This article is sponsored by EcoAct.
With hurricanes in Southern California and Canadian wildfire smoke creating eerie orange skies over New York City and the American south, last summer saw such an alarming number of global warming consequences that the Secretary-General of the United Nations declared a new state of "global boiling." Recently and notably, COP28 wrapped with a decisive "stocktake" calling on a tripling of renewable energy capacity by 2030 and accelerating efforts towards transition away from fossil fuels.
While good intentions are a prerequisite to impactful actions, many organizations are perplexed by the idea of disrupting the core of their businesses, while dealing with an incomplete understanding of the climate-related risks they face. A holistic and iterative climate transformation plan is an invaluable tool to close the gaps between net-zero ambitions and effective net-zero actions. Building comprehensive roadmaps for decarbonization, which seamlessly integrate business and sustainability goals, are critical for unified company transition strategies, mitigating organizational resistance and formalizing change management.
Complex problems demand transformative solutions. Organizations aspiring to reduce carbon footprints face roadblocks unrelated to their willingness to change. Regulatory uncertainties, lack of internal reporting infrastructure, and siloed functions can paralyze sustainability leaders. A thoughtful climate transition plan addresses these issues by codifying everything, implementing rigorous governance structures, and integrating climate risks into core business processes.
Credible climate transition plans
A climate transition plan is a time-bound, detailed roadmap aligning an organization with climate science recommendations. These plans are science-based, actionable and hold organizations accountable. However, achieving net-zero emissions is a complex challenge that requires a customized approach, not a "one size fits all" solution. A credible corporate plan integrates climate considerations into business strategies, monitors actions, ensures accountability and transparency and engages stakeholders.
Despite growing recognition of the need for climate transition planning, a 2022 study by the CDP revealed a stark reality. Less than 1 percent of disclosing organizations had credible climate transition plans, with just 13 percent making progress and 35 percent reporting they will develop a transition plan within two years. Credible transition planning is essential to closing the gap between stated ambition and substantive action.
Here is how to create a credible climate transition plan:
1. Assess current state of play to build the plan’s foundation
The first element is a methodical outline for measuring the organization’s existing environmental footprint, encompassing Scope 1, 2 and 3 emissions. The analysis will include, but isn’t limited to:
- Full greenhouse gas (GHG) emission profile
- Primary data coverage and data verification across all emission scopes
- Identification of climate-related risks (physical and transition risks) through climate scenario analysis (CSA)
- Map "double-materiality," which accounts for both the organization’s actual environmental/social impact on the world, as well as the climate risks that impact the company’s financial value
- Biodiversity screening and biodiversity footprint
The organization will choose a method to measure emissions, based on accounting standards from either the GHG Protocol or ISO (International Organization for Standardization). Once the company has measured its footprint, it has a defined baseline and a clear picture of existing gaps, which will inform a change readiness assessment to get a realistic picture of an organization’s willingness and ability to implement change.
2. Commit, communicate, collaborate
Armed with a state of play, the company can formalize its commitment to change. Just as important, the document will include a plan to communicate commitments across the organization and entire value chain, always in line with evolving regulatory reporting requirements.
- Determine internal barriers to transformation: such as stakeholder ambition, current policies and procedures, etc.
- Commit to reducing emissions in line with science by setting robust science-based emission reduction targets
- Understand the economic abatement options for decarbonization and prioritize short- and medium-term focus
- Cascade company targets operationally
- Communicate your sustainability and climate commitments internally and externally
For an organization to achieve real impact, leadership must be aligned across departments toward a clear prioritization of decarbonization and risk management activities, ensuring that investment is directed to the most material and viable areas first.
3. Operationalize it: Action plan at the intersection of sustainability and business growth
Once an organization defines its carbon reduction objectives aligned with business goals, leaders must outline transparent and realistic actions. This operationalization plan formalizes climate risk preparedness with operational KPIs, aligning with regulatory frameworks and adapting to shifts.
Quantification and monitoring mechanisms are crucial, involving:
- Developing a detailed climate action plan with short- and medium-term emission reduction targets;
- Developing a carbon offsetting strategy for net-zero targets aligned with business priorities and considering all emission scopes;
- Obtaining a comprehensive understanding of the financial implications associated with decarbonization and climate resilience activities, for effective resource allocation;
- Considering the impact the implementation of the climate action plan could have on company performance, including sensitivity analysis of the assumptions applied;
- Developing change management program, including stakeholder upskilling, incentives and company culture initiatives; and,
- Reviewing and developing value chain, industry and peer engagement plans to ensure consistency with your transformation goals. Comprehensive Scope 3 reporting hinges on suppliers reducing barriers to facilitate seamless data exchange.
Transparency is vital because plans impact employment, communities, economies and production costs. Companies must disclose emissions targets across all scopes, emphasizing transparency in carbon credit use. It's crucial to communicate how carbon offsets complement, not substitute, efforts to reduce scope 1-3 emissions within the wider net-zero strategy.
Transition planning as competitive advantage
Both the EU and North American regulatory agencies are not only installing rules for reporting sustainability performance but also unveiling rules asking companies to disclose their businesses’ climate transition plans, which will be voluntary at first. One of the most closely watched being the long-awaited SEC climate disclosure rule, set to be actioned in the spring. By proactively developing transition plans that demonstrate early compliance, they can differentiate themselves as sustainability leaders, gaining a competitive edge in the marketplace and forging better management of climate related risks — and opportunities.
This transformative journey is a collaborative experience that originates at the heart of the business and extends outward, influencing how you operate, collaborate and engage within your supply chain and society. Only upon completion of the transformation plan should a company begin implementation, including monitoring, evaluating and reporting on progress against operational KPIs.