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The Disclosure Framework for Net Zero Transition Plans is a voluntary guide for companies developing transition plans to achieve net zero in their operations. Companies can use this framework to develop, disclose and implement their transition plans. In addition to the Disclosure Framework, implementation guidelines and detailed guidance are being developed for both the real economy and the financial sub-sectors.
As a guideline, it can serve as an example to non-UK companies and increase understanding of the general direction and 'gold standards' of UK companies in transition. As it is expected to be a mandatory tool for UK-listed companies and financial institutions, it would be beneficial if it was taken into account in suppliers' business strategies.
Why is transition important?
Financing sustainable transformation is as important as financing sustainability. At the international level, many countries and regional organisations have taken action on financing and planning for transition, and transition financing has taken its place as an emerging concept in legislative strategy. Having identified the targets to be achieved, companies need to be provided with the necessary tools to achieve them in order to support the transformation.
What are the five key elements for a transition plan?
1. Foundations - Disclose strategic ambitions, including objectives for a low-GHG, climate-resilient economy, and how these goals align with avoiding negative impacts and protecting the environment.
2. Implementation Strategy - Detail actions within business operations and their financial implications to achieve these ambitions.
3. Engagement Strategy - Explain engagement with the value chain and external stakeholders to fulfil strategic ambitions.
4. Metrics & Targets - Report on specific metrics and targets to monitor progress.
5. Governance - Describe the incorporation of the transition plan within the company's governance structures to ensure ambition achievement.
Each element is further broken down into 19 sub-elements and associated disclosure recommendations.
- For example, under Engagement Strategy, companies are encouraged to report on engagement with their value chain, industry, government, public sector and civil society.
Ultimately, the five key elements should reflect a net zero ambition, a meaningful action plan towards that ambition, and the principles of accountability in implementation.
