Why credible transition plans are now essential for business survival and success

Transition plans are fast becoming a ‘ticket to play’ for companies, much like net zero targets were a few years ago.

Net zero targets are now business-as-usual – but how companies plan to get there is not. The market and regulators are essentially flying blind, trying to figure out how companies will achieve these climate goals.

That lack of clarity creates significant financial risk and is already fuelling a rise in greenwashing allegations. That’s where credible transition plans step in, to bridge the gap.

Transition plans are not yet mandatory, but investors, banks and consumers now expect companies to disclose one to determine whether they’ll be around in the decades to come.

With the bar being raised for corporate climate action, alongside increased greenwashing claims, credibility is what really counts.

Companies that voluntarily develop and disclose ‘credible’ climate transition plans send a strong signal – they’re serious about remaining competitive, cutting emissions and staying ahead of the curve.

Credibility is also crucial in the face of Australia’s mandatory climate-related disclosures. With the first reports due early next year, companies that approach disclosures with a narrow, compliance-driven mindset risk more than just capital and their competitive advantage.

Alone, good-quality, useful disclosures will not transition a company or the economy to net zero. It’s the company’s credible planning and actions that matter.

An Australian-first credibility guide now aims to close that gap, supporting those preparing or assessing corporate climate transition plans.

Released by Climateworks Centre, the guide distils global best practices with input from the nation’s leading industry groups and climate transition experts, offering companies and investors a clear benchmark for credibility.

This benchmark improves clarity for stakeholders, reduces uncertainty for businesses, and helps investors assess whether a company is making meaningful, credible progress, including how it stacks up against its peers.

This is critical for investors to make well-informed decisions and could not come at a better time.

Preparing and disclosing a credible transition plan offers both the opportunity to reduce greenwashing risk and future-proof companies in a world racing towards net zero emissions.

It’s not all risk mitigation. There are enormous benefits for those that move quickly and credibly.

Delivering on climate transition plans is already helping companies in Australia secure access to capital and ensure funds ‘don’t start to dry up’, as AGL’s CEO Damien Nicks put it at the Australasian Emissions Reduction Summit.

Credible climate transition plans translate net zero ambition into strategic, genuine, company-wide action.

They present an incredible opportunity for internal alignment and accountability across the company’s departments, fostering an ‘all-hands-on-deck’ approach to drive strategic execution and increase business resilience.

Credible transition plans are powerful tools for managing climate risks, aligning portfolios and capturing long-term value.

No single company – or even industry – can reach net zero alone.

Credible transition planning exposes external dependencies that might impact a company’s ability to successfully implement their plan, and the plans themselves can be used by companies as a tool to communicate and engage with a diverse range of external stakeholders, including companies across their value chains, peers and government.

The direction of travel is clear. This is much more than a compliance exercise. Companies that prepare and disclose credible transition plans are setting themselves up for success in the coming decades.

This article was first published on Monash Lens. Read the original article

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