In this evolving landscape, the EU Corporate Sustainability Reporting Directive (CSRD)—set to impact over 50,000 companies—offers a significant opportunity for enhanced transparency and accountability in sustainability practices.
Beyond compliance, the CSRD has the potential to drive transformative change, encouraging companies to embed sustainability into their core business models and operations. However, with the first round of mandatory disclosures approaching in early 2025, many companies are still struggling to turn this potential into meaningful progress.
Companies face challenges such as data availability, data quality, and technical complexities in creating a credible plan. But, credibility is just the beginning. A well-constructed climate transition plan not only meets regulatory demands but also unlocks long-term value. By embedding sustainability into their strategy, companies can build resilience, foster innovation, and strengthen stakeholder trust while contributing to global net zero goals.
Under the CSRD, a climate transition plan (CTP) is a forward-looking strategy outlining how a company intends to meet its climate goals, with a specific focus on reducing greenhouse gas emissions. It's not just about setting ambitions—it's about translating them into concrete actions.
Stakeholders expect a clear, actionable plan that outlines how the business model will evolve, the key decarbonisation levers that will be deployed, the financial resources mobilised, and the governance structures put in place to ensure effective implementation.
It must detail your company's efforts to reduce emissions, aligning your strategy and business model with the Paris Agreement. This means it needs to:
Annual reporting has shifted from optional sustainability disclosures to a mandatory requirement. The CSRD now mandates that companies report on their climate impacts, risks, and decarbonisation strategies in a clear, standardised manner. Climate transition plans are essential for compliance, helping companies avoid penalties and investor scrutiny.
The CSRD is more than just a compliance measure; it's a strategic opportunity to transform business practices in support of global climate goals. Achieving net zero by 2050 requires businesses to decarbonise and transform. Companies that fail to act risk being left behind.
A climate transition plan helps businesses build resilience against environmental, regulatory, and market shifts. This approach opens opportunities to thrive in a low-carbon economy, ensuring long-term viability in a net zero future.
The CSRD requires companies to set long-term net-zero targets aligned with the Paris Agreement's 1.5°C goal. These targets must be backed by timelines, and interim milestones, and cover emissions across scope 1, 2, and 3. Compliance ensures alignment with global climate science.
A credible transition plan hinges on reliable data. Companies must provide qualitative descriptions and quantitative reports on decarbonisation strategies. Accurate emissions data helps identify hotspots and assess reduction potential, outlining the actions needed to decarbonise operations and the value chain.
The CSRD requires businesses to assess how their transition plan impacts the broader business model. This includes evaluating how decarbonisation affects operations, products, services, suppliers, and customers. Integrating climate considerations into overall strategy ensures compliance and strengthens the company's ability to thrive in a low-carbon world.
A credible transition plan must be supported by adequate resources. Companies must disclose capital (CapEx) and operational expenditures (OpEx) invested in their transition plans. Some may go beyond compliance by disclosing investments in technology, R&D, and human capital, signalling a commitment to long-term value creation.
A climate transition plan must be dynamic, regularly monitored, and adjusted as necessary. The CSRD expects companies to establish governance structures with clear roles at the board and management levels to oversee progress. Milestones should be reviewed regularly, with adjustments made when targets are missed, ensuring climate goals are treated as seriously as financial ones.
Developing a credible transition plan requires sophisticated emissions modelling and scenario analysis to project emissions and assess decarbonisation potential. New concepts like “locked-in emissions" or modelling the financial costs of decarbonisation demand expertise in carbon accounting and climate science which can be a struggle for companies as they are still developing capacity.
Access to high-quality data has always been a challenge, and the CSRD raises the bar. Companies face limited visibility into the carbon footprint of suppliers, logistics partners, and customers. With the CSRD, companies must ensure that their data is accurate and reliable enough to inform strategy and business decisions. Many will need to develop new systems or tools to meet these stringent requirements.
Effectively communicating climate efforts to a broad range of stakeholders is a growing challenge. While investors and regulators are still key, customers, employees, NGOs, and the broader public now demand transparency. Meeting minimum disclosure requirements is no longer enough—companies need to communicate efforts in ways that build trust with diverse audiences. Balancing these demands is complex and resource-intensive.
As the risk of crossing critical climate tipping points increases, the urgency for businesses to act has never been greater. To avoid the worst impacts of climate change and achieve a zero-carbon economy, companies must embrace transformation—"business as usual" is no longer viable.
Forward-thinking companies view the CSRD not just as a regulatory requirement, but as an opportunity to reassess their business models and embed sustainability at the heart of their strategy. By embracing this challenge, companies can turn compliance into a driver of innovation, resilience, and long-term success.
The most effective way to demonstrate this commitment? Publish a credible climate transition plan.
Our team of technical experts, sustainability strategists, and communications consultants are here to guide you through the process.
Get clarity on your current sustainability reporting and prepare for upcoming regulations, through our CSRD Solutions such as Gap Analysis or Double Materiality Assessments.
Contact us today to start building a climate transition plan that works for your business and comply with regulation.
