Transition plan: target pathway and delivery

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A transition plan sets out how a business model becomes compatible with climate targets. It ties a decarbonisation pathway to concrete actions, investments and lines of responsibility. Since the reporting standards were revised, it is no longer a mandatory document for many companies. It is still being asked for, only by different parties than before.

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What ESRS E1-1 requires

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ESRS E1-1 is the substantive reference for transition plans in Europe, including for companies outside the reporting scope, because lenders and major customers frame their requests around it. The standard asks for four things.

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First, the decarbonisation levers and the planned actions, each tied to your emission reduction targets. Second, a quantification of the investments and their funding, with reference to taxonomy-aligned capital expenditure and to the CapEx plan under Delegated Regulation (EU) 2021/2178. Third, an assessment of the locked-in emissions from existing assets, supplemented for relevant activities by significant investments in coal, oil and gas and by a statement of whether the company is excluded from the EU Paris-aligned Benchmarks. Fourth, an explanation of how the plan is embedded in your business strategy and financial planning.

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The plan no longer has to be produced as such. Companies that do not have one disclose that fact and state whether and when they intend to draw one up. There is also a new obligation to disclose where your own climate targets are not compatible with a 1.5 degree pathway. The revised standards apply for financial years beginning on or after 1 January 2027, with an option to apply them for 2026.

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Who still asks for the plan

 

Banking supervision: For credit institutions, transition plans are binding through Article 76(2) CRD and the EBA Guidelines, from structured target pathways through integration into the business and risk strategy to the allocation of financial resources. The quality of the planning feeds into the SREP and therefore into the capital position.

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Insurance supervision: Under the amended Solvency II Directive, insurers must, from 30 January 2027, draw up sustainability risk plans with quantifiable targets that are incorporated into underwriting, investment and capital planning. These targets must be disclosed annually.

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Lenders and investors: Institutions have to assess whether their borrowers and investees can manage their own transition, and they rely for this on the target pathway, investment planning and implementation status of those companies. For a company, the plan therefore determines lending terms and access to capital, reporting obligation or not.

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Funding programmes: In manufacturing, the transition plan is also a condition of funding. Module 5 of the German federal programme for energy and resource efficiency in industry (Bundesförderung für Energie- und Ressourceneffizienz in der Wirtschaft) subsidises its preparation. It calls for a baseline analysis with a greenhouse gas inventory, a commitment to greenhouse gas neutrality by 2045 at the latest, a ten-year target of at least a 40 per cent reduction in Scope 1 and Scope 2, and an action plan that addresses production processes.

 

The SBTi: The Corporate Net-Zero Standard V2.0 makes transition plans with board-level accountability mandatory for all companies, and Category A companies have to publish theirs. For newly submitted targets the standard applies from 1 February 2028.

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Where plans fail under scrutiny

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The most common finding is the gap between ambition and means. The target pathway runs to 2045, while the investment plan for the next five years does not reflect it. Missing interim targets are just as common, along with responsibilities that stop below board level and unquantified emissions from existing assets. At institutions, the plan often describes the balance sheet alone and leaves open how well the companies they finance can transition.

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Our services

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• Target pathway and actions: Starting from your carbon footprint, we derive a decarbonisation pathway with interim targets and underpin it with actions whose contribution is quantified.

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• Investments and the CapEx plan: We connect the pathway to your investment and financial planning and develop the capital expenditure plan that allows activities to be counted as taxonomy-aligned.

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• Fundable transition plans: For manufacturing companies we prepare the plan so that it meets the requirements of the funding module.

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• Transition plans for credit institutions: We develop the plan along the components the EBA has set out and work with you to assess how well your borrowers and investees can transition.

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• Scientific grounding: We align your targets and your plan with the SBTi requirements, and for financial institutions with the FINZ standard.

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• Governance and disclosure: We anchor accountability at board level, define the metrics for tracking progress, and prepare the presentation for your report, your governing bodies and incoming data requests.

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Contact us

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Whether you are an industrial company, an energy utility or a financial institution, we will work out with you who is actually asking for your plan and which step makes sense next. Book a 30-minute introductory call.