Insights into factors influencing corporate climate transition plans

An organisation’s climate transition plan outlines the roadmap to achieving its net-zero commitment.

This commitment is usually derived from the UN’s 2050 goal to achieve net-zero carbon emissions and limit warming to 1.5 degrees Celsius, in line with the Paris Agreement and forms part of the overall sustainability strategy.

The climate transition plan should be tailored to an organisation’s unique context with clearly defined targets and milestones. One main challenge for organisations preparing this roadmap is determining the timelines for the net-zero targets.

This also involves ensuring there is ownership at the right levels for delivering on the transition plan and the required stakeholder engagements. Overlaying the high levels of uncertainty organisations are experiencing today with this challenge makes it all the more difficult to develop these plans. Some factors that influence an organisation’s climate transition plan include the following.

The Nationally Determined Contributions (NDCs) adopted by governments, along with the priority areas set by governments, should be the very first factors to consider when developing a roadmap.

For example, the nature of the NDCs could impact the timing of product roll-out and innovation, as they indicate the potential regulatory environment to expect based on the government’s priorities and timelines. Failure to align a climate transition plan with the NDCs can be costly and disruptive to its future success.

Another important factor to consider is the market trends shaping the industry in which an organisation operates. These trends could range from technological shifts to regulatory changes.

Organisations would also have to make informed estimates on the time horizons of how these changes would impact the industry. In addition, they need to consider their governance structure when setting their climate transition plan.

An organisation’s governance structure has an outsized impact on its climate transition plan.

While governance is required to determine roles and responsibilities across the organisation regarding the transition plan, ensure that the set targets are balanced and grounded in reality, particularly when defining time horizons. Other factors to consider include skills and competencies, partnerships and availability of finance to fund the transition.

Having the right climate transition plan contributes significantly to an organisation’s overall sustainability strategy.

The writer is a partner at PricewaterhouseCoopers. He is an author who writes and speaks widely on corporate reporting topics.