7.2 Content Requirements for Climate Transition Plans
Climate transition plans address and mitigate potential transition and physical risks, which is why they are a mandatory component of a climate report. The Climate Ordinance gives companies considerable leeway to structure their reports and also refers to the TCFD “Guidance on Metrics, Targets, and Transition Plans” (October 2021 version), which offers detailed recommendations on the elements that should be considered in a climate transition plan. The key recommended elements include governance, strategy, and risk management, as well as metrics and targets:
Governance
Approval: The board of directors or the relevant board committee approves the transition plan and the climate-related targets.
Supervision: The board of directors or an appropriate board committee oversees the implementation of the transition plan.
Accountability: The executive management is responsible for executing the transition plan, and the responsible parties have sufficient authority and access to resources to ensure effective implementation.
Incentives: Compensation and other incentives are aligned with the organization’s climate goals and are outlined in the transition plan.
Reporting: The board of directors or the relevant board committee, as well as the executive management, are regularly informed of the current status.
Review: The organization regularly reviews and updates its plans, activities, metrics, and targets.
Transparency: The organization reports to external stakeholders on its transition planning goals and performance, including financial aspects, performance against targets, and the impact on the business.
Assurance: The organization’s reporting is subject to independent third-party review or assurance.
Strategy
Alignment with the strategy: The organization aligns its transition plan with its overall strategy; the transition plan describes the following:
Activities – how the organization will achieve its goals within defined timeframes.
Absolute decarbonization or temperature target – alignment with Switzerland’s net-zero target, relevant legal requirements and/or sector-specific decarbonization goals.
Plan assumptions: The transition plan outlines the organization’s assumptions, particularly regarding uncertainties in the transition pathway and challenges during implementation. These assumptions should be consistent with those used for the organization’s financial accounting, capital expenditures, and investment decisions.
Prioritized opportunity: The transition plan outlines how the organization intends to leverage its key climate-related opportunities during the shift to a low-carbon economy.
Action plan: The transition plan details short- and medium-term tactical and operational plans and describes how the associated actions address significant sources of greenhouse gas emissions. The plan includes ongoing and planned initiatives to reduce climate-related risks and enhance climate-related opportunities.
Financial plans: The transition plan outlines the supporting financial plans, budgets, and associated financial targets (e.g., the amount of capital and other expenditures to support the decarbonization strategy).
Scenario analysis: The organization assesses the feasibility of the transition plan and its related targets by using multiple climate-related scenarios.
Risk management
Description of risks: The transition plan outlines the risks that the organization faces as a result of the transition to a low-carbon economy.
Challenges and Uncertainties of the Plan: The transition plan describes the assumptions, uncertainties, and challenges that the organization may encounter in successfully executing the transition plan.
Metrics and targets
Metrics: The plan details the metrics that the organization monitors to track progress against its plans and targets. This includes relevant operational and financial performance indicators, along with cross-industry, organization-specific, and climate-related metrics.
Targets: The transition plan includes quantitative and qualitative targets based on sound climate science. For greenhouse gas emission targets, the plan specifies the type and scope of emissions included, as well as the extent of emissions across different areas, periods, or activities.
Methodology: The metrics and targets in a transition plan are based on widely accepted and transparent methods.
Timeline: The transition plan outlines when specific goals are to be achieved.
Reduction of greenhouse gas emissions: The transition plan addresses the relative contributions of reductions, removals, and offsets in achieving the GHG emissions targets.