Dr Geoffrey Annison on credible net zero transition plans

The pressure on companies from investors, customers, and indeed from government to reduce carbon emissions is increasing rapidly. Additional regulatory obligations will impose costs on businesses some of which may be penalties if carbon emission reductions and reporting fall short of regulatory targets and requirements. This, in turn, is drawing the attention of investors.

Investors are increasingly focusing on how companies will transition to net zero and consequently, will be expecting companies to report on their transition plans. More specifically, investors will be looking for transition plans which describe practical carbon emission reducing strategies and steps the company will be taking to remain competitive in a low-carbon business environment. Companies which include high-quality, credible transition plans in their reporting are more likely to be viewed as a good long-term investment.

Guidance for companies on preparing transition plans has recently been released in the United Kingdom by the Transition Plan Taskforce (TPT) but the principles are applicable in international jurisdictions, including Australia. The TPT’s Disclosure Framework and Implementation Guidance is intended to be the gold standard for transition plans to net zero and supports international convergence (i.e., harmonisation of regulatory frameworks and compliance) on what makes a transition plan robust and credible. It provides a global baseline of climate-related disclosures, providing consistency and comparability for investors and enabling companies to communicate with existing and potential investors.

The central element of transition planning is the identification of what needs to change (and how) in the short and medium terms for the company to reach net zero (or an alternative climate ambition) in the long term. Such changes might cover business plans, operations, products and services, policies and conditions, financial plans, stakeholder engagement plans, governance and organisational structures, skills, and/or culture.

The Disclosure Framework applies three guiding principles – ambition, action, and accountability – with detailed advice on issues such as implementation and engagement strategies, metrics and targets, and governance. A copy of the document can be downloaded here. Alternatively, contact the National Retail Association (g.annison@nationalretail.org.au) requesting a copy to be forwarded.

The National Retail Association continues to upweigh its activities in the ESG to assist members in understanding and navigating the ESG landscape. For more information, please contact Dr Geoffrey Annison.