Got A Climate Target But No Transition Plan? Start Here

More and more companies are setting climate commitments and net-zero targets. Over 5,000 organizations have set science-based targets, and many more are releasing public climate reports and disclosures. 

However, only a small fraction of companies have credible plans for reaching their targets. Just 24% of CDP-disclosing companies are on track to reaching their goals. Meanwhile, only 5% of Financial Times Stock Exchange 100 companies have credible net-zero transition plans.

The gap between ambition and action is a red flag for investors and other stakeholders that are highly wary of the potential for corporate greenwashing — sharing misleading information about environmental impact or exaggerating climate action. But with climate being a new area of focus for many organizations, it can be difficult to turn targets into action.

This article identifies four key steps that companies can take to move the needle on their climate targets.

Embed climate across the organization

Climate governance — how and who from your company oversees climate risk — should be a priority for any organization with a climate target. The Task Force on Climate-related Financial Disclosures (TCFD) includes governance as one of its four core pillars, asking companies to describe the role of their boards and management teams in assessing and managing climate-related risks and opportunities.

For this reason, it’s important that companies reporting on climate governance — and those looking to make real action toward their climate targets — focus on climate from the top down. Every employee should also know that leadership teams prioritize climate and support climate-friendly initiatives.
It’s also important to not isolate climate as a function within ESG or sustainability teams. Climate is an enormous risk area of its own and requires its own dedicated focus. We recommend selecting a climate champion — ideally a Head of Sustainability, Director, or  C-suite executive — to drive effective climate management. Your company should also give its climate champion or sustainability team full access across the organization. This is because corporate climate risk management will require collaboration from multiple teams and departments.

Identify climate risks and opportunities

Embedding a climate focus across the organization will make it easier to identify your company’s climate-related risks and opportunities. Conduct a materiality assessment to identify relevant risk factors. Gather as much data from as many relevant internal and external stakeholders as possible — whether it’s qualitative data in the form of interviews, quantitative data around greenhouse gas emissions and resource usage, and other metrics that help you assess and manage climate risks and opportunities.

The disclosure frameworks or standards you’ll be reporting against can also help identify relevant risks and opportunities. For example, the TCFD identifies several types of physical and transition risks, and it recommends that companies perform relevant scenario analyses.

Benchmarking against peers can also inform materiality assessments. Read competitor climate disclosures to identify material risk factors and opportunities or use software to more easily analyze competitor data. Don’t just look to close competitors — get inspiration from climate-leading organizations in your industry or even in other industries.

Create a credible climate transition plan

Once you identify the key climate risks and opportunities your company faces in a new, low-carbon economy, it’s time to develop an effective transition plan. Although climate targets and commitments make headlines, transition plans attract and convince external stakeholders of targets’ validity. Transition plans are also crucial resources internally because they help get different teams and departments on the same page, and they lay out a clear roadmap for achieving climate targets.To create your climate transition plan, work backwards from your long-term climate targets to identify realistic medium- and short-term milestones. Certain net-zero frameworks, such as the Science Based Targets initiative’s Corporate Net-Zero Standard, help companies set mid-term goals — at least those involving emissions reductions. However, your climate commitments may involve more than just emissions reductions, so make sure your transition plan addresses each of your climate goals.

Communicate climate progress clearly and frequently

Without a clear climate communications plan, your organization may miss out on some of the reputational benefits of strong climate management. Our 2022 Disclosure Benchmark Review revealed that only 49% of climate disclosures were useful for decision-makers. Meanwhile, data from EY suggests that 88% of investors find many corporate ESG disclosures limited in their decision-usefulness.

With the corporate fear around greenwashing, many companies are hesitant to talk about their climate targets and progress toward them. For some companies, this results in ‘green-hushing’ — where positive climate action is kept out of public earshot. Although failing to disclose climate action likely won’t affect physical risk management, green-hushing can increase your exposure to climate transition risks if the right people don’t know about your climate progress. For example, you may find it more difficult to access capital, receive lower valuations and credit scores, and be passed over by clients looking for climate-forward suppliers.

Get started today

With investors demanding more on climate and governments accelerating disclosure requirements, it’s never been more important to demonstrate genuine action toward climate commitments. The companies that move fast on climate today will gain a competitive advantage and prove far more resilient to the physical and transition risks ahead. Although taking action on long-term climate targets can feel overwhelming, tools and information exist to make this process readily achievable.