Established in 2022, the Transition Plan Taskforce (TPT) aims to help organisations meet their climate goals and support the UK government’s pledge to achieve net zero by 2050. It is designed to be consistent with, and build on, the final climate-related disclosure standard (IFRS S2) issued by the International Sustainability Standards Board (ISSB).
Developing a standard for climate transition plans
As organisations in the private sector make commitments and plans to reach net zero, there's a growing need for stakeholders to be able to assess the credibility of their transition plans. The Transition Plan Taskforce aims to drive good practice based on three key principles: ambition, action and accountability.
Ambition
Objectives and goals should be ambitious and help the wider economy meet net-zero targets. Your reduction targets should include scope 1, 2 and 3 emissions and prioritise abating CO2 emissions (rather than balancing them with carbon credits).
Action
Firms need to break down these ambitions into clear actions in the short and medium and long-term. You need to support your actions with tangible plans for resourcing, financing and operational considerations. Action plans should include details of any key assumptions, dependencies or uncertainties.
Accountability
Your transition plans need to have board-level oversight, and be backed by appropriate governance arrangements, incentives and accountability processes. Metrics and targets should be quantifiable, with set deadlines for completion. You should report against these targets annually and include them in financial reporting. It's important to make it clear if you've sought any assurance over your transition plans.
How the TPT final disclosure framework works
There are five disclosure categories, each containing a number of sub-elements. The framework aims to provide a robust outline to ensure firms can provide well organised data without the need for constant changes throughout implementation.
1 Foundation
At the foundation stage, firms need to consider their objectives and priorities, and what this means for the business model. You need to think about reducing greenhouse gas (GHG) emissions, and managing risks and opportunities, as well as key milestones and how to speed up the transition. It also involves looking at the business model implications and the impact on products or services, including resourcing, cost and material interdependencies.
2 Implementation strategy
Firms need to disclose planned activities to deliver their objectives and priorities. This includes changes to strategy or resourcing, and any plans for GHG or carbon-intensive assets, and material interdependencies. You'll need to disclose any changes to products or services to support the transition plan, including changes in (direct or indirect) use of high-carbon products or services. You should include internal policies or conditions, for example around energy or water use, to align with strategic ambitions.
When implementing the transition strategy, organisations need to think about the financial implications and impact on the wider business strategy, resources or products, including investments or financial plans. This should include a sensitivity analysis, including key assumptions or dependencies, and the impact on achieving the transition plan if you don’t meet those key assumptions.
3 Engagement strategy
Firms must disclose current or planned activities across the value chain, for wider feedback and to encourage change aligned to strategic ambition. You should boost this with wider engagement across the industry to share expertise and address common challenges.
4 Metrics and targets
You should disclose the metrics and targets you use to track progress against your strategic ambition, at least annually. This includes financial metrics, GHC metrics or use of carbon credits.
5 Governance
Firms should disclose governance arrangements to support their transition plans and meet their strategic ambitions. This includes board oversight and reporting, senior management responsibilities and accountabilities, steps taken to build the right culture (including policies and procedures), incentives and remuneration, and skills and training needed to meet strategic ambitions.
Implementation: what happens now?
At present, the Financial Conduct Authority (FCA) requires listed companies, large regulated asset owners and asset managers to disclose their transition plans within their Task Force on Climate-related Financial Disclosures (TCFD) disclosures. The Transition Plan Taskforce framework gives firms the toolkit to disclose those plans consistently, and in a way that’s easy for investors and market participants to compare performance and progress towards net zero. The FCA will also consult on transition plan disclosure expectations for listed companies, and alignment with the TPT framework. This reflects the government’s pledge to make transition plan disclosures mandatory for UK companies.
Establishing practical working groups, roles and responsibilities will help you get started on your transition plan. The plan will require significant input from all areas of the business, supported by robust timelines and key milestones. It will also need to establish accountability for tangible goals, and boost transparency to ensure that pledges are put into action – with real-world impact. Getting ahead will help firms maintain a competitive edge and put effective transition plans in place to meet the government’s 2050 targets.
For more insight and guidance, contact Rashim Arora (Financial Services), Irina Velkova (Financial Services), Carolyn Hicks (Business Consulting) and Arti Bareja (Government and Public Sector).
