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Understand the requirements of Net Zero transition plan disclosure

Your plan should set out the workable approach your company will take to achieve its Net Zero target

Sustainability reporting standards increasingly require disclosure of a comprehensive Net Zero transition plan on a ‘comply or explain’ basis. For instance, in the US, the Securities and Exchange Commission’s proposed climate disclosure regulation includes disclosure of a transition plan, and in the UK, the Transition Plan Taskforce has set out a framework to support regulatory transition plan disclosure. IFRS S2 also contains a requirement for businesses to provide information about transition plans or explain why they are not disclosing one. Figure 4 sets out the requirements to publish a transition plan under the key reporting mechanisms.

This shift toward requiring businesses to disclose Net Zero transition plans is reflected in the guidelines and standards for best practice on Net Zero from international bodies such as the UN High-Level Expert Group on the Net Zero Emissions Commitments of Non-State Entities, the Science-Based Targets initiative, and the International Organization for Standardization. All these international bodies are aligned on the need for a business’ Net Zero target to be followed up with the regular disclosure of a robust plan to achieve it.

The Science-Based Targets initiative is also planning to move from an exclusive focus on target setting guidance and validation of targets to verifying progress toward those targets. To read more about this, visit: Measurement, reporting and verification (MRV) - Science Based Targets.

Figure 4: Requirements to publish a Net Zero transition plan under key reporting mechanisms

What is a Net Zero transition plan?

A Net Zero transition plan requires your company to outline what it will do over the near and long term to decarbonize in line with Net Zero. A Net Zero transition plan (or climate transition plan) is a time-bound action plan that clearly outlines how your company will achieve its targets to reduce its value chain emissions to Net Zero.

The precise requirements for a robust and credible Net Zero transition plan continue to be determined through various international standardization processes.

The UK’s Transition Plan Taskforce (TPT), which has played an advisory role in the development of the ISSB standards, has set out the following framework for reporting a credible Net Zero transition plan (see Figure 5).

Figure 5: The Transition Plan Taskforce’s Disclosure Framework

Although the TPT’s transition plan disclosure framework was designed for UK businesses, regardless of where your business is based, it is worth considering whether adhering to the principles and processes it sets out will help your business meet the requirement from ISSB and CSRD to publish a transition plan. The TPT has published a final disclosure framework in October 2023.

Devising your Net Zero transition plan will be an iterative process that builds on the insights you have revealed through climate-related risk and opportunity assessment and reflects on your company’s impact on the climate. Your company’s validated Net Zero target and interim targets should provide key milestones for your transition plan.

Each of the steps in this guidebook will have supported you to compile the information needed to produce a robust Net Zero transition plan.

For more about how to prepare your company’s Net Zero transition plan, refer to the Integrity Matters Report from the United Nations’ high-level expert group on the net zero emissions commitments of non-state entities and the We Mean Business Coalition’s briefing on Climate Action Transition Plans.