The UK Transition Plan Taskforce: What's new and what's next?

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The UK Transition Plan Taskforce: What's new and what's next?

Partner Insight: The TPT has released its final disclosure framework and implementation guidance for use by UK businesses as a common structure for framing and delivering a net zero strategy - Verco explores the implications for companies, and the expectations for would-be disclosers

The final guidance and disclosure recommendations have been published by the TPT nearly a year on from the 2022 release of the draft transition plan framework.

The TPT have implemented a series of updates, following the receipt of feedback from over 500 companies, financial institutions, NGOs and other civil society entities. Verco's analysis suggests that these changes are largely neutral to the structure and should not cause concern for companies who had already begun engaging with the draft TPT disclosure framework. That being said, there are some key updates addressing the consultation feedback, some of which do impact the reporting effort expected of companies. Our headlines to note are detailed in the table below:

 

2023 update: Details of change?

Verco view: Impact on reporting effort?

Roadmap actions - to quantify or not?

  • A significant ask of any would-be transition planners in the draft framework was to quantify the expected contribution of actions outlined in the Implementation strategy to the achievement of transition plan targets.
  • In the final framework, this has been changed to disclosing the ‘expected principal contributions'.

Harvey Balls 0% with solid fill

  • Neutral: Companies will still need to consider how the planned activities in the transition plan contribute to target achievement.
  • The associated guidance further explains this to mean either point/range estimates or qualitative descriptions.

Ramping up engagement

  • Throughout the disclosure recommendations, requirements now specify how entities shall prioritise and plan engagement with suppliers, trade bodies, and other stakeholders.
  • A key aspect of this is the inclusion of forward-looking information, including targets and strategy.

Caret Up with solid fill

  • Increase: Companies who have not set specific approach and targets around engagement activities will now need to provide a justification for this and any plans to change in future.
  • Companies will also be expected to describe any processes for the management of poor engagement.

Financial disclosure detail pared back

  • An aim of the TPT, as with previous initiatives such as the TCFD, is to better integrate financial and climate disclosures.
  • The final framework is still clear that the impact of the transition plan on financial position, performance and cash flow should be detailed, but only to the extent that they are ‘separately identifiable'.

Caret Down with solid fill

  • Decrease: The TPT have now provided more comprehensive information about the conditions for when this information should and should not be expected by stakeholders.

Strategic ambition

  • The cornerstone of the disclosure framework is the very first disclosure requirement, which has now been renamed as the Strategic ambition.
  • This is a foundational aspect of the framework and is referred to frequently throughout the recommendations. In the newly updated version of the framework, companies should ensure that the vision described covers:
  1. objectives and priorities;
  2. the impacts and dependencies of the transition plan on stakeholders;
  3. alignment with recognised pathways;
  4. potential trade-offs, and;
  5. key targets.

Caret Up with solid fill

  • Increase: The greatest new emphasis here is on the importance of stakeholders in (b). Companies will need to ensure that they have considered the interconnectedness of the transition plan on a range of stakeholders.
  • Companies engaging with other sustainability initiatives (e.g., Taskforce for Nature-related Disclosures) will be familiar with the wording and approach used by the TPT here.

Standardised requirement wording

  • Phrasing which featured throughout the draft framework has been replaced with clearer wording (e.g., ‘sensitivity analysis' is now ‘key assumptions and external factors') while other clunky terminology has disappeared entirely.
  • The syntax has also been standardised throughout, removing paragraphs in favour of numbered requirements.

Caret Down with solid fill

  • Decrease: While this has not resulted in a less demanding list of disclosure requirements, the language of the framework is now more concise, reflecting the style expected of a reporting standard.

New supplementary guidance

  • The disclosure guidance is now primarily web-based and includes a set of 40 sector-specific summaries covering key decarbonisation levers, metrics and targets.
  • In addition to this, new supplementary guidance papers have been released on a series of topics. These include:
    • areas of alignment with the International Sustainability Standards Board (ISSB);
    • areas of alignment with the European Sustainability Reporting Standards (ESRS), and;
    • an FAQ of legal considerations for UK report-preparers

 

Harvey Balls 0% with solid fill

  • Neutral: The web-based guidance suggests a more dynamic system where updates may be made more frequently. While this may be helpful to report-preparers, it will require users to stay up to date with the platform.
  • For example, further ‘deep dive' sector guidance is expected to be delivered in November 2023.

 

Transition planning as an act of doing, rather than disclosure.

What should companies do next?

When the TPT released its draft guidance in late 2022, it was not immediately clear what the reaction would be from the market. Since then, some high-profile companies have been quick to engage with the framework, including Diageo, NatWest and John Lewis Partners. In addition, the UK financial reporting regulators will soon consult on the inclusion of new TPT-aligned transition plan guidance in mandatory reporting rules for UK listed and large private limited companies from 2025.

We recommend that companies consider the transition plan structure as the backbone for developing and implementing climate strategy, rather than seeing it as 'yet another reporting requirement'. Transition planning as an act of doing, rather than disclosure, responds to the ultimate driver - preparing UK companies to contribute and adapt to, and thereafter excel in, the low carbon economy. As guiding principles we suggest that companies should:

  • Get started and persevere. Companies' approaches to transition planning differ greatly. Some are keen to have absolute certainty over how net zero targets can be achieved and a good sense of what peers are doing before advancing. Others are happy to set bold ambitions, but struggle to fill in the detail of how such ambition is to be achieved. We work with companies from both ends of the spectrum, and it is clear to us that in both cases it takes time to develop all aspects of a transition plan. Whether it be at site-level or group level, Verco helps businesses to understanding the materiality of their emissions sources, the main levers for decarbonisation available to them, and how to chart a course of actions to achieve net zero.

  • Collaborate with others. The world will not reach net zero without collaboration within and between industries, and a business will not achieve resilience in a changing climate without the support of (and without supporting) its value chain partners. Use the TPT framework to structure your engagement with stakeholders as a two-way process e.g. achieving better Scope 3 data for your own reporting and helping suppliers to decarbonise in the process.

  • Communicate and influence. Ensure that the company's communications are aligned with the strategic ambition of the transition plan, and that these are used effectively in any matters of engagement with policymakers and civil society. Invest in the teams charged with responsibility for climate disclosures and provide them with the capabilities needed to draw together the relevant arms of the business.

It is only by taking a strategic and rounded approach such as this that progress will be made in the long-term. Making good on business opportunities during the transition away from carbon-intensive products and processes will often require multifaceted business transformation. Companies that successfully integrate sustainability with effective corporate planning and change management will be best prepared.

Join our webinar: UK Transition Plans: TPT final disclosure framework- what's new and what's next?

For further information on the TPT guidance, including the likely implementation timeline, how you can prepare, and tips on getting the most value out of transition planning, join us on 28 November at 2pm GMT. Find out more and register here: https://zero.vercoglobal.com/tptwebinar

Meet us at the net zero festival

Verco will be exhibiting at the Net Zero Festival on the 31 October and 1 November. Come and visit stand 28 to meet some of our experts.

For further information and guidance please visit Verco's website

This article is sponsored by Verco.

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