1. Foundations

Explore the Disclosure Recommendations

Element 1 provides the foundation for the entity’s transition plan.

An entity shall disclose the Strategic Ambition of its plan: its overarching aims for its transition plan. This comprises its objectives and priorities for responding and contributing to the transition towards a low GHG-emissions, climate-resilient economy. It also sets out whether and how the entity is pursuing these objectives and priorities in a manner that captures opportunities, avoids adverse impacts for stakeholders and society, and safeguards the natural environment.  

To ground the transition plan, this element also includes recommendations to describe, at a high level, the current and anticipated implications of its Strategic Ambition on its business model and value chain, as well as the key assumptions that the entity uses and external factors on which it depends.

The rest of the transition plan builds on 1. Foundations and describes how the entity plans to achieve its Strategic Ambition.

Specific considerations for disclosures in line with 1.1-1.3 are set out below. In some cases, these are accompanied by examples of how entities are currently disclosing related information in transition plans or other climate-related disclosures.

1.1 Strategic Ambition

An entity shall disclose the Strategic Ambition of its transition plan. This shall comprise the entity’s objectives and priorities for responding and contributing to the transition towards a low-GHG emissions, climate-resilient economy, and set out whether and how the entity is pursuing these objectives and priorities in a manner that captures opportunities, avoids adverse impacts for stakeholders and society, and safeguards the natural environment.

As part of this, an entity shall disclose:

a. its objectives and priorities:

i. for reducing its Scope 1, 2 and 3 GHG emissions in either its operations or value chain

ii. for enhancing its resilience to the changing climate and responding to the risks and opportunities that arise from the transition to a low-GHG emissions, climate-resilient economy

iii. to use the levers and capabilities it has available to embed and accelerate a transition to a low-GHG emissions. climate-resilient economy

b. whether and how it has identified, assessed and taken into account the impacts and dependencies of the transition plan on its stakeholders (e.g. its workforce, value chain counterparts, customers), society (e.g. local communities), the economy, and the natural environment, throughout its value chain, that may give rise to sustainability-related risks and opportunities  

c. the extent to which it has taken into account and aligned with any external requirements, commitments, science-based targets, transition pathways, roadmaps or scenarios, which may include:

i. national or international commitments

ii. any targets it is required to meet by law or regulation

iii. sectoral pathways, roadmaps or other climate scenarios

iv. voluntary commitments (e.g. existing public commitments, organizational and industry standards, contractual relationships, codes of practices etc.)

d. any potential trade-offs, synergies or co-benefits identified between the objectives and priorities in 1.1a

e. any short-, medium- and long-term targets and milestones it has set to measure progress, including how short-, medium-, and long-term are defined in the context of transition planning.1

The Strategic Ambition provides the basis for all the other elements of the entity’s transition plan and is likely also to be a core part of the entity’s wider corporate strategy.

Users of a transition plan will want to understand where the entity sees its main transition levers, and the relative emphasis that the entity places on the three inter-related channels of a strategic and rounded approach to transition planning:

  • decarbonising the entity;
  • responding to climate-related risks and opportunities; and
  • contributing to an economy-wide transition.


The impacts and dependencies of a transition plan on stakeholders, society, the economy and the natural environment, throughout the entity’s value chain
, may give rise to sustainability-related risks and opportunities (1.1.b). Users will value information about whether and how an entity has identified, assessed and taken these into account. For example, given the role of nature loss in driving climate change and the importance of nature for greenhouse gas (GHG) sequestration and supporting climate resilience,2 users will find it important to understand whether and how an entity’s climate transition plan safeguards nature.

The disclosures under this Sub-Element will also enable users to assess:

  • Whether and how the entity has identified, assessed and taken into account the impacts and dependencies arising from the transition plan on its stakeholders, society, the economy, and the natural environment, and how these may give rise to sustainability-related risks and opportunities that might affect its prospects.
  • Whether is the entity has taken into account and aligned with credible external benchmarks or other reference points, such as science-based targets.


Where an entity discloses that its Strategic Ambition is informed by, or aligned with, a credible external benchmark, users will be better able to gauge the level of the entity’s ambition, compare across entities, and understand the expected trajectory of the entity towards its long-term targets. This will support users in monitoring and assessing the entity’s progress in the short and medium term, improving accountability.

Altogether, these disclosures will enable comparison against peers and support users in assessing the entity’s Strategic Ambition.

In order to disclose effectively in accordance with 1.1, an entity may wish to consider the following.

(Non-exhaustive) examples of objectives and priorities (1.1.a) may include:

  • short-, medium- and long-term GHG emissions reduction targets across Scopes 1, 2 and 3;
  • developing and scaling climate solutions (e.g. via research and development activities);
  • adapting business operations to a low-GHG economy;
  • phasing out GHG intensive product processes;
  • shifting to low-GHG emissions products and services;
  • introducing new procurement processes to decarbonise supply chains;
  • advocating for policy change in support of the transition to a low-GHG emissions, climate-resilient economy;
  • supporting and encouraging entities in hard-to-abate sectors in their transition;
  • investing in activities required for the transition towards a low-GHG, climate-resilient economy;
  • avoiding, reducing or mitigating current or future negative impacts on nature; and
  • regenerating and restoring ecosystems.

 
Depending on the size, sector and location of the entity, targets and timeframes for achieving objectives and priorities will vary. Entities will also differ in the transition levers they identify, and the emphasis of an entity’s ambition may focus on a subset of the three channels. For example, a company providing solutions to companies in hard-to-abate sectors that help them manage their energy usage may itself have relatively low Scope 1 and 2 GHG emissions, but significant opportunities to help embed and accelerate a whole-of economy transition by adapting and expanding these solutions.

The impacts and dependencies of a transition plan on stakeholders, society, the economy and the natural environment, throughout the entity’s value chain, may give rise to sustainability-related risks and opportunities (1.1.b). For example, such impacts and dependencies may include:

  • dependencies on the entity’s workforce (e.g. on workers ability to successfully implement envisioned changes in the entity’s operations);
  • dependencies on particular ecosystem services (e.g. on water availability, regulation of water quality, regulation of hazards, such as floods);
  • adverse or positive impacts on workers (e.g. from new opportunities or lay-offs resulting from a change in the entity’s strategic direction);
  • adverse or positive impacts on the ability of nature to provide social or economic functions (e.g. resulting from land or ocean use change);
  • adverse or positive impacts on customers (e.g. from changes in product prices or specifications); and
  • adverse or positive impacts on communities in which the firm operates (e.g. from changes to local employment, or benefit sharing agreements).

 
Disclosing whether and how the entity has identified, assessed and taken into account such impacts and dependencies will help users assess the comprehensiveness of the plan and whether it adequately addresses potential implications for long-term value. For example, an entity may want to disclose information about:

  • any impacts and dependencies it has identified;
  • how these impacts and dependencies have been assessed including the scope and methodology of the assessment (e.g. what business operations have been considered);
  • the resulting risks and opportunities to the entity and how these have been identified;
  • where in the value chain the resulting risks and opportunities are concentrated; and
  • how these impacts and dependencies have been taken into account in the entity’s Strategic Ambition, including how they may have resulted in specific changes to objectives and priorities.

 
In assessing and disclosing the nature-related impacts and dependencies of its transition plan, an entity may find it helpful to refer to the recommendations of the Taskforce for Nature-related Financial Disclosures (TNFD). 

An entity’s transition plan may be informed by both bottom-up considerations drawn from the entity’s own situation and operating context, as well as top-down considerations based on the changes needed to limit the worst effects of rising global temperatures. In defining its objectives and priorities, an entity may therefore reference:

 
Where an entity references such benchmarks in its transition plan, it should disclose which ones it has taken into account and the extent to which it has aligned its Strategic Ambition with these (1.1.c).

An entity may find that there are trade-offs, synergies or co-benefits between different objectives and priorities (1.1.d). Examples of potential trade-offs may include:

  • scaling up low- or no- GHG emission technologies may result in a short-term increase in GHG emissions (e.g. emissions resulting from the production and or delivery of the technology);
  • pursuing rapid short-term emissions reductions may not be additional to the economy-wide transition (e.g. where firms focus on installing roof top solar panels to reduce Scope 2 emissions in areas where the regional or national decarbonisation implies a rapid decarbonisation of the wider electricity grid); and
  • scaling up renewable energy projects may result in higher vulnerability to the physical effects of climate change (e.g. where these projects are located on flood plains or low-lying areas).

 
Examples of potential synergies and co-benefits (1.1.d) may include:

  • nature-based solutions that strengthen resilience and create additional co-benefits by storing carbon in biomass (e.g. increasing tree cover, installing green rooves, protecting and/or restoring wetlands and marshes)
  • social measures which increase the availability of key skills and knowledge while ensuring an inclusive and equitable transition (e.g. re-skilling and upskilling measures)
  • the provision of products and services which tackle entity-level emissions whilst also reducing the cost faced by consumers (e.g. scaling up low-cost renewable power generation).


Where such trade-offs, synergies, or co-benefits arise, entities should disclose these, and may consider explaining how any trade-offs have been managed, or synergies and co-benefits leveraged.

Entities’ definitions of short-, medium- and long-term time horizons (1.1.e) are likely to differ. This may depend, for example, on their sector, existing financial or business planning cycles as well as engagement with initiatives that apply particular definitions. Entities should be transparent about how they have defined these time horizons and may consider providing information about why these have been defined in a particular way.

Please note: Transition planning is an emerging space in which current practice is rapidly evolving. The selected examples should not be regarded as an articulation of “best practice” and come from organisations at different stages of their transition planning journey. They are intended to illustrate the type of information an entity may want to include under a particular Sub-Element to support interpretation of the framework by preparers. It is important to note that selected examples will often not cover the entirety of TPT Recommendations and may sometimes contain information which is relevant to multiple TPT Sub-Elements. Readers should note that some examples are taken from transition plan-related content in entities’ wider climate-related disclosures, as well as content in standalone transition plans.

Example 1:
Example of how a company in the Food & Agriculture Sector has disclosed information relevant to 1.1.a.ii:Source: Diageo plc, Annual Report, p.23, 2023.

Example 2:

Example of how an Asset Owner has disclosed information relevant to 1.1.e:

Source: Phoenix plc, Net Zero Transition Plan, p.39, 2023. 

1.2 Business model and value chain

An entity shall disclose a description of the current and anticipated implications of the entity’s Strategic Ambition on its business model and value chain.

As part of this, an entity shall disclose:

a. at a high level the current and anticipated strategic changes to its business model and value chain, as elaborated in Implementation Strategy and 3. Engagement Strategy

b. the timeframe over which changes are expected to occur.

This Sub-Element provides users with a description of the strategic implications of the entity’s Strategic Ambition on its business model and value chain. A clear articulation of expected business model and value chain implications is important to demonstrate to users how the Strategic Ambition of the transition plan is embedded in wider corporate strategy. This Sub-Elements is intended to provide a high-level summary of key changes to the entity’s strategic direction, which are then elaborated under 2. Implementation Strategy and 3. Engagement Strategy.

In order to disclose effectively in accordance with 1.2 an entity may wish to consider the following:

Examples of business model changes (1.2.a) that an entity may disclose include:

Downstream changes:

  • changes in the entity’s portfolio of products and services offered (e.g. moving from oil and gas production to renewable electricity generation and retail, shifting from a “fast” fashion product portfolio to a slow fashion product portfolio);
  • entering or exiting specific markets.

 
Changes within the business model:

  • reductions or removals in the entity’s office space (e.g. a service business selling its offices and becoming fully ‘remote’);
  • changes in the channels or methods of customer interaction (e.g. a retailer closing physical stores and becoming online-only);
  • changes in ‘own’ site electricity and fuel usage (e.g. moving to renewable sources of electricity and powering machinery using low- or no- GHG emissions fuels);
  • changes in investment strategies (e.g. moving to an investment strategy with a greater focus on transitioning assets or climate solutions);
  • changes in production or distribution technology (e.g. phasing out diesel-fuelled vehicles and replacing them with electric vehicles).

 
Upstream changes

  • entering new supply chains due to significant changes in product design, required inputs or procurement policies;
  • changes in the geographical reach of the entity’s value chain.

 
To communicate the timeframe over which the changes are expected to occur (1.2.b), an entity can refer back to the timeframes defined under 1.1 Objectives and Priorities and categorise expected changes into those expected over the short-, medium- and long-term.

1.3 Key Assumptions and external factors

An entity shall disclose key assumptions that it uses and external factors on which it depends in order to achieve the Strategic Ambition of its transition plan.

As part of this an entity shall disclose:

a. the nature of the key assumptions that it uses and external factors on which it depends, and their implications for the achievement of the Strategic Ambition of its transition plan; these may relate to matters such as

i. policy and regulatory change

ii. the decarbonisation trajectory of the global economy, relevant geographies and/or sectors

iii. macroeconomic trends (e.g. labour availability, cost of borrowing etc.)

iv. microeconomic and financial factors (e.g. availability of finance, relative prices)

v. technological developments

vi. access to counterparty data and reliability of data

vii. shifts in client and consumer demand

viii. the levels of warming over the short, medium, and long term

ix. the physical impacts of the changing climate, and the regional and spatial implications of these

x. the effectiveness of adaptation efforts and possible limits to adaptation, and the regional and spatial implications of these.

b. the timeframes over which any key assumptions and external factors under 1.3.a. are expected to occur

c. whether and how the assumptions under 1.3.a.i are reflected in the entity’s financial statements.

Transition plan disclosures are forward-looking and take place in a context of imperfect information. This means entities will likely need to make significant assumptions about a variety of factors as part of their planning process. In addition, entities may depend on external factors outside of their control in order to achieve their Strategic Ambition. Furthermore, since transition planning is necessarily a dynamic, iterative and adaptive process, the assumptions and dependent external factors underpinning the plan are likely to be updated and revised over time. 

It is critical that users can clearly identify key assumptions and dependencies and understand the impact on the plan if these assumptions do not hold or if external factors do not materialise. This will enable users to make a judgment on whether firms are basing their plans on reasonable assumptions and ultimately inform a user’s overall opinion on the ambition, robustness and feasibility of achieving the plan.

In order to disclose effectively in accordance with 1.3, an entity may wish to consider the following:

The relevant key assumptions and external factors are likely to vary significantly across entities, depending on their size, sector and geographic location.

Examples of key assumptions and external factors could include:

  • policy and regulatory action (e.g. existing or future subsidies for R&D activities, incentives for demand-side behaviours, government action on climate adaptation)
  • decarbonisation (e.g. the speed of grid decarbonisation, the availability of key low-carbon inputs at scale)
  • macroeconomic trends (e.g. labour availability, cost of borrowing, inflation, interest rates)
  • microeconomic and financial factors (e.g. availability of finance, relative prices, cost of capital, margins on key activities, expected capex needs to acquire, maintain and upgrade fixed assets)
  • technological developments (e.g. speed of technological innovation, costs of key technologies)
  • access to counterparty data and reliability of data (e.g. information about asset location, exposure to physical and transition risks, emissions data)
  • shifts in client and consumer demand (e.g. projected demand for new and existing products and services)
  • the levels of warming over the short, medium and long term
  • the physical impacts of the changing climate, and the regional and spatial implications of these (e.g. expected changes in precipitation patterns, water availability, temperatures, and extreme weather events, expected impacts of these changes on assets and/or supply chains)
  • the effectiveness of adaptation efforts and possible limits to adaptation (e.g. resilience of assets and/or supply chains to changes in precipitation patterns, droughts, floods, heatwaves and other extreme weather events)

Please note: Transition planning is an emerging space in which current practice is rapidly evolving. The selected examples should not be regarded as an articulation of “best practice” and come from organisations at different stages of their transition planning journey. They are intended to illustrate the type of information an entity may want to include under a particular Sub-Element to support interpretation of the framework by preparers. It is important to note that selected examples will often not cover the entirety of TPT Recommendations and may sometimes contain information which is relevant to multiple TPT Sub-Elements. Readers should note that some examples are taken from transition plan-related content in entities’ wider climate-related disclosures, as well as content in standalone transition plans.

Example 1
Example of how an Asset Owner has disclosed information relevant to 1.3.a.i.:

Source: Phoenix plc, Net Zero Transition Plan, p.12, 2022.

Example 2

Example of how a financial services entity has disclosed information relevant to 1.3.a.i.:

Source: L&G plc, Climate Transition Plan, p.26, 2023.

Footnotes:

  1. The TPT recommends that the short-term is defined as no longer than three years. This would align with the recommended publication cycle of standalone transition plans. If the entity defines short- term as exceeding three years, it would be good practice to provide an explanation for why this is the case.
  2. Intergovernmental Panel on Climate Change (IPCC), Climate Change 2022: Mitigation of Climate Change. Contribution of Working Group III to the Sixth Assessment Report of the Intergovernmental Panel on Climate Change (2022).

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