This article will explore the basics of climate transition planning, the benefits it offers, the capabilities required to create effective transition plans, and the key sustainability planning challenges that need to be overcome.
Is your organization among the growing number of companies upping the ante on its climate commitments? Despite headlines suggesting companies are wavering on their climate goals, PwC’s 2025 State of Decarbonization report found that 84% of organizations are standing by their commitments. In fact, 37% are increasing them.
Leading organizations know it's one thing to set sustainability goals, and it's another to meet them. So how can companies be sure they live up to their promises? Climate transition planning.
Climate transition plans give organizations a clear-eyed view of attainable sustainability objectives by laying out pathways that are not only operationally and financially feasible but also attractive to investors.
The thing is, establishing the process to create climate transition plans requires organizations to overcome planning challenges, including data gaps, scenario modelling, and budget constraints.
This article will explore:
- The basics of climate transition planning
- The benefits of climate transition planning
- Required capabilities to create climate transition plans
- Sustainability planning challenges to overcome
The basics of climate transition planning
Climate transition plans are step-by-step guides towards the climate commitments companies set to contribute to the low-carbon economy. They translate climate objectives into strategy by providing a detailed answer to the question, “How do I make my carbon emissions goals a reality?”
To the public, climate transition plans prove that a company is putting its money where its mouth is. Climate transition plans demonstrate to investors, suppliers, customers, and stakeholders that the organization is committed to climate objectives and remains both relevant and profitable in a net-zero carbon economy. Put differently, they are evidence that a company is actively working towards climate targets, not just paying lip service, even if they haven't met their targets.
Within a company, climate transition plans strengthen business resilience by providing the business with a roadmap towards their climate objectives. By creating actionable plans at granular levels, climate transition plans make lofty, high-level goals achievable by providing milestones to guide the company towards larger climate objectives.
Here are the basics of climate transition plans:
| Goal | Climate transition plans are a holistic, high-level corporate strategy that outlines how the company will transition its business model to mitigate its impact on climate change. Its end game is to provide a pathway for the company to contribute to the goal of limiting global warming to 1.5°C by 2050. |
| Climate targets | Climate transition plans can establish targets for several climate actions, from transitioning to renewable energy, to biodiversity protections and water resource management, but strongly emphasizes reducing scope 1, 2, and 3 emissions. |
| Timeframe | Climate transition plans involve short-, medium- and long-term planning over decades, including end goals (e.g. carbon neutral by 2050) and interim milestones (e.g. reducing emissions by 35% by 2030.) |
| Scope | Climate transition plans outline clear, measurable sustainability objectives for KPIs that include carbon emissions, climate risk, the circular economy, and maintaining or improving a company's financial viability during its climate transition. |
| Use | Climate transition plans provide a strategic roadmap for embedding climate commitments into business operations, which includes concrete goals, timelines, and pathways for technology investments, transition strategies, and carbon offsetting. |
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The benefits of climate transition plans
2024 is confirmed to be the warmest year on record and the first calendar year that the average global temperature exceeded 1.5°C above its pre-industrial level. Recent disasters, like the California wildfires and Brazil’s catastrophic floods, have made it clear to businesses that no region is immune. For many, the fall out of climate change is creeping close to home, and the urgency to pursue net zero goals is intensifying.
Here’s how climate transition plans help companies heed the call towards more sustainable business practices.
Climate transition plans provide a pathway towards emissions targets
Climate transition plans detail the steps a company will take to work toward its climate-related objectives. As a result, these plans help companies align actions with targets and track progress over time.
Typically, decarbonization plans include a baseline assessment of current Scope 1, 2, and often Scope 3 emissions, identifying key sources of emissions. They also set short-, medium-, and long-term targets for emissions reductions.
In addition, many plans include:
- Action plans for operational, technological, and supply chain changes
- A capital allocation strategy that includes planned investments in low-carbon initiatives and potential divestments from carbon-intensive assets
- Key performance indicators (KPIs) and mechanisms for performance monitoring and reporting
- Scenario analysis and stress testing under different climate and regulatory conditions
- Financial forecasting that uses climate and economic models to estimate potential impacts on revenue, margins, and cash flow under various transition pathways
By laying out these components in climate transition plans, companies have a roadmap for action and clear metrics to assess whether they are on track to meet their sustainability targets.
Climate transition plans provide redemption for companies that have missed targets
When net zero targets were adopted, businesses treated them as essential mandates but often had no clear roadmap for achieving them. As ambitious as organizations’ climate commitments were, they lacked the planning to fulfill their lofty goals.
We now see the consequences of hollow goals and poor planning: CDP research shows that just 35% of businesses are on target to reach their net-zero targets.
Companies that miss their targets could face significant reputational repercussions and financial consequences, especially as carbon pricing becomes globally established.
For companies that find themselves foundering in the face of their net zero targets, climate transition plans help the business get back on track, stay on track, and demonstrate their renewed commitments to stakeholders.
Climate transition plans are increasingly mandatory
Regulators and voluntary frameworks are increasingly calling for climate transition plans to be included in sustainability reporting requirements. While companies in regulated regions must create and disclose these plans, many organizations in unregulated areas are proactively developing them to demonstrate their climate commitments and prepare for future requirements.
Currently, transition plans are mandatory for companies reporting under:
- EU’s European Sustainability Reporting Standards (ESRS E1)
- IFRS S2 Climate-related disclosures
- UK’s TCFD-aligned disclosures
- Australia’s Proposed Climate-related Disclosure Regime
Climate transition plans instill confidence in stakeholders
A 2024 Morgan Stanley report found that more than half of individual investors planned to increase their allocations to sustainable investments in 2025, and more than 70% believe strong ESG practices can lead to higher returns. The numbers speak for themselves: investors see environmentally sustainable businesses as safer investments with the potential for greater financial returns.
What’s more, customers and consumers prefer to make purchases from environmentally sustainable businesses. For example, recent PwC research found that consumers are willing to pay 10% more for sustainable products, and 36% of B2B customers would switch suppliers if sustainability needs were met.
These figures signal that stakeholders are embracing climate-conscious businesses and distancing themselves from those with poor environmental practices. For organizations that have yet to reach their climate targets, a credible climate transition plan can be a tool for getting on the good side of investors and consumers. They demonstrate that organizations are actively working toward climate goals and is thus a worthy investment for the environmentally-minded stakeholder.
Climate transition plans are essential to staying competitive
While ethics are at the heart of climate transition plans, effective climate action also gives businesses a competitive advantage.
The stats show that most organizations are accelerating their climate and decarbonization commitments. A study found that 25% of companies reported having a 1.5-degree aligned climate transition plan – a 44% increase since last year. What’s more, the Science Based Targets initiative (SBTi) announced a major milestone this year: more than 10,000 businesses have set science-based emissions reduction targets or made commitments to do so — a 30% increase from the year before.
The moral of the story? Corporate transparency is contagious. The more companies publish climate transition plans, the more competitors will adapt to keep up with the Joneses.
