With mandatory climate-related financial disclosures beginning to take effect for Australia’s largest companies, businesses are scrambling to develop transition plans that meet investor expectations and regulatory requirements. But with so much guidance available globally, how do businesses know if their plans will actually stand up to scrutiny?
A new Australian-first credibility guide from Monash University’s Climateworks Centre aims to cut through the complexity, offering clear criteria that companies, investors, and regulators can use to assess whether climate transition plans are genuinely credible or just well-intentioned paperwork. The phased introduction of mandatory climate-related financial disclosures starting in July 2024 has fundamentally shifted the landscape for Australian companies. Planning for net zero is no longer optional. It is becoming standard practice. But as Climateworks Centre CEO Anna Skarbek AM points out, while “net zero targets are now business as usual,” how companies plan to get there often isn’t.
“Investors, regulators and consumers are holding the bar high for corporate climate action,” says Skarbek, a former investment banker. The guide, developed with input from Australia’s leading industry groups and climate transition experts, consolidates global best practice guidance into a framework specifically designed for the Australian context. “There is global climate transition plan guidance from many sources and Climateworks Centre’s guide synthesises this and localises it for Australia, providing a crucial credibility lens for companies, investors, regulators and government,” Skarbek explains.
Three core principles
Before diving into specific criteria, the guide establishes three fundamental principles that define credibility in climate transition plans:
- Plans must outline emissions reductions genuinely aligned with Paris Agreement goals, not just aspirational targets without substance.
- Transition strategies must be integrated into broader company strategy, providing confidence they will actually be implemented rather than sitting on a shelf.
- Plans need to be thorough, regularly updated, and transparent enough for stakeholders to make informed decisions.
Seven credibility criteria explained
The guide breaks down credibility into seven key areas, each with specific sub-criteria:
- Ambitious and Robust Emissions Targets
This means science-based net zero targets with supporting interim goals covering scope 1, scope 2, and relevant scope 3 emissions. Companies cannot just set a 2050 target and call it a day. They need measurable milestones along the way. - Feasible Action Plan
Plans must detail specific, measurable actions to meet short and medium-term targets, plus explain how companies position themselves for long-term goals. Vague commitments to “investigate opportunities” do not cut it. - Emissions Reductions Before Carbon Credits
Credible plans prioritize actual emissions reduction within the value chain first, using carbon credits only when appropriate. This prevents companies from simply buying their way out of making real operational changes. - Strategic and Financial Alignment
Transition strategies must be integrated with broader organizational strategy, including financial planning. If the climate plan does not align with business strategy and budgets, it is unlikely to succeed. - Supportive Policy and Stakeholder Engagement
Companies need clear engagement strategies with stakeholders who impact their emissions targets, plus transparent climate-related policy advocacy positions. - Strong Governance
Plans require clear governance structures embedded in overall company governance, with supportive culture and incentives for boards, executives, and senior management. - Continuous Review and Disclosure
Plans must outline verification and maintenance processes while maintaining comparability over time. Static plans quickly become irrelevant.
Beyond compliance
Charlotte Turner, co-author of the guide and former lawyer specializing in climate risk, emphasizes that credible plans offer advantages beyond regulatory compliance. “A credible climate transition plan is one of the best ways for companies to adjust to the new era, where planning for net zero is becoming standard practice,” Turner explains. “Investors now expect companies to disclose a credible transition plan. Plus, they will make everyone’s lives much easier in the face of mandatory climate-related financial disclosures, which were introduced in Australia in January of this year.”
“Those who view disclosures as more than a compliance exercise and make credibility a central pillar stand to gain,” Turner adds. The benefits extend to competitive positioning and capital access. “Companies can improve business resilience and all stakeholders can accelerate climate action by applying Climateworks Centre’s credibility guide to climate transition plans and other relevant climate-related disclosures,” Turner notes. “As the world’s money moves to align with the Paris Agreement goals, companies with credible plans, aligned to all seven criteria, are better positioned to attract and retain capital,” she adds.
With companies influencing approximately 70 percent of Australia’s greenhouse gas emissions, the quality of corporate transition plans has real-world implications. “Urgent and credible corporate action is crucial to prevent the worst impacts of climate change and allow companies to thrive in a world looking to reduce emissions rapidly,” Turner emphasizes. The guide also serves multiple audiences beyond individual companies. Financial institutions can use the criteria when assessing company transition plans for investment decisions, while governments and regulators can draw on it to inform policy development and disclosure guidance.
As mandatory climate disclosures take effect and stakeholder expectations rise, the quality of corporate climate transition plans will increasingly separate leaders from laggards. Companies that embrace credibility as a core principle, rather than viewing disclosures as a compliance exercise, are better positioned to access capital, manage risks, and contribute meaningfully to Australia’s net zero transition.
The Climateworks Centre guide provides a roadmap for that credibility, offering clear criteria in a complex landscape. For Australian businesses navigating this new era, the question is not whether to develop a transition plan. It is whether that plan will be credible enough to deliver real results.
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