Climate transition planning

As companies face a future increasingly focused on greenhouse gas (GHG) emissions, climate transition planning can be a cost-effective and business-friendly framework to help organisations prepare for a low-carbon economy, while supporting their current reporting requirements.

What is a climate transition plan?

A climate transition plan is a strategic action plan that outlines how an organisation will adapt its business model and operations to align and adapt to a net zero future. Aligning to net zero future means developing a plan with high-level targets, such as reducing emissions by 50% by 2030, actionable steps and interim milestones to meet these goals.

Adapting to a net zero future involves integrating climate considerations into governance and financial planning to ensure the organisation remains resilient and profitable in a low-carbon economy.

A climate transition plan encompasses several critical business areas, focusing on mitigation, adaptation, and a societal lens. Mitigation involves strategies to reduce greenhouse gas emissions, such as transitioning to renewable energy sources, enhancing energy efficiency, and implementing carbon capture technologies.

Adaptation addresses the need to adjust business operations to withstand the impacts of climate change, which includes investing in resilient infrastructure, revising supply chain management, and developing contingency plans for extreme weather events.

The societal lens ensures that the transition considers social equity and community impact, promoting inclusive practices, supporting workforce retraining, and engaging with stakeholders to foster sustainable development. Together, these elements create a comprehensive approach to navigating the challenges and opportunities presented by climate change.

Climate transition plans gained significant traction with the establishment of the Transition Plan Taskforce (TPT) in 2022. The TPT was launched by the UK Government to create a standardised framework for credible and robust climate transition plans in the private sector.

This initiative was driven by the need for consistent, high-quality disclosures that would help companies effectively plan and communicate their strategies for achieving net-zero emissions. The TPT's work has been informed by extensive global engagement with financial institutions, corporates, policymakers, and civil society.

Climate transition plans are aimed at a wide range of organisations, particularly those with significant environmental impacts or those that play a crucial role in the economy. These include:

Financial Institutions

Banks, asset managers, and insurers are often required to develop climate transition plans to align their investments and operations with net-zero goals.
Large corporations

Especially those listed on major stock exchanges, such as FTSE 100 companies, which are mandated to create and implement credible transition plans.
Energy companies

Including those in oil, gas, and renewable energy sectors, which need to transition to sustainable energy sources.
Manufacturing firms

Companies in heavy industries like steel, cement, and chemicals, which have high carbon footprints and need to adopt cleaner technologies.
Public sector organisations / Semi-state companies

Government bodies and public institutions that are setting examples and driving policy changes towards sustainability.

These plans help ensure that these organisations can meet local, regional and global climate targets while maintaining their operational and financial stability.

A well-developed Transition Plan demonstrates commitment and transparency which strengthens trust and reputation.

Shane O'Reilly

Managing Director, ESG Strategy & Transition Planning Lead

KPMG in Ireland

Benefits of the climate transition plan

Leveraging existing structures: Organisations can effectively use their climate transition plans by integrating them into their overall business strategy, ensuring they are overseen by executive leadership, and allocating resources towards decarbonisation initiatives.

Setting clear goals and corresponding actions: These plans set clear, measurable goals and objectives, and translate them into actionable steps that drive tangible progress towards emissions reductions.

Enhancing credibility: Fostering a corporate culture that prioritises climate action and engaging with value chains and stakeholders can enhance the credibility and impact of these plans.

Creating value: This holistic approach not only mitigates climate-related risks but also capitalises on opportunities for sustainable growth and resilience.

What a good transition plan looks like

A robust climate transition plan emphasises transparency and stakeholder engagement. It includes regular reporting and communication with stakeholders, including investors, customers, employees, and the broader community, to maintain accountability and build trust.

The plan should also consider the social dimensions of the transition, ensuring that actions taken are equitable and inclusive. This means supporting workforce retraining, engaging with local communities, and promoting sustainable practices throughout the supply chain. By addressing both environmental and social aspects, a good climate transition plan not only contributes to climate action but also enhances the company's reputation and long-term sustainability.

Additionally, a good transition plan leverages existing frameworks and best practices, such as those from the TCFD, SBTi, and CDP, to ensure credibility and effectiveness.

By integrating climate considerations into strategy and operations, companies can identify new opportunities to improve resilience and position themselves competitively in a low carbon economy.

Aniko Kraft

Associate Director, ESG Strategy & Transition Planning

KPMG in Ireland

Most common challenges of climate transition plans

Climate transition planning often faces several common challenges, including lack of clear data, financial constraints, regulatory uncertainty, stakeholder resistance, and technological barriers.

Lack of clear data

Companies often struggle with insufficient or unreliable data on their emissions and climate impacts. To overcome this, businesses can invest in advanced monitoring and reporting tools and collaborate with third-party experts to ensure accurate and comprehensive data collection.
Financial constraints

Implementing climate transition plans can be costly, especially for small and medium-sized enterprises. To address this, companies can seek out government grants, subsidies, and green financing options to support their sustainability initiatives.
Regulatory uncertainty

Changing regulations and policies can create uncertainty and hinder long-term planning. Businesses can mitigate this by staying informed about regulatory trends, engaging with policymakers, and building flexible strategies that can adapt to new regulations.
Stakeholder resistance

Employees, investors, or customers may resist changes due to perceived costs or disruptions. Overcoming this requires effective communication and education about the benefits of climate action, as well as involving stakeholders in the planning process to gain their support and buy-in.
Technological barriers

Some companies may lack access to the latest technologies needed for effective climate action. To overcome this, businesses can invest in research and development, partner with technology providers, and participate in industry collaborations to stay at the forefront of technological advancements.

What is the difference between climate transition plans and sustainability / ESG strategies?

A climate transition plan is a strategic framework specifically designed to guide an organisation towards achieving net-zero emissions by focusing exclusively on climate-related targets and actions.

In contrast, a sustainability strategy encompasses a broader range of topics that are material to the organisation, addressing various environmental, social, and governance (ESG) issues. While the climate transition plan has a clear, defined net zero emissions goal, the sustainability strategy may set diverse goals based on stakeholder alignment and organisational priorities.

Both approaches are essential for mitigating risks and leveraging opportunities, but the sustainability strategy can further enhance value creation and drive innovation due to its holistic approach to sustainability.

A Transition Plan provides a roadmap with defined objectives and interim milestones so everyone in the organisation understands what success looks like and how to get there.

Tim Keenan

Manager, ESG Strategy & Transition Planning

KPMG in Ireland

How climate action plan relates to other frameworks
i.e. ‘Digesting the Alphabet Soup’

Climate transition plans are useful for companies reporting to the Carbon Disclosure Project (CDP), as they detail strategies to reduce carbon emissions and manage climate risks. Having a climate transition plan can make CDP reporting more efficient and improve performance scores.

Climate transition plans are integral to Ireland’s Climate Action Plan, which outlines the nation’s roadmap to halve emissions by 2030 and achieve net-zero by 2050. Climate transition plans help businesses align their business strategies with national decarbonisation goals, enhancing their contribution to a sustainable and resilient economy.

Climate transition plans provide detailed strategies for reducing environmental impact and managing climate risks, and align well with reporting requirements from CSRD regarding ESRS E1.

Climate transition plans of companies can help members of the Glasgow Financial Alliance for Net Zero (GFANZ) transition financed emissions to net zero by 2050.

Climate transition plans align well with the International Sustainability Standards Board (ISSB)’s standard, IFRS S2 Climate-related Disclosures, structured around four core elements, governance, strategy, risk management and metrics and targets.

Climate transition plans address climate action (SDG 13) while also contributing to other goals like affordable and clean energy (SDG 7) and sustainable cities and communities (SDG 11).

Climate transition plans are crucial for companies aiming to align with the Science Based Targets initiative (SBTi), as they outline specific actions to meet scientifically validated emission reduction targets.

Climate transition plans of companies can help financial companies disclose how their investments contribute to climate change mitigation and adaptation.

Climate transition plans are increasingly incorporating nature-related risks and opportunities, aligning with the Taskforce on Nature-related Financial Disclosures (TNFD) framework.

Climate transition plans align well with the requirements specified by the UN Global Compact, as it encourages businesses to adopt sustainable and socially responsible policies and puts great emphasis on climate-related strategy, policies, actions and targets.

Climate transition plans can help companies adhering to the United Nations Principles for Responsible Investment (UN PRI), by outlining strategies to manage climate risks and opportunities within investment portfolios.

What isn’t the climate transition plan?

Not all-encompassing ESG / sustainability plan

A climate transition plan specifically focuses on strategies to reduce greenhouse gas emissions and manage climate-related risks, whereas an ESG or sustainability plan encompasses a broader range of environmental, social, and governance issues. While climate transition plans are a critical component, they do not address other important aspects such as social equity, corporate governance, and overall sustainability practices.
Not compulsory

Businesses are not legally required to develop or implement a climate transition plan. However, having such a plan can significantly enhance a company's resilience to climate risks, improve stakeholder trust, and align with emerging regulatory and market expectations, creating additional value to the company.
Not anti-business

A climate transition plan is meant to support the sustainability of business by addressing climate risks and opportunities and building businesses’ resilience against potential future shocks. By implementing such a plan, companies can drive innovation, tapping into new market opportunities, and ultimately benefiting their bottom line.
Not greenwashing

A climate transition plan includes genuine, actionable strategies to reduce emissions and manage climate risks, rather than superficial or misleading claims. By implementing transparent and measurable actions, companies can demonstrate their commitment to sustainability and avoid accusations of greenwashing.
Not isolated, doesn’t stop at the company’s gates

A climate transition plan extends beyond the company's operations to include value chain actors such as supply chains, customers, and broader community impacts. By engaging with external stakeholders and collaborating on climate initiatives, businesses can amplify their efforts and drive systemic change.
Not impossible

A climate transition plan involves practical, step-by-step actions that can be tailored to a company's specific context and resources. With the right commitment and collaboration, businesses of all sizes can develop and execute effective climate strategies that drive meaningful change.
Not reinventing the wheel

A climate transition plan builds on existing best practices and proven strategies to address climate challenges by leveraging established frameworks and collaborating with industry peers.
Not dependent on size or industry

A climate transition plan can be tailored to fit the unique needs and capabilities of any organization, regardless of its scale or sector.
Not a PR exercise

A climate transition plan involves concrete, actionable steps to reduce emissions and manage climate risks, demonstrating a genuine commitment to sustainability. By implementing transparent and measurable actions, companies can build trust with stakeholders and drive real environmental impact.
Not exclusive to corporates

A climate transition plan can be adopted by organisations of all types, including small businesses, non-profits, and public sector entities.
Not a cost exercise

A climate transition plan is an investment in long-term sustainability and resilience. By implementing such plans, businesses can unlock new opportunities, drive innovation, and ultimately achieve cost savings through improved efficiency and risk management.

How KPMG can help

Businesses of all sizes will be impacted by the shift to a low-carbon economy. Understanding how this affects you and your business, and how you can lead in your sector, opens the door to new opportunities both now and in the future.

At KPMG, we help organisations develop and disclose transition plans, meet mandatory reporting requirements, and embed sustainability into strategy. From multinationals navigating climate scenarios to SMEs exploring what sustainability means for them, our global expertise spans every sector.

Our Sustainable Futures team works across industries from energy and infrastructure to banking and semi-states, helping our clients create world-class transition plans and stay ahead of the curve.

Ready to future-proof your business? Connect with us today to start building your transition plan.