Why Transition Plans Matter Today

Climate change has become a material business issue, not just an environmental one. Companies face climate risks that threaten assets and supply chains, alongside mounting regulatory and investor scrutiny. The United Nations warns the world is on track for 2.9°C of warming, far above the Paris Agreement’s 1.5°C goal. In response, over 80% of global emissions are now covered by net-zero pledges. But a pledge alone is not enough what matters is the plan behind it.

“Climate commitments to net zero are worth zero without the plans, policies and actions to back it up,” U.N. Secretary-General António Guterres has cautioned.

Regulators in major markets are moving from voluntary sustainability reporting to mandatory climate disclosures, including requirements to outline transition plans. Investors, too, are pressing for action: “Businesses, cities and countries that do not plan for a carbon-free future risk being left behind,” warned Larry Fink, CEO of BlackRock.

What Is a Corporate Transition Plan (vs. Sustainability Reporting)?

A climate transition plan is a forward-looking strategy detailing how a company will pivot its business model, assets, and operations to thrive in a low-carbon or net-zero economy. It lays out the roadmap to align with scientific climate targets (like limiting warming to 1.5°C) while ensuring the business remains viable (and profitable) in a decarbonized future. This is distinct from traditional sustainability or ESG reporting, which often catalogues historical environmental and social performance. Transition plans are about the future, integrating climate strategy into core business planning rather than a static CSR report.

As one adviser puts it, “transition plans are living, dynamic distillations of business strategy” and not documents to sit on a shelf. Unlike an annual sustainability report, a transition plan typically is updated only every few years or when strategy shifts, tends to be more comprehensive, and crucially has executive-level buy-in (not just the sustainability team). In practice, some firms publish a standalone climate transition plan, while others embed it into their annual or ESG reports. The common thread is that a credible transition plan moves beyond generic disclosures to outline a concrete, company-wide strategy for the net-zero transition.

Building Blocks of a Credible Transition Plan

Not all climate plans are equal as quality and detail matter. Leading frameworks (from the UK’s Transition Plan Taskforce to CDP and TCFD) highlight several core building blocks of a robust corporate transition plan:

Ambitious Targets: Clear, science-based and time-bound emissions targets are the foundation. This means a long-term net-zero goal by 2050 (or sooner) and nearer-term interim targets (e.g. for 2025, 2030) across all relevant scopes of emissions. Targets should align with limiting warming to 1.5°C, implying rapid cuts (45% global reduction by 2030 per IPCC). They must cover Scope 1, 2, and ideally Scope 3 emissions, and be absolute reductions, not just intensity improvements or “offset” claims.
Concrete Actions & Levers: Targets are hollow without a strategy to achieve them. A transition plan should spell out the key actions and decarbonization levers the company will deploy. This includes changes to business strategy or models (e.g. phasing out coal power or gasoline vehicles), investing in new technologies (renewables, green hydrogen, carbon capture, etc.), process efficiencies, product redesign, and supply chain engagement.
For example, plans might detail the retirement of carbon-intensive assets by specific dates, a shift to electric fleets, use of renewable energy, or R&D into low-carbon materials. The assumptions and dependencies (such as policy support or new technology scale-up) should be transparent.
Financial Planning: A climate transition is also a financial transition. A credible plan links with the company’s capital allocation and investment decisions. Companies should disclose how their expenditures, capex and R&D align with the transition goals, for instance, what portion of the budget is going into low-carbon solutions versus high-carbon business. Investors want to see that new spending or M&A decisions are consistent with a net-zero pathway.
A solid plan addresses this by outlining the financing of the transition (investment required, use of green bonds or other instruments, etc.) and considering impacts on the profit model. It also assesses risks like asset stranding (for example, writing down coal plants) and includes a viable funding strategy for the transition.
Governance & Accountability: The plan must be backed by strong governance structures. This means clear board and executive oversight of climate risks and opportunities, and defined management responsibility for executing the transition plan. Ideally, climate targets are tied to executive performance incentives or remuneration to drive accountability.
Good governance also involves robust internal controls and auditing of climate data, and a “tone at the top” that makes climate a business priority. Simply put, the plan should not live only in the sustainability department, it needs to be owned by the C-suite and board, with oversight processes to monitor progress.
Transparency & Disclosure: Finally, credible transition plans require transparent disclosure to stakeholders. Companies should publish their plan (or integrate it into annual reports) and regularly report updates on progress (at least annually). They should disclose the metrics they will use to track success, for e.g. emissions reduced, share of “green” revenue or capex, etc. and report consistently against those. Many frameworks (TCFD, ISSB’s climate standard) now call for companies to describe any climate transition plan in their mainstream filings, underscoring that this is becoming a standard part of corporate disclosure.

Real-World Examples: The Good, the Bad, and the Ugly

How are actual companies stacking up? Transition plan quality varies widely across sectors, some firms have detailed strategies, while others offer only platitudes. Here are a few examples from key industries:

Energy (Power and Oil & Gas)

Perhaps the starkest contrast is in the energy sector. On the positive side, Denmark’s Ørsted (formerly an oil and gas company) is often hailed as a transition success story. Ørsted transformed its business model from fossil fuels to renewables; it has already phased out coal and aims to be virtually carbon neutral in power generation by 2025, a 98% cut in emissions from 2006 levels. This kind of rapid shift, shutting down coal plants and massively investing in offshore wind shows a strong transition plan in action. In contrast, some oil & gas majors have set long-term net-zero 2050 targets but continue to invest heavily in fossil fuel expansion. For example, BP initially announced in 2020 one of the most ambitious plans in the sector, pledging to cut its oil and gas production 40% by 2030 and grow renewables. However, by 2023 BP scaled back its 2030 emissions reduction target to just 25%, and in 2024 it effectively abandoned the output-cut pledge entirely, refocusing on oil projects in the Middle East and Gulf of Mexico. Similarly, Shell has slowed investments in renewables under new leadership. These reversals, driven by pressure for short-term returns and energy security concerns, have drawn criticism from investors for undermining the credibility of the companies’ net-zero commitments.

Steel and Heavy Industry

Steelmakers face a tough but crucial transition, as steel is highly carbon-intensive. Leading players are starting to act. ArcelorMittal, for instance, has a roadmap to cut CO₂ emissions intensity 25% globally by 2030 (35% in Europe) and reach net-zero by 2050, using measures like hydrogen-based steel production and electric arc furnaces. It is investing in pilot projects for green steel, though full scaling depends on affordable clean energy. However, the industry overall is lagging on short-term action. Many steel firms are still at planning stages or waiting for breakthrough technologies. Crucially, few have tackled Scope 3 (supply chain) emissions or set 2025–2030 targets that align with a 1.5°C pathway. This suggests that without stronger policies (e.g. carbon pricing) and tech innovation, heavy industries’ transition plans remain more aspirational than actionable. Still, examples like SSAB in Sweden (producing fossil-free steel with hydrogen) show it’s possible to plot a credible course in this sector, and investors are watching for the companies that lead versus those that stall.

Cement

The cement industry has begun formulating transition plans, often focusing on energy efficiency, alternative fuels (like biomass), and nascent carbon-capture technologies to deal with process emissions. Giants like Holcim have set science-based targets as it aims to reduce its Scope 1 and 2 emissions by 21% by 2030 and is experimenting with carbon capture and low-clinker cements. However, common gaps in cement plans include a heavy reliance on future technological fixes and offsets, rather than concrete near-term emissions cuts. Many cement firms have yet to lay out how they will dramatically lower the clinker-to-cement ratio (a key driver of CO₂) or transition to alternative building materials. According to analysts, as of the mid-2020s, no major cement maker is on track for a 1.5°C-compatible reduction without substantial additional measures. This underscores the need for more aggressive interim targets and capital investment into low-carbon innovations (from electric kilns to carbon capture) in the next decade.

Technology (ICT sector)

Tech companies generally have lighter carbon footprints than heavy industry, but many have taken high-profile climate pledges. Strong example: Microsoft has one of the most comprehensive corporate climate plans. In 2020, Microsoft announced a “bold commitment and detailed plan to be carbon negative by 2030” meaning it will remove more carbon than it emits and to remove all historical emissions by 2050. The plan includes running on 100% renewable energy, electrifying its global operations, and investing $1 billion in a Climate Innovation Fund to spur carbon removal technologies. Microsoft also employs internal carbon fees to drive accountability for emissions across business units.
Weaker areas: Not all in tech are equal; some companies rely mainly on purchasing carbon offsets to claim neutrality without deep supply chain decarbonization. Also, the tech sector’s indirect emissions (device manufacturing, data centre construction, etc.) can be significant. Many smaller or emerging tech firms have yet to publish robust transition strategies, and few detail how product design or consumer use-phase emissions will be tackled.
Nonetheless, the tech sector overall has demonstrated its ability to set ambitious targets and often meets them (e.g., Amazon’s Climate Pledge to be net-zero by 2040 across its businesses). The key differentiator is how detailed and integrated the plan is, for instance, whether it addresses scope 3 emissions like supply chain manufacturing and device energy use. Tech companies with large cloud infrastructure (like data centres) have started linking renewable energy investments and efficiency improvements directly to their growth plans, which is a positive sign of integration of climate strategy into business strategy.

Transportation (Automotive and Shipping)

In autos, virtually all major carmakers now have plans to electrify their line-ups, for example, GM and Volvo plan to phase out internal combustion engine sales by 2035 or earlier. These are concrete transition plans responding to both policy and market signals. The credibility of auto-sector plans can be gauged by their investment in EVs (tens of billions of dollars committed) and the phase-out timelines for gasoline models. Many auto firms also set supply chain decarbonization targets (for steel, batteries, etc.) to tackle indirect emissions.
Shipping is another interesting case: it’s a hard-to-abate sector, yet a couple of large firms have led the way with ambitious targets, making the shipping sector one of the few currently on track for 1.5°C alignment. For instance, A.P. Moller–Maersk, the world’s second-largest container shipping company, has committed to net-zero emissions by 2040 and has already launched the first carbon-neutral ships running on green methanol. Maersk’s transition strategy involves ordering new green-fueled vessels and investing in fuel innovation, a concrete action plan that puts it ahead of most of its peers.

These examples show a spectrum: leading companies back up long-term visions with interim targets, real investments, and business model changes, whereas laggards set distant goals with little substance or even roll back existing targets. Data from 2024 indicates that nearly 80% of large global companies have pledged net-zero by mid-century, and most have assigned board oversight of climate risk, reflecting broad awareness. However, fewer than half have concrete decarbonization strategies explaining how they’ll reach those goals. And tellingly, out of ~2,000 major listed companies analysed by the Transition Pathway Initiative, 98% had not presented a credible transition plan that reallocates capital in line with their climate goals. Only a small handful (the top 2%) are demonstrating the full package of thorough targets, plans and investments. This credibility gap is further evident in emissions data: on current trajectories, the world’s businesses are set to overshoot their collective 1.5°C carbon budget by 61% between 2020 and 2050, underscoring that corporate plans in aggregate are nowhere near ambitious enough yet.

For corporate leaders reading this, the message is clear: climate transition plans are no longer optional or peripheral; they are fast becoming a core part of corporate strategy and disclosure. A credible plan is a tool for competitiveness in a changing world, not just a compliance exercise. It forces a company to stress-test its business model against climate realities and to innovate for the future. As pressures on our planet intensify, there is a growing divide between companies moving forward and those falling behind.

“Companies that embed climate and nature into their strategy, governance, and financial planning are leading the way; yet far too many businesses remain on the sidelines,” notes CDP’s Sherry Madera.

The challenge for every executive team is to ensure they are on the right side of that divide.

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