Net-zero pledges are everywhere, but most companies lack a real plan to get there. That’s where climate transition plans come in.
As pressure mounts to act on climate, vague promises no longer suffice. Investors, regulators, and consumers are demanding credible, actionable plans. A Climate Transition Plan (CTP) offers a strategic roadmap for how a company will navigate and thrive in a low-carbon, climate-disrupted world.
It goes beyond reducing emissions. While decarbonization (mitigation) is a critical component, a robust CTP also addresses adaptation—how the business will respond to physical climate risks—and transformation, including shifts in business models, value chains, and governance.
By setting out clear priorities, timelines, and accountability mechanisms, a CTP ensures that climate ambition is backed by real, measurable progress—and that the business is prepared for a future shaped by more than 2°C of global warming.A credible climate transition plan is becoming increasingly critical for obtaining funding, achieving corporate efficiencies, and meeting regulatory and market requirements. But without clear and honest reporting, even well-intentioned efforts can seem like greenwashing—giving the illusion of sustainability without real action. To build credibility, companies must set realistic targets, track progress, and be transparent about successes and setbacks.
While decarbonization—cutting carbon emissions—is a major part of the plan, it’s not the only focus. A strong transition plan also considers climate-related risks, industry challenges, financial impacts, and opportunities for innovation. Above all, transparency is key to ensuring accountability and earning trust.
What Is a Climate Transition Plan?
A Climate Transition Plan (CTP) is a strategic summary of how firms expect to transition to a sustainable economy and connect their operations with global climate goals, particularly those outlined in the Paris Agreement. A CTP is a long-term strategic roadmap that outlines how a company intends to reduce its climate impact and align its operations with global climate goals, such as achieving Net-zero emissions by latest 2050. It encompasses various facets of the business, including governance structures, risk management protocols, financial planning, and operational adaptations. By integrating these elements, a CTP ensures that sustainability is embedded into the core of the company’s strategy.
Key components of a CTP include:
1. Emissions Targets (Mitigation)
Sets science-based, time-bound targets to reduce greenhouse gas emissions across the value chain (Scopes 1, 2, and 3). Aligned with global climate goals (e.g. 1.5°C pathway).
2. Climate Risk & Resilience (Adaptation)
Identifies physical and transition climate risks and outlines how the company will adapt operations, supply chains, and strategy to remain resilient in a changing climate.
3. Governance & Accountability
Defines roles, responsibilities, and decision-making structures—ensuring oversight by the board, integration into executive performance, and internal accountability.
4. Business Model Alignment
Assesses whether the company’s products, services, and growth plans are compatible with a net-zero and climate-resilient future—and what needs to shift.
5. Financing & Capex Plans
Explains how the company will finance its transition, including planned investments, capital allocation, and how financial decisions align with the transition strategy.
6. Workforce Transition
Addresses the human side of the transition: upskilling, job redesign, fair treatment of workers, and support for employees affected by changes in operations or strategy.
7. Metrics & Monitoring
Sets clear KPIs and systems to track progress, assess performance, and adjust the strategy over time. Ensures transparency for internal and external stakeholders.
For instance, a manufacturing company might implement a CTP by investing in energy-efficient machinery, transitioning to renewable energy sources, and redesigning its supply chain to minimize emissions. Similarly, a financial institution could develop a CTP that involves assessing the carbon footprint of its investment portfolio and setting targets to finance more green projects. For example, in 2023, Danone unveiled its CTP, aiming for a 30% reduction in methane emissions from fresh milk by 2030, in line with the Global Methane Pledge. The plan outlines steps to achieve Net-zero emissions by 2050 across its entire value chain. Key initiatives include transforming food systems, promoting regenerative agriculture, and enhancing packaging sustainability.
By developing and implementing a robust climate transition plan, companies don’t just meet regulatory expectations—they gain a strategic edge. Frameworks like the ISSB (IFRS S2), TCFD, CSRD, and the UK Transition Plan Taskforce are increasingly aligning around the need for credible, forward-looking plans. Even the latest draft of the SBTi Net-Zero Standard (v2)—now open for consultation and set to roll out by 2026—recognizes the climate transition plan as a core component of a credible net-zero strategy. In short: the climate transition plan is becoming the benchmark for serious, future-proof sustainability leadership.
What Is a Decarbonization Roadmap?
In the face of mounting environmental concerns and regulatory pressures, businesses are increasingly adopting Decarbonization Roadmaps to systematically reduce their greenhouse gas (GHG) emissions. These plans are tactical blueprints that detail specific actions and targets aimed at minimizing a company’s carbon footprint, and they’re part of your Climate Transition Plan.
Why Decarbonization Roadmaps Matter
With the global push towards sustainability, frameworks like the CSRD and the ISSB’s EFRS S2 require companies to not only disclose their emissions but also demonstrate concrete steps towards reduction. A decarbonization plan provides a structured approach to meet these obligations, ensuring businesses remain compliant and competitive.
Key Components of a Decarbonization Plan
1. Baseline Emissions Inventory
A detailed measurement of current greenhouse gas (GHG) emissions across Scopes 1, 2, and 3, serving as the foundation for setting targets and tracking progress.
2. Reduction Targets
Specific, time-bound emissions reduction goals, ideally aligned with science-based pathways (e.g. limiting global warming to 1.5°C). Can include interim and net-zero targets.
3. Emissions Reduction Levers
Concrete actions the company will take to reduce emissions—such as energy efficiency improvements, renewable energy procurement, low-carbon technologies, or process redesigns. Since a significant portion of emissions typically arises from Scope 3 (indirect value chain emissions), companies must actively engage with both suppliers and customers. This means collaborating to identify reduction levers throughout the value chain, from sourcing and production to distribution and end-of-life management. Building strong partnerships and transparent communication are essential to drive collective progress.
4. Implementation Timeline
A roadmap outlining when specific actions will be taken, with milestones to monitor progress and ensure the plan stays on track.
5. Accountability & Ownership
Clear internal responsibilities for delivering the plan—often involving sustainability teams, operations, procurement, and executive leadership.
6. Resource Allocation & Investment
An overview of the funding, internal resources, and technology needed to implement the plan—aligned with the company’s financial and operational planning. This typically involves using Marginal Abatement Cost (MAC) curves to identify and prioritize the most cost-effective emission reduction levers. Incorporating internal carbon pricing into decision-making processes helps quantify the financial impact of emissions, guiding investment choices and ensuring that decarbonization efforts align with long-term business objectives.
7. Monitoring & Reporting
A system for tracking emissions reductions over time, verifying results, and reporting transparently to stakeholders (e.g. through CDP, CSRD, or ESG disclosures).
Beyond environmental benefits, decarbonization also makes economic sense. Rising fossil fuel prices and the falling cost of renewables have made clean energy a cost-effective alternative. Many energy-saving initiatives offer a quick return on investment, with additional financial incentives such as government tax breaks and subsidies. Meanwhile, fossil fuel price volatility—seen in the rising Dutch natural gas prices in 2024—poses financial risks to companies reliant on traditional energy sources. By switching to renewables, businesses can reduce costs, stabilize energy expenses, and enhance long-term resilience.
However, many companies fall into the “Net-zero trap”—setting ambitious long-term climate goals without concrete pathways to achieve them. Relying too heavily on carbon offsets rather than real reductions can lead to accusations of greenwashing, damaging reputation and stakeholder trust.
To avoid this, a decarbonization plan should include:
- Science-based reduction targets aligned with frameworks like SBTi.
- Near-term milestones that bridge the time between now and the Net-zero target year
- Clear implementation strategies, such as transitioning to renewables and improving efficiency.
- Regular progress assessments and transparent reporting to ensure accountability and allow for adjustments.
Real-World Example
A compelling example is Ørsted, a Danish energy company that transformed itself from one of Europe’s most coal-intensive utilities into a global leader in renewable energy. Ørsted has committed to achieving net-zero emissions across its entire value chain by 2040, with science-based targets aligned to a 1.5°C pathway. Its climate transition plan includes phasing out coal entirely, investing heavily in offshore wind, engaging suppliers on decarbonization, and integrating biodiversity and circularity into project development. Ørsted’s strategy demonstrates how climate action can be embedded into core business transformation, rather than treated as a separate initiative.
In summary, a decarbonization plan is a focused, tactical approach that enables companies to systematically reduce their GHG emissions. By setting clear targets, adopting renewable energy, and making operational changes, businesses can make measurable progress toward sustainability and compliance with evolving regulations.
Key Differences Between Climate Transition Plans and Decarbonization Roadmaps
While both plans aim to address climate change, they differ in scope and focus:
Understanding these distinctions is crucial for companies to develop comprehensive strategies that not only reduce emissions but also ensure long-term sustainability and resilience in a low-carbon economy.
Why Transparency Matters
Transparency in climate transition plans is essential for companies aiming to reduce business risks and comply with evolving regulations. With frameworks like the CSRD making climate reporting mandatory, transparency is no longer optional—it’s a business imperative. A lack of clear reporting can harm a company’s reputation and result in legal issues.
A 2023 study by the NewClimate Institute found that many companies’ climate pledges lack transparency and integrity, exposing them to accusations of greenwashing.
To mitigate these risks, companies should adhere to established reporting standards such as the Task Force on Climate-related Financial Disclosures (TCFD) and CSRD. These frameworks provide guidelines for consistent and comprehensive disclosure, enabling stakeholders to assess a company’s commitment to its climate goals.
Companies that consistently track and communicate their progress send a clear signal to the market: we take sustainability seriously, and we’re making it happen.
Clear, consistent reporting:
- Builds investor confidence, making it easier to attract long-term capital
- Strengthens brand reputation by showing authenticity and accountability
- Cultivates better relationships with regulators, partners, and customers
- Drives internal alignment, helping teams stay focused on shared sustainability goals
By openly sharing both progress and challenges, companies demonstrate maturity, transparency, and commitment—qualities that resonate with all stakeholders. Over time, this builds trust, resilience, and competitive advantage in an economy where sustainability is no longer optional.
Companies that fail to report transparently don’t just lose trust—they face real financial risks:
- Fines & Legal Trouble – Governments worldwide are cracking down on misleading sustainability claims.
- Investor Pullback – Investors increasingly favor businesses with credible ESG strategies.
- Consumer Backlash – Greenwashing scandals can damage brand reputation and lead to boycotts.
Conclusion: A Clear Path Forward
Building a sustainable future requires more than just bold promises—it demands actionable strategies and transparent reporting.
- A Climate Transition Plan provides a big-picture strategy for aligning a business with a low-carbon economy.
- A Decarbonization Plan is a key component, outlining specific steps to cut emissions and drive real change.
- Transparency is essential to ensure credibility, avoid greenwashing, and maintain trust with investors, consumers, and regulators.
Companies that integrate both strategies will be better positioned to meet global climate goals, comply with evolving regulations, and future-proof their business. The path to Net-zero isn’t just about commitment—it’s about having a clear, actionable plan to get there.
How The Overview Effect Can Help
At The Overview Effect, we support companies across every step of the process: from GHG accounting and target setting to developing actionable net-zero roadmaps and assessing climate-related risks. We help align your strategy with leading frameworks like the CSRD, SBTi, and GHG Protocol, while embedding your transition plan into core business and financial decision-making. Whether you’re at the beginning or refining your approach, we bring pragmatic expertise to help you move from ambition to action—with clarity and credibility.
Reference list:
- CDP (n.d.) Climate Transition Plans. Available at: https://www.cdp.net/en/climate-transition-plans (Accessed: 25 February 2025).
- Danone (2023) Danone Climate Transition Plan 2023. Available at: https://www.danone.com/content/dam/corp/global/danonecom/about-us-impact/policies-and-commitments/en/danone-climate-transition-plan-2023.pdf (Accessed: 25 February 2025).
- European Commission (n.d.) Corporate Sustainability Reporting Directive (CSRD). Available at: https://ec.europa.eu/info/business-economy-euro/company-reporting-and-auditing/company-reporting/corporate-sustainability-reporting_en (Accessed: 26 February 2025).
- Financial Stability Board (2023) Task Force on Climate-related Financial Disclosures (TCFD) Recommendations. Available at: https://www.fsb-tcfd.org/recommendations/ (Accessed: 24 February 2025).
- NewClimate Institute (2023) Corporate Climate Responsibility Monitor 2023. Available at: https://newclimate.org/resources/publications/corporate-climate-responsibility-monitor-2023 (Accessed: 27 February 2025).
- Ramboll (n.d.) What is a Climate Transition Plan? Available at: https://www.ramboll.com/en-gb/insights/decarbonise-for-Net-zero/what-is-a-climate-transition-plan (Accessed: 25 February 2025).
- Reuters (2024) What’s inside the EU’s ‘Simplification Omnibus’ on sustainability rules? Available at: https://www.reuters.com/sustainability/whats-inside-eus-simplification-omnibus-sustainability-rules-2025-02-26/ (Accessed: 26 February 2025).
- World Resources Institute & World Business Council for Sustainable Development (2004) GHG Protocol Corporate Standard. Available at: https://ghgprotocol.org/corporate-standard (Accessed: 27 February 2025).