This is the second article in a three-part series on understanding decarbonization commitments. This article focuses on transition plans. the First post explored how commitments are defined and the next article will cover climate scenarios.
1. Does the company have a clear transition plan?
The writer Antoine de Saint-Exupéry said “a goal without a plan is just a wish”. The same goes for climate commitments without clear transition plans. A transition plan is the detailed roadmap of goals and actions that a business will pursue on its journey to net zero. It provides transparency and accountability to internal leaders and external stakeholders, which is why regulators, investors and activists have demonstrated growing interest in net zero transition plans.
The Taskforce on Climate-related Financial Disclosures (TCFD) is the de facto standard for climate-related financial risk reporting and has incorporated transition planning into their latest disclosure guidelines. The TCFD suggests that transition plans should be concrete and specific, embedded in corporate strategy and governance, anchored in quantitative metrics, regularly reviewed and communicated to shareholders. Climate Action 100+an investor-led initiative, and CDP, which supports global emissions disclosure, both have effective transition planning frameworks. These executives expect credible transition plans to consider multiple time horizons, set intermediate decarbonization targets, and be explicit about the capital allocation and investments needed to transform the business.
2. How are offsets used?
Many net zero commitments and transition plans mention the use of carbon offsets. Offsets are emission reductions or removals used to offset emissions produced elsewhere. In recent years, offsets have come under criticism for providing a “license to pollute” and not capture the claimed emissions. However, high quality certified offsets can be valuable tools in the fight against climate change.
In net zero commitments, offsets can be part of a company’s climate strategy, but should not replace dedicated efforts to reduce company emissions. For greater transparency, offsets must be reported separately from emission reductions.
Most alliances and initiatives take a conservative stance on using offsets to meet net zero commitments. The NZBA states that upon reaching the net zero end state, offsets should be limited to “balance[ing] residual emissions when there are technologically or financially viable alternatives to eliminate the emissions.” Also, all offsets must be “additional and certifiedwith additional reference to the need for offsetting to further reduce emissions (eg buying an existing forest does not count, planting a new one might). When assessing net zero liabilities, any use of offsets should be carefully considered.
3. What are the checkpoints on the road to net zero?
Although transition plans may have a common long-term destination (net zero by 2050), ambitious short-term goals are essential to a credible plan. For models included in recent IPCC assessments, 1.5˚C aligned scenarios required an average reduction of 45% of carbon dioxide emissions by 2030. Many governments have promised 50% reductions by 2030, a figure also used by Race to Zero.
However, climate change demands immediate action, which makes short-term goals essential in determining which organizations meet and fall short of their commitments. The NZAOA requires 2025 targets on four pillars: Sub-Portfolio, Sectors, Engagement and Transition Funding. Although single goals can be misinterpreted, these pillars provide a more comprehensive view of a company’s net zero progress. In addition, while some commitments may specify intensity-based targets (emissions per given economic unit) or absolute reduction targets, reporting progress against both methodologies improves transparency.
The quality of the target also matters. This is why net zero alliances such as NZAOA, NZBA and others have developed goal setting protocols. A facility’s targets must adhere to an established target setting protocol and be certified by the Science-Based Targets Initiative (SBTi), which provides guidance on appropriate pathways and practices for target setting. Goals.
4. What does the plan say about nature and just transition?
The air conditioning system is connected to a variety of other environmental support systems also facing pressure from human activities. These include biodiversity, freshwater resources, marine ecosystems, clean air and many more. Transition plans cannot afford to ignore other nature considerations. Transition activities must be sustainable both in terms of net emissions and their impacts on the wider environment.
The transition to net zero will also lead to widespread changes in all economies. A green future must be a future that works for everyone. Transition plans must consider workers who will be displaced by changing economic realities and protect the rights of Indigenous peoples. In addition, transition plans must take into account the different human development and environmental challenges in each region of operation. An unwavering commitment to just transition should be evident in a company’s transition plan.