How can businesses accelerate transition plans in an age of uncertainty?

"We can't succeed in the eyes of the world if we continue with the levels of political turbulence we have seen in recent times. It is always in my mind that I am the seventh Prime Minister in 10 years."

So said Andy Burnham during his speech at the Labour Party Conference in Liverpool late last month, as he sought to wrestle with the some of the big interlocking challenges that have hit the UK over the past decade, from Brexit and the social care crisis to soaring energy costs and - yes - political instability. Each of those seven Prime Ministers has brought with them different priorities, fresh policy proposals, and new ministerial teams. For many businesses, investors, and policy wonks, uncertainty has been the only certainty.

To take just one pertinent example, the Whitehall department in charge of energy and climate policy has worked through nine Secretaries of State, two different departmental names, and too many junior Ministers to count over the past decade. Throughout much of the 10 years a degree of stability was provided by the broad political consensus in support of the UK's long term net zero targets, which meant that while specific decarbonisation policies were chopped and changed the overarching direction of travel remained consistent. But in the past two years the rise of Reform and the Tories' ditching of their support for the Climate Change Act means even the assumption that broad climate action will continue can no longer be taken for granted. 

This age of policy uncertainty presents a huge challenge for businesses seeking to accelerate their own net zero transitions and the sustainability executives tasked with driving forward corporate decarbonisation efforts. Indeed, Burnham's speech came just hours after a number of leading UK sustainability professionals had sat down for BusinessGreen's latest roundtable discussion, during which frustration over constant policy shifts and political uncertainty was palpable.

Taking place in central London under the Chatham House rule, the invite-only event drew candid reflections from a dozen or so attendees on the challenges and opportunities they are facing as they seek to accelerate corporate climate action against a backdrop of worsening geopolitical volatility and policy instability.

The roundtable, hosted in association with SE Advisory Services and billed as 'Transition Plans 2.0: How to accelerate Corporate Decarbonisation Efforts', shone a light on how organisations' transition planning is evolving fast as companies look to enhance their resilience in response to both worsening climate impacts and economic headwinds.

In the UK, transition plans are expected to outline the steps and strategies for an organisation to reduce its greenhouse gas emissions and contribute to the development of a net zero economy by 2050, according to the framework developed by the Transition Plan Taskforce. But it remains unclear how widespread such plans will become with the government having yet to make a final decision on to make the publication of transition plans a mandatory requirement for listed firms. Plus, attendees were at pains to point out how flexible such plans have to be, given the policies and market trends that underpin them can change with remarkable speed. 

For one of the participants in the discussion, who works in corporate sustainability at a major financial firm, there remains "a lot that's unknown" when it comes to transition planning. "One of the challenges we've always had, even when we first released our transition plan, is that we're heavily reliant on government policy," they said.

The firm is making good progress towards its 2030 emissions targets, but progress requires auditing every year and the targets are revisited every three years to try and keep track of shifting policy requirements. "One of our decarbonisation targets is around our motor portfolio, and at the point where we set out transition plan, the government was on track to implement new electric vehicle [EV] regulation by 2030," they explained. "That's now pushed out, but that was embedded in our plans."

Uncertainty around road transport policy direction was a bugbear raised by several participants, quite understandably given the government is currently consulting on changes to the Zero Emission Vehicle (ZEV) Mandate in response to pressure from the automotive industry - much to the frustration of the EV charging sector and fleet owners and operators across the country. It remains to be seen what changes will be adopted, but they could range from weaker targets for electric car and van sales, to greater flexibilities for carmakers to try and meet them, all of which could then have a knock on impact on corporate goals to transition towards EV fleets.

Another sustainability lead in the technology sector similarly reflected on how policy uncertainty can have a direct impact on corporate efforts to decarbonise their fleets. "Obviously, with the noise around the ZEV Mandate being weakened, what impact does that have on manufacturers to put pressure on them to make sure they continue to invest in the technology, and certainly in the commercial vehicle space as well?" they said. "We need to make sure we have good relationships with our vehicle suppliers and in our engagement around policy to make sure it is a positive landscape to ensure the investment and infrastructure is there to make that change."

The green economy faces far greater challenges on the other side of the Atlantic, of course, where the Trump administration has launched a full spectrum attack on the climate policy framework built up under Presidents Obama and Biden.

"We're a US-based company and we've therefore been through a number of different administrations," said one executive at a leading clean tech firm. "We've seen everyone go all in, then everyone's out, everyone's back in, and everyone's out again. It's really tough when you're trying to secure long-term offtake agreements to de-risk your project, to get investment, top build, and then through that to help everybody else with their transition plan.".

But even in a more supportive policy environment, such as in the UK, there are still challenges created by a stop-start levels of support. "We work with industries that are severely risk-allergic, and it seems as though governments are sort of hedging," they said. "As an example, the UK has quite stringent Sustainable Aviation Fuel [SAF] regulations that are quite positive for the industry, but they're also opening up a consultation to reframe it because not all the volumes have been delivered. That then makes the airlines think 'this is probably going to be watered down, so we don't need to sign an offtake agreement, and we'll put a pin in our transition plan'. So it is challenging."

Such challenges are apparent even in sectors where clean technologies are proven and ready to build, and the surge in fossil fuel prices following the Iran war that have made them far more cost competitive. "We just need investment," one delegate explained. "But the problem is we can't get the investment because of that [policy] uncertainty."

In the UK, transition plans remain voluntary, although from the accounting period beginning next year listed companies are expected to disclose whether they have developed such a plan, and it they haven't developed such a plan, explain why not. It forms part of the "comply or explain" approach to sustainability disclosure rules confirmed by the Financial Conduct Authority (FCA) last month.

However, despite having held a consultation that ended over a year ago on a range of options for climate-related transition plans aligned with a 1.5C pathway that included making them mandatory - for FTSE 100 companies and UK-regulated financial institutions including banks, asset managers, pension funds and insurers - the government is still yet to make a final decision.

As such, when it comes to transition plans for UK firms - and indeed for those in Europe, where Brussels has spent the past year cutting back or "streamlining" its corporate sustainability reporting rules - uncertainty continues.

"We want mandatory transition plans for big firms," said one of the attendees at the roundtable, who works in sustainability in the technology sector. They argued such a move would help to move the dial in accelerating transition planning across the economy. "You have to do it," they said of mandatory reporting requirements, "that's the easiest way."

The case for standardised and mandatory transition planning is strengthened by the way many big companies are already fairly advanced in their transition planning and sustainability data disclosure, in part due to the way many of them already report data to disclosure non-profit CDP. Similarly, in the EU many firms had expected transition plans to become mandatory before last minute changes to narrow the reach of new sustainability disclosure regulations were confirmed.

"A lot of companies really invested a lot of money, brought a lot of expensive consultancy in at significant rates to get a transition plan up to scratch, and governments in lots of places have just pulled the rug," one senior executive said.

Another attendee also called for transition plans to be mandatory for major UK firms. "You have to force companies to do this," they said. "We're a prime example, as we don't really want to step out too far [on our own]. We want to be in the middle of the pack and see what the first movers look like before we actually go into it."

However, all delegates were keen to stress that there remain opportunities for businesses to accelerate their transitions even where policy uncertainty abounds, as demonstrated by the clear need to adapt buildings and households to increasingly extreme weather in the UK. Such resilience efforts and investment efforts are becoming a necessity regardless of the policy signals from government.

"Regardless of what is happening in politics, our vision is to be the undisputed leader in supporting our clients' decarbonisation journey, so that is something which is embedded within our business," said one sustainability director, who works at a multinational energy and engineering firm. "This summer has been really hot and our buildings are not coping, so we need to make sure we work with clients to adapt their buildings."

Business transformation planning

Increasingly visible climate impacts are one of the reasons why, despite on-going political turbulence, there is a strong sense of corporate support for transition planning and climate action has continued to advance and mature in recent years. Rather than merely being seen as a niche environmental sustainability issue, transition planning is increasingly being viewed, by growing numbers of larger corporates as core to a business's strategy, resilience, and future-proofing.

That was certainly the view of Martin Palmer, sustainability commercial  director at SE Advisory Services. "It's no longer a sustainability objective with just us working on it," he said during the discussion. "It is business transformation, which requires bringing stakeholders through that process. And that brings challenges. How do we invest? How do we engage? What are our obstacles?"

A similar view was aired by another participant working in sustainability in the non-profit sector. "My role has evolved from sustainability to a broader business transformation role in the last few years," they said.

This shift has happened as corporates have moved past the wave of ambitious corporate climate commitments that followed COP26 in Glasgow in five years ago and are now working on detailed practicalities of measuring and reducing emissions. Consequently, some companies have watered down or dropped their near-term emissions target, as they have realised they were over-ambitious and reliant on fast decarbonisation across the wider economy. Others have found their energy use rising again, as the explosion in AI development has taken off, presenting a major new decarbonisation challenge for the technology industry. But attendees were keen to stress that the recalibration of some corporate targets should not be interpreted as a weakening in corporates' commitment to climate action. "The larger corporates, particularly those operating in Europe, are cracking on, and it is moving from target setting to implementation," one delegate argued. "Often it is about phasing in and implementation now, where the policies have been set, the targets have been decided, and they're sort of getting on with it."

Climate resilience

Many participants also highlighted how the increasing visibility and costs of climate change impacts had helped to focus minds within their companies on the need for greater resilience in the face of both extreme weather and volatile energy prices driven by fossil fuel reliance. As such, measures that help to reduce exposure to fossil fuels and better prepare and adapt firms and their value chains for the growing threat from heatwaves, storms, droughts, and flooding are increasingly regarded at boardroom level as not just a 'nice to have', but a business imperative that should be part and parcel of transition planning.

"You know, four years ago, we would have talked about wildfires in the UK as a climate risk, and people would laugh at me," said Frankie Bright, a principle consultant at SE Advisory Services. "Whereas now it's like 'okay, it's come a lot quicker than you told me you thought it would!'"

For one sustainability executive, the summer heatwaves brought home the huge ramifications of extreme heats on the workforce. "How does climate impact the world of work in terms of productivity?" they asked. "We all felt that over the summer. In terms of the disruption, what does that mean in terms of our own workplaces, but also again in terms of supporting clients externally?"

Not all participants felt their industries were taking climate adaptation seriously enough, however, including one sustainability professional in the construction sector who warned the industry was struggling to respond to the new realities it was facing. "We're seeing a lot of clients with, you could say 'informational deficits' - which is the diplomatic phrase to use - but they're still building social housing on floodplains and imposing quite significant risk and maintenance burdens," they said.

For others, highly visible climate impacts offer a route to embed resilience and climate action beyond the sustainability department, as best practices to respond to climate risk and curb fossil fuel reliance should be seen as purely practical, operational and financial necessities. One senior sustainability lead said he was now seeing infrastructure resilience measures put in to respond to flooding, extreme heat, and wildfire risk because they are being recognised as "mission critical". "Where they're putting in adaptations, they're not necessarily doing so because of sustainability drivers," they said.

Meanwhile, soaring energy costs are strengthening the financial case for installing efficiency measures and clean technologies. "[The finance team] has finally realised investing now protects the business in the future," one delegate observed. "Sometimes those external pressures help to fast-track things going forward."

As such, they argued transition plans that can unite climate resilience, decarbonisation, and energy cost savings should increasingly be recognised as fundamental to a company's long-term strategy. "I think it's a plan to know how your business is going to operate in five, 10, 15 years based on what we know how," they said.

Internal engagement

But transition planning isn't just about preparing businesses for the external changes and challenges taking place across the economy on the road to net zero - it is also very much an internal process too requiring staff and stakeholder engagement.

Bright at SE Advisory Services, who in her role works with companies to help them adopt clean energy and efficiency measures and processes, stressed the continued importance of building support across an organisation. "Traditionally we'd come in and provide guidance and technical information, whereas my role now is more about embedding change within a business," she said. "For longer-term projects we really need to get into the business themselves to understand the different drivers and the different people within it. So, I think my role has changed massively from being an independent, external advisor, to maybe becoming more of an internal partner with them."

This tallied with the view of another roundtable participant, who said they viewed their role as a "translator" for sustainability for the boardroom and the wider organisation. "The business case will be different for each and every one of us here, depending on our sector and circumstances," they said. "And it's for us to make that translation for what the drivers are for sustainability in this organisation which are going to resonate with the stakeholders around the table, whether the exec or the board."

They added that 'change management' training and principles had been key to successfully securing buy-in within their organisation for developing and delivering transition plans - a view similarly expressed by several other of those in the roundtable. "I found it really transformative," they said. "That's the kind of stuff which I think as sustainability professionals we need more of."

Engaging, educating, and upskilling staff right across a business - from the boardroom right down to the shopfloor - is therefore a critical part of transition planning, as another attendee who leads on sustainability for major engineering firm argued. "It's about upskilling all of the other departments," they said. "You can set whatever targets you like, but if you haven't got the financial backing, the C-suite, the value chain, and suppliers helping you and actively engaged, you're never going to progress it. The transition plan can't just be a document that sits with the sustainability team, it needs to work all around."

It is this sense of a transition plan as a living document that is embedded right across an organisation that can help organisations navigate the political and policy turbulence, which inevitably means strategies have to evolve over time, while remaining true to their long term strategic goals and the urgent need to both decarbonise and build resilience.

As Palmer at SE Advisory Services argued, policy changes and economic turbulence are inevitable, but the fundamental business case behind many corporate sustainability projects remains robust. "We need to be confident on the business cases, not just us, but the leaders in our organisations too," he said. "If the government can't be bold and make those decisions, then we can be bold. Because we can see the risk of not making that change for the sustainability and longevity of our organisations and the ability for them to be able to trade in 10, 15, 20 years if we don't adapt."

BusinessGreen's latest Sustainability Leaders Club roundtable discussion - 'Transition Plans 2.0: How to accelerate Corporate Decarbonisation Efforts' - was hosted in association with SE Advisory Services.