Value creation, protection, and resilience building
While some companies may see the creation of a climate transition plan as simply a compliance exercise, it provides a significant opportunity for a business to take stock and reassess their strategy and business plans. This exercise will likely reveal opportunities for new revenue streams which emerge in a low-carbon economy, and which your business may be well-placed to move into or capitalise on. Transition planning can also drive resilience by understanding where your supply chain might be most impacted, highlighting carbon-exposed components of your operations, and proactively addressing future climate-related risks.
Decarbonisation statements require action
Despite there being no shortage of climate commitments and net-zero targets which have hit the market, climate transition plans provide confidence to the market and investors that these commitments will turn into real action. Businesses are beginning to realise that actions need to be taken now to invest, pivot, or rethink their plans, and that delay in action could create large cost headaches down the road or require a public withdrawal of targets.
This action is required at both the strategic and operational level
Companies are recognising the overarching impact the transition will have on their business model – from the goods they offer, to how they are produced and distributed. That makes it important for companies to approach from a top-down strategic as well as a bottom-up implementation point of view in order to fully capitalise on the transition. Only approaching climate from a top-down view without understanding how it practically will impact your day-to-day operations could lead to issues down the road as you attempt to hit your targets.
Mandatory requirements
At present, climate transition plans are included in the FCA’s listing rules for some listed companies and asset owners and managers but are expected to become mandatory for all in the future. The government launched UK Transition Plan Taskforce is also expected to publish its finalised framework and guidance in mid-2023.With the UK Government moving towards making disclosure of climate transition plans mandatory, we envisage other major economies will follow this approach.
