Climate transition plan (CTP)

A transition plan for climate change mitigation encompasses a variety of corporate measures and tactics designed to address the challenges of global warming. Furthermore, a designated climate transition plan serves as the foundation for minimizing the effects of climate change on your business.

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Definition: What is a climate transition plan?

A climate transition plan is defined as a corporate action plan to achieve its net zero target by 2050. A climate transition plan must be compatible with limiting global warming to 1.5 degrees in line with the Paris Agreement. Therefore, a CTP, abbreviation for climate transition plan, is part of corporate climate management and contributes to the sustainable transformation of the economy. The term “climate transition action plan” is also commonly used.

Moreover, the Corporate Sustainability Reporting Directive (CSRD) includes a climate transition plan definition. According to the European Sustainability Reporting Standard (ESRS) E1 – climate standard, a climate transition plan provides an understanding of a company’s past, current and future efforts to mitigate climate change. In addition, a CTP should ensure the future viability of a company and its business model. The climate standard ESRS E1 standard therefore requires the disclosure requirement E1-1 – Transition plan for climate change mitigation.

What are the elements of a climate transition plan? 

The elements of a climate transition plan cover several measures:

Science-based climate targets

Decarbonization measures & reduction potential

Financing of decarbonization measures

Embedded in overall business strategy & financial planning

Approved by the Executive Board and the Supervisory Board

Aligned with climate risk management & embedded in governance structure

Transition Plan Taskforce and further climate transition plan frameworks

Climate transition plans, ESRS, and CSRD are interconnected terms with a shared objective: they serve as your tool to establish your business model sustainably and make a significant and science-based contribution to a carbon-neutral world. However, the discussion and development of climate transition plan disclosures, even on a voluntary basis, were underway prior to the CSRD’s adoption in 2023. 

In 2021, the Taskforce on Climate-Related Financial Disclosure (TCFD) already mentioned climate transition plans as an additional disclosure recommendation. Similar to TCFD, there are also overlaps with the Carbon Disclosure Project (CDP). The CDP discussion paper on climate transition plans for organizations, in turn, overlaps with existing frameworks and related benchmarks such as the Science Based Targets initiative (SBTi).

Moreover, the UK’s Transition Plan Taskforce (TPT) aims to establish best practices for transition plan disclosures, with guidance influenced by its partnership with Glasgow Financial Alliance for Net Zero (GFANZ).

Lead by your climate transition plan example and take a significant stride toward the future.

Benefits of a climate transition plan according to ESRS E1 climate standard

  • Meet regulatory requirements
  • Set the right steps for climate risk mitigation
  • Enhance your company’s resilience
  • Gain competitive advantages
  • Reduce the risk of greenwashing
  • Show your commitment for climate action

Our approach: denkstatt climate transition plan guidance

If climate change is material to your company, you must disclose on CTPs. Our expert team provides assistance in creating climate transition plans and integrating them into your corporate strategy. We also ensure compliance with regulatory requirements outlined by the CSRD and EU taxonomy, taking into consideration any pre-existing initiatives and measures within your company.

6 steps: Your CSRD climate transition plan

We offer comprehensive consulting services covering the following 6 steps and related topics for your net zero pathway.
climate transition plan example
  1. Carbon Footprint calculation: The foundation of your climate transition plan is a comprehensive CO2e footprint. The CCF (scope-1-2-3) must be in accordance with the GHG Protocol.
  2. Decarbonization measures: Based on the CCF, a decarbonization roadmap encompassing all three scopes is developed. We calculate the respective CO2e reduction potential and conduct a financial assessment of the measures. This process involves identifying locked-in emissions and formulating management plans.
  3. Climate targets: We establish short-term climate targets, with optional long-term objectives. These climate targets must align with the 1.5-degree reduction pathway and ideally follow the SBTi guidelines. When setting climate targets, we take into account concurrent requirements from the EU taxonomy and the results from a climate risk analysis according to TCFD.
  4. Integration with the business strategy: The climate transition plan must align with your business strategy. Therefore, we ensure alignment between the CTP and financial planning while identifying synergies to ensure EU Taxonomy compliance.
  5. Approval and disclosure: The final transition plan has to be approved by the Board of Directors and Supervisory Board, with relevant key performance indicators derived for monitoring and measuring success. Subsequently, we provide support for timely disclosure in accordance with CSRD ESRS E1-1 requirements.
  6. Climate governance: Embedding your climate transition plan within your governance framework is the key to success. We assist you in establishing the right structures and tools for monitoring. Furthermore, we ensure that the organization is equipped through knowledge-building and appropriate structure to support the measures. With this additional step, you ensure the implementation of your climate transition plan.

Reach out to our expert to find a solution that suits your company!

Constantin Saleta

International Service Leader Decarbonization

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FAQ

Frequently asked questions on climate transition plans

Climate transition plans are a crucial instrument to showcase an organization’s dedication to pursuing the 1.5-degree pathway. Climate transition plans are developed to ensure the continued relevance and profitability of a company’s business model, both to capital markets and stakeholders. It places global warming at the core of your company’s strategy, clearly illustrating its significance for businesses. This approach underscores the importance of addressing climate change in companies.

Disclosures on climate transition plans are mandatory if a company falls under the scope of the CSRD and climate change is deemed material. The materiality analysis is the prescribed procedure of the CSRD to determine which sustainability topics are material. It can be assumed that, if at all, only a few companies will consider global warming as non-material. For all other companies covered by the CSRD, a climate transition plan that aligns with a 1.5°C world is mandatory.

In addition to legal requirements, there is another aspect driving the increased demand for CTPs. Since managing and adapting to climate risks has long become a crucial criterion in investment decisions, climate transition plans also provide important answers for investors and other stakeholders.

Climate transition risks are financial and operational challenges faced by organizations during the transition to a low-carbon, net-zero economy. They arise as companies move away from fossil fuels and high-carbon procedures, embracing cleaner alternatives while addressing climate change impacts. The CSRD climate standard ESRS E1 calls for the disclosure of climate-related impacts, risks, and opportunities along the value chain (IRO-1). 

A good climate transition plan aligns with current scientific understanding and ensures actual emissions reduction within your company. It essentially maps out the transformation of your business and your business model. The approval processes and engagement of various stakeholders ensure that the climate transition plan is pursued and holds strategic significance within your organization. A good climate transition plan emphasizes transparent communication, implements effective emission reduction measures, and can be tracked through key performance indicators and monitoring structures. Ideally, the CTP is firmly embedded within your company’s governance structures.

When working on a climate transition plan, the following questions provide some guidance:

  1. CCF calculation: What is my company’s impact on the climate?
  2. Data quality: How can I ensure the data robustness for my CCF baseline?
  3. Risk and opportunities: How does climate change impact my company and its business model?
  4. Climate action: What are the most effective decarbonization levers?
  5. Strategy alignment: How can I engage C-Level and decision-makers?

Climate strategy describes the company’s overall climate targets (emission reduction targets) and pathways to reach these targets with adequate reduction measures. A typical climate strategy covers different time horizons, with a focus on more granular elements in the near- to mid-term. Find out more about our decarbonization and climate strategy consulting services.

Net zero strategy specifically addresses the company’s long-term pathway and planned measures to reach net zero GHG emissions in a dedicated period of time (typically 2040 or 2050). According to SBTi, residual emissions of max. 10% from the base year is allowed to claim net zero, while the reduction target needs to be aligned with a 1.5° pathway. Learn more about science-based target setting.

A climate transition plan incorporates a 1.5 ° transition pathway and requires science-based climate targets as milestones for this pathway. It therefore asks for a net zero target by 2050 at the latest (net zero strategy). The CTP is essentially the implementation plan of the climate or net zero strategy, as it incorporates strategic and operative planning of embedding the climate / net zero strategy in the overall business model and financial planning, in the best case also embedding it directly in the company’s governance structures.

Yes, as the climate or net zero strategy is one pillar of the climate transition plan it is possible to match the existing climate targets into the CTP, building up on these existing pillars. In the case of a well below 2 degrees climate strategy, there is a need to update the strategy and align it with a 1.5° pathway.

As the CTP is the implementation of climate targets and strategies, it is a well-recommended next step to think about how to bring corporate commitments on the ground and derive specific actions and initiatives. As included in its name, a climate transition plan is about transition planning, i.e. strategic preparation of the necessary transformation of the company, its business model and operating mode for a net zero future.

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