Climate transition plans: CEOs on how to deliver more than just net-zero
Climate transition plans are crucial for companies. Image: Unsplash.
- Climate transition plans are critical in ensuring that a realistic, credible net-zero pathway is designed and delivered for a company.
- The Alliance of CEO Climate Leaders is making climate transition plans an obligatory requirement for member companies.
- Three companies from the Alliance share how they're implementing and using transition plans within their organizations.
Companies are under growing pressure to take climate action by key stakeholders including governments, investors, civil society groups and consumers.
Climate transition plans are crucial for companies to anticipate and adapt to the physical and transition risks induced by climate change, build accountability, and show that their net-zero targets are backed up by a credible implementation roadmap.
A public transition plan can help companies deliver new value, as they can represent an opportunity to stay ahead of the competition, securing green advantage with:
- Investors: Over 50% plan to boost sustainable investments in 2024 – providing sustainability leaders with favourable access to cheaper capital: top environmental performers in Europe historically secured an average 100bps WACC discount.
- Customers: increasingly favouring innovative eco-friendly products.
- Suppliers: provided greater visibility on contemplated decarbonization levers and end-markets for green commodities – easing the achievement of Scope 3 targets.
- Future employees: as 40% of talent are putting sustainability as a primary job selection driver.
- Jurisdictions: starting to require climate transition plans: The EU’s Corporate Sustainability Reporting Directive (CSRD) will progressively mandate companies to develop a Climate Transition Plan and the UK already requires certain companies to disclose their transition plan as part of their Task Force on Climate-Related Financial Disclosures (TCFD).
- Other leading economies (Australia, Canada, the US) are expected to move from voluntary disclosure to mandatory, auditable transition plans.
- Staying ahead of the regulation will give companies the time to prepare their processes, upskill talent, and develop required technologies.
How is the World Economic Forum fighting the climate crisis?
How to develop a climate transition plan?
Building a climate transition plan is not just about reducing emissions. It’s about positioning the company for future success in a rapidly changing global landscape. A successful climate transition plan relies on three pillars:
- Ambition: focusing on the most impactful areas with science-based targets aligned with the latest standards and disclosed transparently to ensure strategic alignment.
- Action: implementation roadmap anchored in the realistic deployment of decarbonization levers and backed with adequate investment and engagement strategy.
- Accountability: through systems for monitoring progress, reporting results and continuously improving the plan.
3 companies that are tackling their climate transition plan
Stefan Klebert, CEO of GEA
“The climate crisis demands urgent action across all sectors. As an engineering leader, GEA understands the critical importance of ambitious climate transition plans. Our Climate Transition Plan 2040, recently approved by GEA shareholders through a “Say on Climate” vote, provides a strategic roadmap to achieve net-zero emissions across our entire value chain by 2040. This comprehensive plan, with ambitious targets validated by the Science Based Targets initiative, underscores our commitment to decisive action for a sustainable future.
"Transitioning to renewable energy sources, electrifying our vehicle fleet, and improving energy efficiency are vital steps in decarbonizing our operations. However, the biggest opportunity lies in innovating our product portfolio to empower our customers with solutions that reduce their environmental footprint. From energy-efficient machines to disruptive low-carbon technologies like carbon capture, we are pioneering intelligent innovations for resource-efficient production.
"While the path to net zero by 2040 is challenging, it presents immense opportunities for sustainable growth through innovation. By embedding sustainability into our culture, engaging our supply chain, and developing new solutions for customers, we are positioning GEA for continued industry leadership. We invite all stakeholders to join us on this vital journey."
Miguel Stilwell d’Andrade, CEO of EDP
“EDP’s Climate Transition Plan outlines the company’s coordinated effort to combat climate change and foster the transition to a clean energy era. EDP is on track to phase out coal energy generation by 2025 and become all-green by 2030 while investing heavily in our global renewable portfolio. The next challenge will come with scope 3 emissions – and our efforts to provide clarity on the emissions in our supply chain have also been backed by our investors.
"I strongly believe that a clear transition plan will drive corporate value creation by helping attract more talent, improving market valuation and giving access to financing with lower cost of capital, as well as improved risk management and resilience.
"At EDP, our Climate Transition Plan is a critical part of our overall strategy and gives transparency and credibility to our push towards a sustainable planet for the generations to come."
Jesper Brodin, CEO of Ingka Group IKEA
“We are in the most important decade for climate action and setting science-based targets in line with 1.5° is a critical step for companies. 1.5° is not a target, it is a limit. To transition to net-zero, we as businesses have to have a clear roadmap for how to achieve our strategies, and to deliver to our promise and responsibility. At IKEA we have a solid plan to halve emissions by 2030 and are in the finalizing stage of publishing our transition plan”.
The Alliance of CEO Climate Leaders is the world's largest CEO-led community committed to raising bold climate ambition and accelerating the net-zero transition by setting science-based targets, disclosing emissions and catalysing decarbonization and partnerships across global value chains.