Standardise transition plans globally to avoid greenwashing, non-profit urges

Ensuring that companies deliver on their claimed emissions reductions is impossible without an agreed international standard, says Reclaim Finance

International jurisdictions should agree a mandatory standard that all transition plans must follow, and set up supervisors or specific regulatory agencies to ensure that plans deliver on decarbonisation promises, says Paul Schreiber, senior policy adviser at French non-profit Reclaim Finance and author of its report on transition plans.

“Monitoring is not yet covered by existing regulations [and] monitoring transition plans will be impossible if the content is not properly standardised,” he tells Sustainable Views.

The Reclaim Finance report says a robust transition plan should include decarbonisation targets, a decarbonisation strategy, an engagement strategy and details on reporting and governance. It should also include the recognition of risks around biodiversity and the need for a just transition. 

As of June 2023, 929 companies operating globally had transition plans in place – but some are not “robust”, says Reclaim Finance. The report suggests companies are greenwashing their environmental commitments by claiming adherence to a transition plan while engaging in environmentally damaging activities, such as membership of lobbying groups or trade associations that support fossil fuel production.

Reclaim Finance reviewed 26 frameworks used by organisations to develop their transition plans, including those created by the UN High Level Expert Group on Net Zero, Climate Action 100+ and the International Standards Organisation. The researchers said there were gaps in these frameworks that could allow organisations to engage in environmentally detrimental activities even though they had a transition plan in place.

The non-profit termed these gaps “red flag indicators”. It highlighted, as examples of red flags, targets not based on absolute emissions; a failure to include Scope 3 emissions; no mention of lobbying and trade association membership; or a reliance on carbon capture and storage for emissions reductions. 

“Red flag indicators … should sound the alarm for financial investors when a company’s plan is inadequate,” says Schreiber in a statement accompanying the report.

Though the report acknowledges the EU is leading on regulating transition plans with its European Sustainability Reporting Standards, Schreiber says the regulation would need to address the monitoring and enforcement of these standards to fully address greenwashing concerns.

The report says the US Treasury Principles for Net-Zero Finance and the standards for private sector climate transition plans being developed by the UK’s Transition Plan Taskforce are signs that more regulation on climate transition plans will soon come into force. But these initiatives are “not the equivalent of standardising transition plans”, Schreiber adds.

The report is available to read here.