Build your transition plan

Stage 3 Plan your actions

The Transition Planning Cycle

A transition plan is a tool to translate ambitious objectives and priorities into pathways for action, including concrete steps to be taken in the short-, medium-, and long-term. This third stage of the transition planning process therefore involves the translation of your Strategic Ambition into an effective implementation and engagement strategy to deliver the transition plan. 

Develop implementation steps for transitioning your business operations, products and services

As a first step in planning your actions, you may find it helpful to analyse the key changes required in your business operations and products and services, to deliver on your Strategic Ambition, and associated objectives and priorities.

Once these changes have been identified, the actions and timelines needed to implement these can be mapped out into granular action-oriented implementation steps for the short- and medium-term.

These implementation steps will also need to account for the key assumptions and external factors on which your plan depends identified in earlier process steps (see Stage 2). This will have implications, not only for the design of your implementation strategy, but also the stakeholder engagement activity that you may need to carry out to influence the actions of others to help achieve your Strategic Ambition.

Depending on your strategic objectives and priorities, and the outcome of your transition levers assessment, defined implementation steps could include, for example:

Steps to introduce changes to your production processes, equipment, workforce, supply chain and procurement, such as:

  • introducing energy efficiency measures (e.g. investing in state-of-the-art equipment, optimising manufacturing processes, or implementing advanced energy management systems);
  • switching to less GHG intensive inputs (e.g. introducing low-GHG packaging); and
  • improving supplier evaluations to identify suppliers with stronger alignment to your Strategic Ambition (e.g. by assessing suppliers current practices, climate-related objectives, and resilience to climate-related risks).


Steps to introduce changes relating to the entity’s facilities and other physical assets, such as:

  • moving into more energy-efficient or climate-resilient office spaces;
  • relocating production facilities to areas with more secure supply of renewable energy or lower vulnerability to physical climate risks; and
  • introducing energy efficiency measures (e.g. installing insulation, or on-site renewable energy generation capacity).


Steps to increase the share of low- GHG emissions products and services in its portfolio, such as:

  • increasing the share of products providing climate solutions (e.g. introducing electric or hydrogen-powered vehicle models into your product range);
  • increasing the share of plant-based products;
  • creating new green or transition-related financial products, increasing the share of investment activities in low-GHG assets;
  • phasing out high-GHG products and services (e.g. phasing out blast furnaces and replacing with electric furnaces, phasing out the sale of vehicles with traditional internal combustion engines); and
  • innovating on customer-centric low GHG emissions service offerings (e.g. offering energy-efficient home retrofitting, providing low GHG emissions transport solutions).


Steps to phase out high-GHG products and services, such as:

  • replacing blast furnaces with electric furnaces; and
  • phasing out the sale of vehicles with traditional internal combustion engines.

Resources:


This sub-step may inform disclosure against:

  • TPT Sub-Elements: all under 2. Implementation Strategy

Natwest case study

COMING SOON

Revisit your policies and conditions

To translate your Strategic Ambition, and associated objectives and priorities, into actionable steps for the short- and medium-term, you may consider what needs to change across policies and conditions, skills, learning and development programmes, financial and resourcing plans, data requirements, back-office investment and reporting systems, R&D and innovation strategy, or corporate transactions planning.

Depending on your strategic objectives and priorities and transition levers assessment, defined implementation actions could include:

  • creating or updating policies or terms and conditions that consider climate resilience in existing processes (e.g. lending policies for evaluating borrowers or their projects, procurement, safeguards on human rights and the natural environment, hiring requirements, and staff evaluation); and
  • evaluating if existing monitoring mechanisms work for tracking progress on policies and conditions that changed.

This sub-step may inform disclosure against:

  • TPT Sub-Elements: all under 2.3 Policies and conditions

Assess the resilience of your Implementation Strategy

As in any strategy development process, you may assess the resilience of your action-oriented implementation steps. You may want to:

  • test the resilience of your roadmap to changes in the key assumptions identified in Stage 2; and
  • revisit the findings of your assessment of climate-related risks and opportunities under Stage 1, to assess the resilience of your plan to the changing climate.


Where key vulnerabilities are identified, plan steps to manage and mitigate these.

Having identified possible impacts and dependencies of your transition plan on stakeholders, society, the economy, and the natural environment (see Stage 1), it will be good practice to review planned implementation actions with reference to them. Where this step identifies potential opportunities, you may consider refinements to the implementation steps to leverage these. Where you identify potential adverse impacts, you may consider how these can best be managed.

Consider, as an example, the planned phase-out of a high-emitting service or business line that has relied on a local workforce with skills and knowledge. Having identified the adverse impact on this local workforce arising from its implementation plan, the entity may consider opportunities for reskilling/retraining the impacted workforce.

If the identified adverse impacts of your planned actions cannot be managed effectively, there may be a case to revisit the strategic objectives and priorities (see Stage 2).

Leading practice:

More advanced firms may engage internal or external change management specialists to help prepare the business for fundamental, transformational change, and to coordinate and drive the necessary internal and external engagement, planning, communications and, ultimately, implementation (see Stage 4).

Internal governance & engagement pointers

  • The three steps below will require deep engagement across the organisation, gathering input and coordinating (via new and established governance structures) to identify the changes needed across all functions/teams, understand the practical implications of these changes and, critically, to ensure they are coherent with the wider corporate.
  • To ensure buy-in and clarity of responsibility, you may consider making champions from relevant functions/teams/business areas responsible for contributing to the action-oriented implementation steps, also empowering them to lead on the strategy within their function/team and delegating appropriately for implementation and execution.

This sub-step may inform disclosure against:

  • TPT Sub-Elements: 1.3 Key assumptions and external factors

Review your governance structures, organisational arrangements, and people strategy

A key part of planning is making sure you have the right governance structures, organisational arrangements, and people strategy in place, to enable successful delivery of the transition plan.

This includes:

Skills, competencies and knowledge: Assessing whether you have the appropriate skills, competencies and knowledge across the organisation to effectively design, develop, deliver and govern the transition plan. This may involve:

  • building a skills taxonomy to identify gaps between current and required skills, competencies and knowledge;
  • implementing internal development programmes or targeted training to upskill, reskill and educate employees where new skills, competencies and knowledge requirements have been identified; and
  • aligning new skills, competencies and knowledge needs with recruitment efforts.


Culture and employee engagement: Engaging employees on the transition plan such that they understand how it relates to their role and how they can influence it, and taking steps to embed your Strategic Ambition on climate within the culture of the organisation. This may involve:

  • promoting awareness of climate issues among leaders and managers, using training to equip and empower them to become climate role models;
  • building climate into your employer brand, values, and employee value proposition; and
  • using and establishing regular and consistent listening and communications exercises to build engagement and knowledge.


Consider remuneration and incentives: Aligning remuneration programmes with the transition plan objectives, to ensure accountability and align the interests of executives and other relevant staff with the successful delivery of the plan. This may involve building climate-related performance metrics into incentive plans that are aligned to the Strategic Ambition of the transition plan, material to the individual participant, measurable, clear, transparent and appropriately ‘stretching’ for the relevant individual. This may be relevant for both executive remuneration and remuneration and incentive structures for employees across the organisation.

Internal governance & engagement pointers

  • This requires the engagement of HR leadership to align the people strategy, policies and procedures with the plan’s strategic objectives.
  • You may consider involving an HR champion/representative on the working group (or equivalent governance body) working with other functions to ensure they have the right roles, skills and incentives in place to embed the transition plan.
  • Knowledge and skills at the Board level will also need continually to be developed as the climate risk and regulatory landscape evolves (see Stage 1)
  •  

Resources:


This sub-step may inform disclosure against:

  • TPT Sub-Elements: all under 5. Governance

Develop your engagement plan

As the guidance has highlighted throughout, external engagement (as well as internal) is key to informing the development and implementation of the plan.  

In addition, engaging with external stakeholders can be a key component of transition plan activities to contribute to the economy-wide transition, as part of a strategic and rounded approach. The engagement strategy, and prioritisation of activities within it, can be informed by the transition levers assessment as well as your assessment of the key external factors on which your transition plan depends.

In particular, achieving your objectives and priorities may require that you engage proactively with:

  • value chain and portfolio companies, for example to:
    • tackle Scope 3 emissions by encouraging others to develop robust transition plans or put in place SBTi approved decarbonisation targets to reduce value chain emissions;
    • collect data to assess physical or transition risks across your supply chain;
    • support smaller suppliers in the design and delivery of their transition plan;
    • assess and address social and nature-related impacts along the value chain; and
    • support customers in making “greener” purchasing decisions.
  • industry peers and initiatives, for example to:
    • exchange best practices (where appropriate);
    • identify solutions to common challenges, which support delivery of the transition plan;
    • ensure that actions taken by industry alliances or trade organisations support, and do not undermine, transition efforts; and
    • create an opportunity for meaningful dialogue with trade unions and other workforce representatives.
  • governments, the public sector, communities and civil society, for example to:
    • advocate for policies that support transition efforts; and
    • ensure opportunity for social dialogue and stakeholder participation.


A good practice engagement program will:

  • prioritise counterparts for engagement strategically, for example by focusing on those with relevant control and influence over the key external factors on which your plan depends (see Stage 2);
  • establish the most suitable process for engagement; e.g. individual or collaborative engagements;
  • include monitoring and measurement of engagement outcomes, including their contribution to achievement of the Strategic Ambition of the transition plan; and
  • be underpinned by escalation procedures where engagement does not lead to the desired outcomes.

Resources:


This sub-step may inform disclosure against:

  • TPT Sub-Elements: 2.3. Policies and Conditions, and all under 3. Engagement Strategy 

Integrate the transition plan into your financial plan

You will need to assess the financial implications of your transition plan. This includes analysing:

  • the financial resourcing needs to implement the transition plan; and
  • more generally, the implications of the transition plan for your financial position, financial performance, and cash flows over the short-, medium-, and long-term.

For example, you may consider whether implementing the transition plan is associated with any significant: 

  • capital expenditures;
  • changes in operating costs;
  • new investments in research;
  • changes in the expected useful life of assets;
  • changes in the expected fair valuation of assets; and
  • changes in revenue forecasts, given changes in the portfolio of products and services offered.


As acknowledged through this guidance, transition planning involves considerable uncertainties. There will be factors beyond your control that influence financial outcomes in unexpected ways (e.g. shifts in consumer demands, etc.). It is therefore inevitable that quantified financial effects will be less precise in the medium- and long-term. However, it will nevertheless be instructive for you to consider ranges and orders of magnitude of financial effects, even for more distant actions and developments. 

Conducting this analysis will ensure that you have a balanced and realistic understanding of the potential impact of the transition plan on your financial position, performance and cash flows. It will also help you refine your assumptions about the development of future markets and the external factors on which you depend (see Stage 2).

Internal governance & engagement pointers

  • To ensure that transition plans are underpinned by robust financial planning, it is critical that finance functions are brought into the conversation at an early stage. In most instances, finance teams will be leading on this planning process.
  • Over time, you may find it helpful to bring transition planning into regular financial planning and budgeting processes, working through existing governance structures to support the implementation of your transition plan.
  • Working groups holding the pen on the transition plan can expect that this will be a regular item that is reported on in Board meetings as scrutiny of the financial impacts of climate risks and opportunities, and of the transition plan specifically, increases over time.
  •  

Resources:

This sub-step may inform disclosure against:

  • TPT Sub-Elements: 1.1. Strategic Ambition and 2.4. Financial planning 

Set your metrics and targets

To drive and monitor progress towards the Strategic Ambition of the your transition plan, this process step involves setting clear, quantified metrics and targets.

In addition to GHG emissions targets, you may consider setting — and, in accordance with the TPT Disclosure Framework, disclosing — targets covering other business activities that are related to the Strategic Ambition of your transition plan. These may include governance, engagement, business and operational targets, as well as financial targets.

GHG reduction targets: When setting GHG emissions reduction targets, you may consider the relevant scopes and categories of emissions and measurement basis (see Stage 1). You may consider setting specific targets for different scopes of emissions. The TPT Disclosure Framework recommends that, for each target, you also disclose any milestones or interim targets used to measure progress.

Good practice GHG emissions reduction targets will reflect the urgency to act, arising from the latest scientific findings, as well as relevant national and international commitments.

In the case of net zero targets, you may refer to the guidance provided by the Science Based Targets initiative (SBTi) and may choose to have targets independently verified by the SBTi.

Note: It is understood that some entities may not set targets against all scopes and categories of emissions immediately. You may prioritise the most material emission scopes and categories. In such cases, it is important to be transparent about which scopes and categories have been included. Where material scopes and categories have been excluded from targets, it will be important to be transparent about the reason for omitting them, and the steps you are taking to enable target-setting for these scopes and categories in the future (see Stage 1)

Governance, engagement, business, and operational targets: In addition to GHG emissions targets, you may consider setting targets for governance, engagement, business, and operational targets to assess the progress of your transition plan.

These targets might relate to the following aspects:

Governance:

  • remuneration (e.g. proportion of individuals with remuneration linked to progress against the Strategic Ambition) (see 5.4 Incentives and remuneration); and
  • skills, competencies and training (e.g. percentage of at-risk workers being offered retraining or redeployment).


Engagement:

  • targets related to be related to the nature as well as the outcome of engagement activities with the value chain, industry counterparts and/or government, public sector, communities, and civil society.


Business and operations:

  • targets related to business and operations (e.g. energy efficiency (e.g. energy/ unit produced), the number of factories located in flood zones or percent of water withdrawn in areas with high water stress); and
  • targets related to products and services (e.g. proportion of total or number of products and/or services that are no- or low-GHG or support the transition towards a low-GHG economy, proportion of total or number of products and services vulnerable to transition and physical risks).


Financial targets: In addition, you may set financial targets. These are likely to differ between real economy companies and financial institutions.

For real economy entities, this may include metrics and targets on no-or low-GHG capital expenditures or metrics and targets on revenues from no-or low GHG products and services. For entities in the financial sector, it may include targets related to directing capital to real-economy transition activities – for instance, in line with the four financing strategies identified by GFANZ.

Across all categories, you may consider the following:

  • You may seek to incorporate and build upon the IFRS S2 § 27-29, 33-35 and TCFD’s Guidance on Climate-related Metrics, Targets and Transition Plans, particularly its guidance on cross-industry climate-related disclosure recommendations (pp. 10-28; 54-65). More specifically, you may want to assess which of the metrics and targets that you already report on in your wider climate-related financial disclosures under TCFD-aligned disclosures could be meaningful for measuring progress against your transition plan.
  • You may link individual targets to your action-oriented implementation steps and engagement plans, as well as the overarching objectives and priorities of the plan.
  • You will want carefully to consider the metrics that will be used to define targets, noting that it may be difficult to obtain data to support your preferred metrics. Where possible, adopt common metrics that enable comparability with other entities, and that can be referenced against top-down external benchmarks (see Stage 2). Where relevant taxonomies are available, you may consider referencing them.
  • You may choose to have targets validated by a third party to enhance robustness and demonstrate rigour to users of your transition plan disclosures. The choice of third-party validation provider will depend on the nature of the target. In some cases, targets may fall under other business management systems (including environmental management systems) so may already be subject to some level of external validation.

Internal governance & engagement pointers

  • In order to measure progress against your targets, you may need to evolve your existing data infrastructure to collect, store, retrieve and analyse transition plan related data securely and effectively. The working group (or equivalent governance body) responsible for the design of the transition plan may find it valuable to engage the IT function as well as the internal audit and/or risk management functions during the target setting phase. This will help to ensure that data systems can support monitoring and reporting under Stage 4.
  • Leadership teams may be mindful that there are many reasons why targets may need to be refined and iterated over time. For example, this could be due to improvements in data quality which impact baseline estimates or changes in external circumstances which either impede or accelerate progress. If targets are restated, it will be important to explain the rationale for changing targets to external users, to demonstrate that changes do not undermine the Strategic Ambition of the transition plan.

Resources:

This sub-step may inform disclosure against:

  • TPT Sub-Elements: 1.1. Strategic Ambition, 2.2. Products and services, all under Element 4. Metrics & targets

Case Study: Tyman’s approach to setting Metrics and Targets

A conversation with Jonathan Garrett, Group Health, Safety & Sustainability Director, Tyman. 

Go to Stage 4

Other TPT publications

TPT Disclosure Framework
Explore the Disclosure Recommendations
Sector Summary
The TPT Disclosure Framework in the Global Landscape

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