ob Doepel, EY Managing Partner, Sustainability, UK & Ireland, comments on the publication of the Transition Plan Taskforce (TPT) Disclosure Framework:
A significant and important step in the right direction
“The TPT Disclosure Framework is comprehensive and an extremely important step in the right direction towards driving the UK towards a net zero future.
“Fundamentally, implementation of the Disclosure Framework (pending consultation) will force the hand of businesses to produce and implement rigorous net zero plans to deliver on the bold pledges and promises they have made to date.
“Not only is this a huge step towards making the UK a net zero economy, but is a significant step towards the world’s progression to net zero, elevating the UK into a leadership position in the global economy on holding companies to account on action. Other G20 countries are likely to stand up and take notice of the UK’s progressive approach and it could well create a ripple effect where other countries follow a similar path.
A ‘maximalist’ net zero plan will be required
“The guidance suggests that businesses should produce a “maximalist” plan covering not only their own decarbonisation plans, but how their plans fit into the UK and the world’s transition to net zero. TPT guidance goes further than TCFD requirements and potentially a long way beyond what many businesses have considered in their net zero planning to date.
“It is a comprehensive framework, focused on strategy, planning but importantly, the actions businesses will execute to achieve their plans. In particular it picks up on the need for significant behavioural change and change management within an organisation if businesses are going to be able deliver on their ambitious plans. Ultimately, a good TPT plan will result in a roadmap of how an organisation will succeed in a net zero economy.
Tipping Point for UK business
“Importantly, the TPT provides a consistent and rigorous framework by which businesses can be compared with one another. Given that plans will be published at similar times, there is potential that the quality of the plan will have an impact on market value upon publication, due to the view taken by investors, customers and other stakeholders. We believe it is therefore essential to move early and prioritise resource to creating a strong plan. Put simply, ambitious purpose statements and pledges simply won’t cut it anymore.
The challenge for business
“While an extremely positive step in the right direction, implementation of the TPT Disclosure Framework will undoubtedly present challenges for businesses, who are navigating supply chain disruption, interest rates rises, high energy prices and inflation.
“We know from conversations with clients that many businesses view net zero as an opportunity. However, the short-term costs and a sense of uncertainty as to what makes a net zero plan stand up to scrutiny presents two significant barriers to its adoption.
“Interactions with our clients tell us that many businesses have climate ambitions and high-level plans in place, but few have plans which would currently meet all TPT criteria. Our review of public information from 50 of the largest UK listed businesses indicates that just over half have published what could be termed a discreet transition plan. Adherence to the TPT criteria also varies, with over 30% of these organisations having published information that relates to no more than 25% of the criteria.
“The other challenge here is the skills, experience and resource to be able to develop and deliver transition plans.
“But the opportunity on offer for those who are able to best leverage the UK’s transition to a green economy far outweigh these challenges. From first mover advantage into new areas of economic growth, to new innovations and partnerships across your value chain, there is much to be gained.
What’s coming next?
“The TPT appears to have stayed silent on the timetable for implementation and precisely which type of business the guidance applies to. We must assume at this stage that both the type of business and deadline for submitting plans follow the detail set out in the original announcement, but we would expect further clarification on these points in due course.
“In addition, while the document signals that the TPT recommendations will become mandatory, it is not explicit. While we recognise the huge challenges that these new regulations will place on UK businesses, inaction is simply not an option. Sustainability and decarbonising our economy are the defining issues of our generation and only by mandating the TPT proposals are we going to drive the pace of change that is needed.”
Financial services perspective
Khadija Ali UK Financial Services Climate Change and sustainability services partner, says:
“The Transition Plan Taskforce Disclosure Framework is a key milestone on the road towards Net Zero, and it is a huge achievement to have reached this point. The Framework provides a solid foundation for the UK as a leading global market in terms of producing strong, practical guidance, and it will support firms as they move deeper into the implementation stage. The Transition Plan Taskforce Disclosure Framework will help firms to convert plans into action and make tangible progress towards achieving their climate targets.
“For financial services firms, the implementation effort will arguably be even more significant as the plans of banks, insurers and asset managers will be inextricably linked to wider market transition activities. This will require a detailed review of all financing and investment portfolios. Overall, the Framework will move all firms towards more comprehensive and consistent reporting.”