Guide to credibility for corporate climate transition plans

The introduction of new mandatory climate-related financial disclosures in Australia in January 2025 marks the start of a new era, where planning for net zero is standard practice for Australian companies.

Reducing greenhouse gas emissions across the value chain – which includes every step from sourcing materials to production, distribution and product use – requires thoughtful, long-term strategic planning.

This can take shape as a climate transition plan, detailing how a company will prepare for and contribute to the global transition to net zero emissions. 

Investors, regulators and consumers are holding a high bar for corporate climate action.

Credible transition plans are one of the best ways for companies to demonstrate a genuine commitment to emissions reductions.

Developing a credible plan strengthens a company’s ability to meet its climate goals. It allows for meaningful engagement within the company’s value chain, enabling the company to manage its indirect value chain emissions (known as scope 3 emissions) and increase their competitive advantage.

It also sends a clear signal to investors and regulators about the company’s long-term value, resilience and alignment with the Paris Agreement. This can enhance confidence from investors and provide better access to capital.

Credibility can help companies mitigate the risk of greenwashing, avoiding legal, reputational and ultimately financial risks. Consequently, demonstrating and assessing credibility in transition plans is a beneficial and necessary skill for companies and financial institutions. 

In recent years, there has been an increase in transition plan guidance and frameworks globally, which collectively provide in-depth and technical insights for developing and assessing credible transition plans. There is strong alignment on what a transition plan must contain to be credible. 

Climateworks Centre has created an Australian-first credibility guide for corporate climate transition plans, drawing on and consolidating 34 global best practice resources, with input from a large number of Australia’s leading industry groups and climate transition experts. 

Ultimately, this guide offers seven credibility criteria and 31 associated sub-criteria to enhance readers’ understanding of what a credible transition plan is and help them determine whether the transition plan they are preparing or using is credible. 

• Companies can use the credibility criteria to benchmark their transition plans against credibility best practices and strengthen alignment with investors’ expectations.
• Financial institutions can apply the criteria as a credibility overlay when assessing company transition plans to inform investment decisions, engagement and stewardship.
• Governments and financial regulators can draw on this guide to inform policy development and disclosure guidance, ensuring alignment with international credibility best practices.

Three defining principles of credibility

The guide puts forward three principles that readers can use to understand what credibility for transition plans means. 

1. Credible transition plans are sufficiently ambitious and feasible for emissions reductions in line with the Paris Agreement.
2. Credible transition plans are internally consistent and integrated into the company’s broader strategy to provide confidence that the strategy will be effectively implemented.
3. Credible transition plans are comprehensive, well-maintained and verifiable for users to make informed decisions. 

Seven credibility criteria 

This guide sets out seven credibility criteria and 31 associated sub-criteria that companies, investors and regulators can use to develop or assess climate transition plans. 

1. Ambitious and robust emissions targets: A credible transition plan includes science-based net zero target(s) and supporting interim emissions reduction targets covering scope 1, scope 2 and relevant scope 3 emissions. 
2. Feasible action plan: A credible transition plan sets out specific, feasible and measurable emissions reduction actions to meet its short- and medium-term targets and explains how the company positions itself to achieve long-term targets.
3. Emissions reductions before carbon credits: A credible transition plan includes actions that prioritise emissions reduction within the value chain and considers carbon credits when appropriate.
4. Strategic and financial alignment: A credible transition plan sets out how the company integrates its transition strategy within the wider organisational strategy, including financial planning. 
5. Supportive policy and stakeholder engagement: A credible transition plan details the company’s engagement strategy that may impact its emissions reduction targets, and its climate-related policy advocacy.
6. Strong governance: A credible transition plan clearly defines its governance structure, which is embedded into the company’s overall governance, with a supportive culture and clear incentives for the board, executives and senior management.
7. Continuous review and disclosure: A credible transition plan outlines how it will be verified and maintained over time, while retaining comparability.

The criteria focus on the mitigation of climate-related transition risks, including emissions reduction strategies, as well as transition-related opportunities.

But climate change is deeply interconnected with broader sustainability issues.

Addressing climate mitigation in isolation can have unintended and/or perverse consequences and investors and governments increasingly expect companies to adopt more comprehensive sustainability strategies.

This guide also provides considerations on critical related challenges, particularly adapting to a changing climate, managing impacts and dependencies on nature and ensuring a just transition for communities and workers.  

The criteria can also enhance the credibility of other climate-related financial disclosures that overlap with transition plans, including the reporting standard issued by the Australian Accounting Standards Board, AASB S2, under Australia’s mandatory disclosures regime. Appendix 1 presents a practical mapping of our credibility criteria against the AASB S2 reporting standard requirements.

Pursuing net zero is now standard practice and requires adequate transition planning and credible disclosures.

By applying Climateworks Centre’s guide on credibility in corporate climate transition plans and other relevant climate-related disclosures, all stakeholders can drive stronger climate action, improve their business’ resilience and accelerate progress toward a sustainable, net zero future.

Download Climateworks Centre’s guide to credibility for corporate climate transition plans [PDF 4.8mb]