals and embed it across different areas of the business.

“It’s really important to recognise that sustainable business is not the delivery machine in the [economic] transition. We are very much the orchestrators and we coordinate and facilitate internal stakeholders from across a number of different functions to come together around that single plan.

“A huge amount of effort was put into gathering the right amount of internal stakeholders and making them advocates and champions for our plan.”

McCormick spoke to edie prior to the event, confirming that Vodafone intends to publish its plan in the first half of 2024, after more than a year of work behind the scenes.

Vodafone first publicly committed to a global net-zero value chain in late 2020, setting a 2040 deadline. It subsequently unveiled a vision to reach net-zero operations in the UK by 2027.

For McCormick, transition planning has had great value in that it “formalises the accountabilities, processes and planning that we were doing already”.

Vodafone notably owns 17 different operating companies across the globe, which makes the development of a transition plan extra challenging. McCormick notes the importance for large, multinational businesses to “look at the unique, local market context” to identify what the contributions to society can be.

Panellists were in agreement that a transition plan was not solely about getting a company’s own four walls under control and mapped out against the future.

The “sphere of influence” referenced by Manning was echoed by Tara Schmidt, managing director and head of climate & sustainability strategy at Lloyds Bank. Schmidt notes that businesses should seek to not only develop an operational strategy “based on concrete actions”, but also explore the trade-offs and co-benefits in delivering transition plans as part of a Just Transition that supported smaller firms down the supply chain.

“When we think about Scope 3 and the value chain, I think sometimes we forget about SMEs. When talking about the Just Transition, SMEs may have the intent, but may not necessarily have the capabilities. So we’ve really been engaging with SMEs across the bank to understand what they need to be able to reduce their emissions.

“When we look at transitions, we need to really look at it through a place-based lens to find opportunities for SMEs and communities to really green the local supply chain.”

Perfection is not the answer

Science-based targets are viewed by many as a pre-requisite to businesses attempting to reach net-zero and would therefore create viable pathways for any transition plans. Surveys have found that around 72% of businesses have stated that their emissions reduction goals are with the SBTi. However, one in four (26%) of the companies who have applied to the SBTi had not published information about the new targets on their own websites or reports.

Transition plans aim to address this disclosure gap, and the TPT itself is trying to help the convergence of disclosure and reporting frameworks to streamline progress for corporates.

Prior to the discussions at edie 24, edie interviewed the UK’s Transition Plan Taskforce secretariat, Kate Levick, to gauge how corporates are faring when it came to producing such plans.

Levick told edie that one of the key aims of the TPT was to try and “move towards convergence on sustainability disclosures internationally” that streamlined processes for sustainability professionals, many of which feel stuck in reporting mode, rather than delivery.

“We see the International Sustainability Standards Board (ISSB) as the global baseline, with many countries expected to adopt that. So we’ve built on that very strongly.

“The goal in the end is to support the creation of consistent, comparable company reports and to reduce the level of complexity faced by firms. All of these different expectations should start to become very compatible.”

Many firms will be waiting for this convergence to take shape before truly rolling out transition plans, which led to delegates asking what the fundamentals for kickstarting transition plans were.

McCormick at Vodafone did describe science-based targets as a “North Star” that could break up the transition into “achievable chunks” based on the deadlines for short-term targets. Setting everything in place for Scope 3 was a different issue, however.

“Scope 3 is difficult, and the starting point is looking at how to build capacity, thought leadership and innovation now to identify activities and solutions in a few years,” McCormick says.

“My mantra throughout our transition work is that you don’t need to know the whole answer, just the direction of travel and magnitude of scale.”

Building on McCormick’s point, Chapter Zero’s Manning adds that transition plans, much like disclosure in alignment with the Taskforce on Climate-related Disclosures (TCFD), are about incremental improvements, rather than getting it perfect from the outset.

“The transition plan will incrementally improve year on year,” Manning says. “It will get better, it will enhance.

“It can’t be a compliance job though, it has to be strategic. It’s getting the board to see not only how a business can survive, but thrive.”

Schmidt’s advice is just to get “stuck in”, and that focusing on concrete action will allow space to explore the “dependencies an organisation has on the value chain”, which in turn opens the door to collaboration.

“I think businesses need to think more about radical collaboration between finance, government and industry to drive transformational change” she says.