Business Advisory

Transition Plan Taskforce Publishes Final Disclosure Framework

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Contents

The Transition Plan Taskforce (TPT) has published its final disclosure framework. Established in the UK in 2022, the TPT aims to help organisations meet their climate goals and support the UK government’s pledge to achieve net zero by 2050.

While its newly developed framework has been developed in the UK, it has global applicability and is designed to be consistent with, and build on, the final climate-related disclosure standard – IFRS S2 ‘Climate-related Disclosures’ issued by the International Sustainability Standards Board (ISSB). 


What is the purpose of the TPT Disclosure Framework?

The goal of the TPT Disclosure Framework is to develop a standard for climate transition plans. As organisations in the private sector make commitments and plans to reach net zero, there's a growing need for stakeholders to be able to assess the credibility of their transition plans. The TPT aims to drive good practice based on three key principles: ambition, action and accountability.

Ambition
Objectives and goals should be ambitious and help the wider economy meet net-zero targets. Reduction targets should include scope 1, 2 and 3 emissions and prioritise abating CO2 emissions (rather than balancing them with carbon credits).

Action
Entities need to break down these ambitions into clear actions in the short, medium and long-term. Entities need to support their actions with tangible plans for resourcing, financing and operational considerations. Action plans should include details of any key assumptions, dependencies or uncertainties.

Accountability
A transition plan needs to have board-level oversight, and be backed by appropriate governance arrangements, incentives and accountability processes. Metrics and targets should be quantifiable, with set deadlines for completion. Entities should report against these targets annually and include them in their financial reporting. It is important to make it clear if any assurance was sought over transition plans.


Key elements of the framework

There are five disclosure categories, each containing a number of sub-elements. The framework aims to provide a robust outline to ensure firms can provide well organised data without the need for constant changes throughout implementation. 

1. Foundation

At the foundation stage, entities need to consider their objectives and priorities, and what this means for the business model. Entities need to think about reducing greenhouse gas (GHG) emissions, and managing risks and opportunities, as well as key milestones and how to speed up the transition. It also involves looking at the business model implications and the impact on products or services, including resourcing, cost and material interdependencies.

2. Implementation strategy

Entities need to disclose planned activities to deliver their objectives and priorities. This includes changes to strategy or resourcing, and any plans for GHG or carbon-intensive assets, and material interdependencies. Entities need to disclose any changes to products or services to support the transition plan, including changes in (direct or indirect) use of high-carbon products or services. Entities should also include internal policies or conditions, for example around energy or water use, to align with  strategic ambitions.

When implementing the transition strategy, entities need to think about the financial implications and impact on the wider business strategy, resources or products, including investments or financial plans. This should include a sensitivity analysis, including key assumptions or dependencies, and the impact on achieving the transition plan if those key assumptions are not met.

3. Engagement strategy

Entities must disclose current or planned activities across the value chain, for wider feedback and to encourage change aligned to strategic ambition. This should be boosted with wider engagement across the industry to share expertise and address common challenges.

4. Metrics and targets

Entities should disclose the metrics and targets used to track progress against your strategic ambition, at least annually. This includes financial metrics, GHG metrics or use of carbon credits.

5. Governance

Entities should disclose governance arrangements to support their transition plans and meet their strategic ambitions. This includes board oversight and reporting, senior management responsibilities and accountabilities, steps taken to build the right culture (including policies and procedures), incentives and remuneration, and skills and training needed to meet strategic ambitions.


Our thoughts

We are supportive of the release of this framework, as it will help entities with the disclosure of their transition plans. As a result of the impact climate is now having on organisations around the world, entities are developing transition plans in order to be more climate-efficient and have lower carbon business models.

This framework will help them to develop and disclose these plans. While the ISSB Standards do not currently require entities to put transition plans in place, IFRS S2 does require disclosure of information about any climate-related transition plans that the entity has.

This means it should complement the ISSB Standards and provide a useful tool for entities developing their transition plans which will then help inform the disclosure requirements of IFRS S2.