In July 2022, the UK Transition Plan Taskforce (TPT) completed the first step of its ambitious two-year remit to provide the most comprehensive set of guidance on corporate climate transition plans available to the UK market. Scheduled for release early next year, the final guidance will direct organisations on how to report on their climate change plans and how it will contribute to the UK’s Net Zero goals.
The call for evidence asked for feedback on its draft proposals for transition plan metrics. Anthesis prepared a submission to the call for evidence – here are Anthesis’ top five considerations for the Taskforce’s final recommendations.
Adaptation, biodiversity and other environmental issues
Climate mitigation, or the trillion-dollar question of how to cut emissions far enough and fast enough to keep a human-friendly climate, is the focus of the current framework. As the UK has just recorded its highest ever temperature, it’s hard to forget climate impacts are definitively here to stay and only getting stronger. Transition plans need to explicitly address not just how and where to eliminate Greenhouse Gas (GHG) emissions in the business, but how to do that while improving resilience to extremes of weather and their economic aftershocks.
Daunting as the problem of climate change is, it’s just the biggest and best understood example of the consequences of breaching planetary boundaries. Without awareness of possible unintended consequences on biodiversity, habitats, water, pollution, waste or most importantly people and communities, the transition to Net Zero risks replacing one problem with another. By following the principle of “Do No Harm” in transition planning, organisations can prevent this from happening and instead incentivise climate solutions. Furthermore, companies should aim to have a positive impact on nature and society.
Ambition
The TPT and individual Transition Plans must respond to what climate science tells us is necessary: limiting warming to 1.5 degrees. Considering the level of warming which we are already committed to with current global emissions levels (“There is a 50:50 chance of the annual average global temperature temporarily reaching 1.5 °C above the pre-industrial level for at least one of the next five years” – WMO, May 2022) this response means ambitious, rapid action.
In most Paris-aligned climate scenarios, decarbonisation is only achieved with extremely ambitious technology deployment and business model change. It is only by ensuring that firms are as ambitious as possible in acting to deliver the transition that the UK (and the world) can hope to meet its Net Zero goal. The standard and guidance should seek to follow the latest climate science and modelling and incentivise plans that are updated regularly in the light of the latest research.
Economy-wide decarbonisation is reliant on individual entities making efforts above and beyond business as usual. For example, the UK electricity grid is decarbonising as renewable electricity becomes less costly, therefore companies will likely show a reduction in their GHG emissions from electricity even if they take no specific action. Plans should enable the recognition of those innovative and transformational actions which will lead to additional emission reductions, without which the UK cannot meet its Net Zero goals.
Alignment
As well as alignment with climate science to keep us below 1.5 degrees of warming, the final outputs of the taskforce must consider alignment with other frameworks and standards.
The past couple of years has seen a flurry of standard-setting activity by international collaborations aiming to bring more consistency and better data to climate reporting. The TPT states that it aims to consider this work, but its initial proposals could do more to avoid reinventing the wheel. The Task Force on Climate-Related Financial Disclosure (TCFD) has already created and consulted extensively on its guidance and recommendations on Transition Plans and reached some degree of acceptance and recognition by companies. This will be a key reference for the TPT to build upon.
As well as climate disclosure standards, the TPT needs to review frameworks and standards relating to other environmental issues. For example, circular economy approaches, whether at a general or sector-specific level, will be important as solutions for climate transition and achieving a more sustainable economy.
In addition to national plans, companies should consider how they can align with the commitments and plans of local authorities and cities where they are active, taking the opportunity to collaborate to increase ambition.
Accountability
“Fail to plan, plan to fail” goes the saying: the TPT needs to consider what the consequences will be for those companies who do “fail to plan” or it risks being accused of “planning to fail”. Planning for transition needs to happen across the whole UK and the global economy. We are no longer in a time when environmental action is a luxury for a few companies seeking a brand differentiator. The consequences for non-compliance need to be made clear to companies and investors following up on poor quality or missing data must be backed by legislation.
While action on emissions is important, company plans need to incorporate how they will manage and govern this action at the highest levels within the company. TCFD’s focus on management governance and monitoring progress is something we’d like to see featured more in the final TPT recommendations.
Action
The taskforce’s membership has strong representation from the financial sector, so it is clear that these users have a voice in the process. But it shouldn’t be forgotten what phrases like “climate action in the real economy” means.
People working within firms across the UK and around the world, as employees and management, make different choices in their everyday jobs; about how they design their products, what machinery and vehicles they invest in, and how they power their business. The people doing the hard work of putting climate transition into practice also need to understand the transition plan of their company and be considered as some of its important users.
A strong focus on action and implementation by companies will help the taskforce deliver the action on climate transition which truly matters.
While transition plans are not yet a reporting requirement, stakeholders including investors are already demanding them of certain companies exposed to climate risk. Leading companies are now considering the best way of reporting on internal plans and progress towards their own Net Zero goals, and Anthesis is supporting clients with this journey. The recommendations outlined above are just as relevant to those preparing to write plans as those setting standards around them. Anthesis will be closely following the work of the Transition Plan Taskforce and other organisations setting standards around transition planning, including the International Sustainability Standards Board, to see how these themes are reflected in their final guidance. For more information about how Anthesis can support you in this rapidly evolving space, contact our Net Zero team.
