UK Plc gets first look at ‘gold standard’ for net-zero transition plans
The first draft of a new disclosure framework for forthcoming mandatory climate reporting from big businesses in the UK has been published today (8 November) and consultations are now underway.
The Transition Plan Taskforce (TPT) was launched by the Treasury this April, then-Chancellor Rishi Sunak used his platform at COP26 to pledge that large businesses in high-emission sectors would be subjected to new net-zero disclosure requirements from 2023. The requirement is around net-zero transition plans, which support long-term corporate emissions goals with interim milestones and outline the necessary steps to change business models and investment. Plans should also detail how workers will be supported and the need for upskilling and reskilling addressed.
Today, the TPT has published its first proposal for a ‘gold standard’ for net-zero transition plans. It was asked to draw up such a standard to ensure that disclosures are meaningful, unified, and would deliver the emissions reductions they tout.
The proposal consists of a framework, recommending how companies should develop plans and the key elements they should include; and an implementation guidance document. The guidance includes advice on when, where and how to provide net-zero transition plans.
The TPT is proposing that companies should have to publish one transition plan next year, then an update in 2026. In 2024 and 2025, information material to the plan should be included in financial reporting, it is recommending.
Regarding the content of a ‘gold standard’ plan, the TPT recommends that organisations should state high-level ambitions to mitigate emissions as well as top-line plans on climate adaptation. This information should be built upon with a list of actions to be taken in the short, medium and long-term and plans to finance these actions.Organisations should also clearly set out how their governance is set up for the net-zero transition.
There are also close ties to TCFD-aligned reporting in the TPT’s proposal. It wants to see businesses assessing the material risks it causes to the natural environment and to communities, and the opportunities it could bring about by reducing and eliminating these harms.
The guiding principles of the proposed framework are “ambition, action and accountability”. Ambition involves “preparing for and contributing to a rapid and orderly economy-wide net-zero transition”. Action involves bolstering long-term goals with interim milestones and making sure financial flows enable their deliver. Accountability covers governance.
The Bank of England’s executive director for financial sustainability Sarah Breeden said that the resources published today “will be key in building out the transition infrastructure necessary for supporting the financial sector to allocate capital efficiently, enabling the real economy transition to net zero.”
Breeden said: “Climate change poses risks to the stability of the financial system and to individual firms. Actions taken by the private sector today will determine the size of future risks which is why it is crucial financial and non-financial firms develop and disclose robust transition plans with a focus on concrete short-term action.”
There is no word yet on which month in 2023 net-zero transition plan disclosures are set to become mandatory, and which businesses will be covered by the mandate. Some firms, including Centrica, SSE and British American Tobacco have already published net-zero transition plans on a voluntary basis.
Commenting on the TPT’s publications, EY UK & Ireland’s managing partner for sustainability Rob Doepel said: “Fundamentally, implementation of the Disclosure Framework (pending consultation) will force the hand of businesses to produce and implement rigorous net-zero plans to deliver on the bold pledges and promises they have made to date.
“Not only is this a huge step towards making the UK a net-zero economy but is a significant step towards the world’s progression to net-zero, elevating the UK into a leadership position in the global economy on holding companies to account on action. Other G20 countries are likely to stand up and take notice of the UK’s progressive approach and it could well create a ripple effect where other countries follow a similar path.
“The guidance suggests that businesses should produce a “maximalist” plan covering not only their own decarbonisation plans, but how their plans fit into the UK and the world’s transition to net zero. TPT guidance goes further than TCFD requirements and potentially a long way beyond what many businesses have considered in their net zero planning to date.”
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