Transition planning for transformation: Unlocking the CSO’s purpose
Climate transition plans are more than another sustainability reporting exercise: they are a holistic tool Chief Sustainability Officers can use to truly integrate sustainability targets into corporate planning – unlocking the long-term business transformation the world desperately needs.
While they are fast becoming a compliance requirement, transition plans should not be viewed as yet another reporting burden for the Chief Sustainability Officer. On the contrary, the regulatory obligation (under CSRD for example) to disclose a transition plan is an opportunity to engage all stakeholders and set the organisation up for success in a climate-friendly world.
Leveraging transition plan disclosures to gain influence as a CSO
As with most things in corporate sustainability, it all starts with governance.
"The biggest message that we hear from sustainability teams that have gone through that first round of publication is that many of them perhaps underestimated the amount of time it takes to get that internal buy-in and get that internal conversation flowing. It's really important to make sure that you have really senior level buy-in on this and have the conversation with your C-suite and the board early on," Ira Poensgen, Secretariat Technical Lead at the UK’s Transition Plan Taskforce, tells CSO Futures.
Because they are forward-looking, climate transition plans can accelerate the Chief Sustainability Officer’s own transition, from a secondary role focused primarily on reporting to an integral and authoritative part of the C-suite – with the budget that comes with this.
“If we're going to make CSOs a C-suite role within large corporations, which is to say that they have as much authority, direction and responsibility as a CFO or a CIO, none of those departments exists without dedicated budgets or the authority to do what they need to do with those budgets,” asserts Matt Paver, Chief Operating Officer at Carbon Responsible.
In his experience, very few CSOs currently have this level of authority, though this appears to be changing.
As a result, the quality of transition plans says volumes about where in the organisation it originated (and indirectly the CSO’s level of influence). “Most transition plans that I've come across are strong in particular areas, but there's very few that are strong across the board. I think that reflects who's been involved in developing it. Has it been the risk team? Is it really strong on the risk elements? Some plans are very heavily influenced by the marketing team: this is an opportunity to sell the ambition of a company, but that then may not have the data to actually underpin what the company is saying,” notes Andy Garraway, Climate Policy Lead at Risilience.
A multi-year approach that starts with board buy-in
Companies that are more advanced in their sustainability journey are already better placed to produce the kind of transition plan that can unlock a real transformation. Of the 4,100 firms that disclosed a 1.5ºC-aligned climate transition plan through CDP in 2022, 81 stood out for disclosing all indicators, from governance and targets to scenario analysis, financial planning and value chain engagement.
One of the things these companies have in common is that they “got the governance right”, says Tatiana Boldyreva, Head of Climate at CDP. “Getting the buy-in from top level management and the board in terms of both the disclosure of information and the actual development of a transition plan itself, is very important.”
At Carbon Responsible, Paver recommends “not trying to do everything at once” when drafting transition plans and seeking board approval for investments. “Don't try to fledge a measurement programme, establish a target, invest in a solution and show change over time. This is a multi-year approach,” he advises.
An exercise in (climate) resilience
Speakers at a January CSO Futures event on sustainability governance highlighted the fact that a board’s ultimate purpose is to ensure the survival of their businesses – so for CSOs, presenting transition plans as a (climate) resilience exercise can help obtain buy-in.
About 97% of companies were already feeling the negative impacts of climate change, so climate resilience is considered “a key piece of good transition planning” under current standards and regulations, according to Garraway.
“The world isn't static, there are multiple futures ahead of us. And so you need to assess your transition plan in a way that not only quantifies your risk before and after applying that 1.5ºC-aligned transition plan, but you should also be looking at physical risk under pathways of 4ºC+, to make sure that your business strategy and your company is well adapted to cope with both extremes, from a policy, legislative and reputation angle, but also from a pure climate, physical impact angle,” he recommends.
The fact that companies are also being asked to demonstrate the financial risks and investments that come with climate adaptation is what will really change behaviours, he adds: “If they're faced with some big numbers on the balance sheet, then that is a very strong forcing mechanism to encourage companies to take action.”
Read also: Climate resilience approaches (and budget considerations) for CSOs
Towards holistic and integrated climate transition plans
The Transition Plan Taskforce (TPT), which is widely seen as the ‘gold standard’ for climate transition planning, recommends a “strategic and rounded approach that looks beyond transition plans as a decarbonisation roadmap,” explains Poensgen.
Of course, companies must think about how they are reducing emissions and mitigating climate change – an urgent aspect of the transition. They also need to think about actions they must take to manage climate risks within their entire value chains – the resilience exercise mentioned above.
But there is a third, crucial marker of quality in climate transition plans, which requires a company to identify the levers it has to accelerate the whole economy’s transition. “At the end of the day, we're not aiming towards perfectly decarbonised individual balance sheets, we're looking to get towards a net zero, climate-resilient economy. These are things like engaging with policymakers on the type of policy efforts you need in order for your sector to transition, thinking about proactively engaging with your value chains and your customers, etc,” Poensgen adds.
Cross-department collaboration and data integration
Because transition planning is a holistic exercise, it also requires collaboration across the entire organisation. All the experts interviewed for this article insisted that climate transition plans cannot and should not be developed in isolation – and recommended concrete actions Chief Sustainability Officers can take to orchestrate this collaboration.
For Poensgen at TPT, “having some mechanism for cross-functional collaboration is important” to be able to bring different functions together and build consensus, though she warns that different companies will do this differently.
Giti Tire, for example, has set up a sustainability governance structure that allows for a constant top-down, bottom-up feedback loop, with a ‘sustainability task force’ made of representatives from various departments in each of its locations.
For Garraway at Risilience, it’s also about “having a collective view of the data”, which will require overcoming the silos most companies currently face.
“Data integration is having that data in one place where you can actually understand the interactions if you pull a lever, in terms of reducing your risk exposure, and what that does to your transition plan,” he explains. (This is something AVEVA’s Global Head of Sustainability Lisa Wee calls “cutting the cost of curiosity”.)
Garraway believes these data gaps will become very clear once companies start submitting their CSRD reports, prompting much-needed integration. “Companies aren't going to get this right on day one,” he warns, but over time, this difficult integration work will pay off.
This last sentence essentially sums up the ‘why’ of transition plans: regulators and other stakeholders know no company is where it should be in terms of the climate transition, but if they start actively planning for transformation now, there is still a chance to future-proof the economy for a climate-resilient world.
This article is part of a CSO Futures series on transition planning for Chief Sustainability Officers. See other articles in the series:
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