Drafting Your Transition Plan: 4 Essential Steps to Get Started

In this latest instalment of our transition plan series, our Governance and Transparency Principal, Laura Reed, shares some practical tips around getting started with developing your transition plan.

A quick recap

A transition plan is a requirement under incoming Australian Sustainability Reporting Standards (ASRS). In the draft legislation it’s defined as “an aspect of an entity’s overall strategy that lays out the entity’s targets, actions or resources for its transition towards a lower-carbon economy, including actions such as reducing its greenhouse gas emissions.”

Plainly, it’s a plan that describes how your business will adapt to operating in the low carbon economy and what you’re doing to future proof your operating strategy.

You can think of it as a wrap up of a range of work you have already done, like your baseline emissions footprint outcome and mitigation modelling, and some pieces that you may currently be working on or are yet to do, like your climate risk assessment and scenario analysis. It can also overlay your external operating environment and your company’s role in contributing to an economy-wide transition to a low carbon economy.

Some companies, particularly in the financial services, property and resources sectors have already started to develop and publish documents in this vein, often called a Climate Change Action Plan (CCAP) or Climate Change Transition Plan (CTAP). We’ve included some examples below to provide a sense of direction.

While the exact format and requirements of transition plans for Australian companies are still to be determined, and they will likely vary depending on company structure and industry, there’s still plenty you can be doing now to prepare.

Practical preparation steps

1. Map what you have, find the gaps

You might be wondering where to get started. A great first step for any organisation is to map which elements of a transition plan you have already done, what you’re doing now and what’s still on the list to be completed.

You can use this very helpful diagram from the Transition Pathway Initiative. You might like to circle or tick the things you already have and then mark up what’s in progress and what’s still to be done. This will provide you with an initial view on where you’ll need to start focusing your efforts in the coming months and years.

Don’t panic if you haven’t done any of these things yet, in this case we’d suggest you start with a climate reporting (ASRS) readiness assessment.

2. Consider your audience

Transition plans will look different depending on your company ownership structure and your industry.

For companies that are listed and / or have a heavy emissions footprint, there will be greater interest in and scrutiny of your transition plan. You will need to ensure that the technical modelling included is translated into a narrative that can be engaged with by a range of stakeholders from sophisticated investors and financial stakeholders like insurers, through to activists and customers. You will likely invest in the communications and engagement approach for your transition plan, potentially delivering a designed PDF version or interactive website.

For privately held companies, your audience may include owners, private equity, government (potentially linked to tenders) and regulators, as well as your employees and customers. In this case, you’ll want to think about the best format to deliver information on your transition plan – it might be better presented in a slide deck that can be shared in face-to-face meetings or via a virtual presentation.

Many companies will have both an internal and an external version of their transition plan. The internal version is likely to be more detailed and include commercially sensitive modelling compared with a more graphical external version where the technical details have been translated into a narrative.

Examples of early transition plans

These early movers provide a sense of the type of content that will be required for inclusion in a transition plan.

• Beach Energy
• Stockland
• Unilever Australia

Commonwealth Bank also recently published its own transition plan requirements for any customers in power generation, oil and gas who wish to access funding after 2025.

3. Engage, engage, engage

Engage early with your board and / or leadership on their accountabilities and expectations. You may need to provide them with some education to be able to engage with the concept of a transition plan and the work that’s required to deliver one.

You’ll also need the buy-in of your financial, risk management and operations leaders to develop, embed and implement your transition plan. Many companies form sustainability councils or climate working groups to engage management on this work.

As appropriate, also engage externally, talk to your investors or owners, meet with proxy advisors and ESG ratings agencies and find out what their expectations are. Get ready for the same questions to be asked of you at the tender or stage or when selling your products.

Your customers and employees may also have a view – consider adding some targeted questions to your next customer pulse or employee engagement survey.

There may also be opportunities to engage with peers through industry conferences or initiatives. Sector-wide transition plans may become the norm, especially with the Australian government intending to publish sectoral transition pathways in the near term.

4. Seek appropriate support

Finally, developing a transition plan is a team sport, you’ll need the help of lots of people internally and externally. Internally this may include your board and leadership, financial, risk and operations leaders and teams, as well as communications and engagement support. Externally this may include specialist climate consultants, design agencies, your financial audit partner and legal counsel.