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Deliver a climate transition plan

Use contracts to implement your organisation's transition plan

Updated:

16 December 2025

Published:

19 March 2026

Application:

Universal application

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This guide enables organisations to:

prepare and implement a transition plan
ensure delivery of the plan by integrating targets and actions into contracts
establish a board committee with specific responsibility to develop, implement and review the transition plan
put in place an annual reporting mechanism to update the plan every twelve months to assess progress made towards its targets.

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What is a transition plan and why do organisations need one?

A transition plan outlines how an organisation will credibly transition to a lower-carbon economy by reducing its greenhouse gas emissions and thereby contributing to limiting the increase in global temperature to 1.5C. The plan should (as best practice) also:

support the organisation’s resilience and address transition risks that may impact its strategy and business model
take into account:
- physical risks impacting the organisation’s assets and operations
- nature-related dependencies, impacts, risks and opportunities that may affect the organisation’s business and its stakeholders
- the achievement of climate and sustainability objectives recognised in international hard law instruments (legally binding instruments such as treaties) and soft law instruments (non-legally binding instruments such as guidelines and standards).

Examples of nature-related dependencies, impacts, risks and opportunities include:

dependency: a water system the organisation relies on
impact: the effect of an organisation’s activities on soil integrity or diversity of the species underpinning an ecosystem
risk: soil degradation or a declining bee population
opportunity: reducing impacts on nature by using less natural resources, like water, while creating operational efficiencies and reducing costs.

There is a clear global trend towards making climate transition planning a legal necessity for organisations. If an organisation is within the scope of relevant legislation or is serious about reducing its greenhouse gas emissions and getting ahead of any legislative changes, it should both (i) put a transition plan in place and (ii) embed targets and actions in its contracts. It needs to be aware of when and how its contracts need to be amended in order to align them with the transition plan.

Before an organisation can prepare a transition plan

In order to prepare a robust transition plan with realistic climate and nature targets, an organisation needs to gather information. It should also consider the wider context of its operations, and identify how it is going to produce and maintain the transition plan and embed targets and actions within its contracts.

An effective transition plan will be prepared collaboratively, involving people from all parts of the organisation, including internal counsel and compliance officers. It should:

Measure:
- the greenhouse gas emissions it produces (scope 1) and the indirect greenhouse gas emissions resulting from its purchase of energy (scope 2), ensuring integrity and reliability of the calculations and the emission boundaries
- the greenhouse gas emissions from its supply chain (scope 3) [and environmental impacts]. It can do this through questionnaires with existing suppliers and due diligence during supply contract procurement (see Request climate information in due diligence questionnaires guide and Just Transition glossary term).
Identify:
- high-emitting assets to be divested and which legal arrangements need to be terminated or amended to implement swift and successful decommissioning of high-emitting assets and technologies
- the organisation’s levers with counterparties and related legal risks deriving from the decommissioning
- new investments in low-carbon capital expenditures that can credibly contribute to the reduction of its emissions to align with the 1.5C pathway
- which type of legal arrangements are needed to implement the commitment to invest in low-carbon technologies, the organisation’s levers with counterparties and related legal risks
- internal and external stakeholders (such as organisations in its supply chain, consumers, businesses in the same sector, industry associations and government) with a view to engaging with them about sharing responsibility for delivering the plan so that they can develop their own targets and delivery methods.
Consider:
- the wider role the organisation can play in reducing economy-wide emissions (for example, through lobbying)
- what impact any transition activities may directly (or indirectly through the supply chain) have on nature with a view to ensuring actions contribute to nature restoration and regeneration rather than decline
- drivers of change related to technology advancements, adoption of policy and legislation, consumer shifts impacting the organisation’s strategy and business model, and their potential impact on the feasibility of the plan
- what engagement the organisation may need to carry out with stakeholders [and a plan of action for regular and meaningful engagement with stakeholders that sets out how any findings will be gathered, considered, and actioned]
- just transition issues (for example, relating to the decommissioning of assets and the investment in low-carbon technologies) and the impact of the transition plan on its own workforce, supply chain’s workforce and communities.
Assess:
- all current contracts (including length and renewal dates) to understand where emissions and other environmental impacts lie and what action needs to be taken to enable the transition plan to be successfully delivered
- the need for skills and expertise to foster the transition within the organisation
- whether any low-carbon technologies the organisation is investing in comply with legal requirements (and whether there may be any subsidies or incentives available to facilitate the adoption of such technology) and whether the technology is aligned with the industrial transition pathways of the country or region that the business operates in.
Prepare:
- a team or teams within the organisation who will be responsible for creating, implementing, reviewing, updating and reporting on the transition plan, ensuring that they have cross-organisational support
- an investment and financial plan and budget to finance any actions in the transition plan.

Prepare a transition plan

A best-practice transition plan should include:

Targets and actions:
- time-bound greenhouse gas emissions-reduction targets (for scope 1, 2 and 3) set at five-year intervals starting from 2030 (or the date of implementation of the plan, if later) up to 2050 based on conclusive scientific evidence. Scientific evidence is evidence with independent scientific validation, consistent with the limiting of global warming to 1.5C with no overshoot as defined by the Intergovernmental Panel on Climate Change and taking into account the recommendations of the European Scientific Advisory Board on Climate Change
- short-, medium- and long-term actions and levers that can be used to achieve the emissions-reduction targets [and any other environmental targets] while safeguarding and restoring nature and human rights.
Details of:
- how and which contracts will be amended on renewal to reflect the objectives of the plan and how the terms of new contracts will be approved and aligned (in line with a just transition)
- the exposure of an organisation to coal-, oil- and gas-related activities
- the role the administrative, management and supervisory bodies of the organisation will play in relation to the transition plan
- measures to mitigate [climate risks or the risks associated with implementing the transition plan] to employees, stakeholders (for example, suppliers, communities and customers) and the environment
- measures to maximise opportunities for employees, stakeholders and the environment
- governance and accountability mechanisms to support the transition plan, including reporting, approval of significant contracts and linking executive remuneration to achieving interim targets.
Consideration of:
- the impacts and dependencies of the plan and the organisation’s business on the natural environment (and associated risks and opportunities) and how these have been identified, assessed and taken into account.

An explanation of and quantification for how meeting targets will be financed (including investments and funding)
Promotion of a just transition to a low-carbon economy.

Check the latest guidance and any mandatory legal requirements that apply in your organisation’s jurisdiction regarding greenhouse gas emissions reporting and reduction (as well as international frameworks and standards) to make sure your transition plan complies with such requirements.

Allocate responsibility for delivery of the transition plan

Buy-in from senior management is key to enabling an organisation to successfully decarbonise its activities. Consider establishing a board committee with specific responsibility to deliver the transition plan and emissions-reduction targets.

The committee should comprise or be advised by subject matter experts who can improve the accountability, evidence base and transparency of the organisation’s climate decisions and measures. The organisation may want to appoint an external climate expert.

For more detail, see our guide Align the board with climate goals.

Example wording

[The Company] shall establish a sustainability committee of the board to oversee the development, implementation and review of its [Transition Plan]. The committee shall be [chaired by a non-executive director with experience of improving sustainability, reducing a business’s carbon footprint and enhancing climate resilience] or [advised by an appropriately qualified climate or sustainability consultant with the skills and experience to diligently, competently and professionally advise [the Company] on how to achieve its [Transition Plan], reduce its carbon footprint and enhance climate resilience.

Require board approval for significant contracts

Consider making board approval mandatory for any proposed significant contracts, as these could have material carbon or nature implications. This gives the board greater oversight and control over transactions that may impede the organisation’s ability to achieve the targets detailed in its transition plan.

To do so, establish governance and approval processes for the board to:

define a ‘significant contract’ by reference to both value and length (such as, above £0.5m or a contract term of more than two years in duration)
consider the impact on the organisation’s emissions targets of proposed significant contract
review and approve the carbon footprint of proposed significant contracts to ensure they are within the organisation’s targets, and align with its decarbonisation strategy and transition plan.

Example wording

The proposal to enter into the [significant contract] with [●] [for [●] years] is [fully, partially or not] aligned with [the Company]’s:

agreed emissions-reduction targets
[Transition Plan]
business strategy

for the following reasons: [insert reasons. Explain if the contract is aligned in one or more aspects, but not in others.]

The [significant contract] will help us achieve our [Transition Plan] by enabling us to deliver the interim commercial goals that are consistent with our near- and medium-term emissions-reduction targets for the following reasons: [insert reasons]

The [significant contract] may prevent us from achieving our [Transition Plan] and interim commercial and emissions-reduction targets. But:

it is necessary because [insert rationale]
it can be mitigated by [insert mitigation options together with costings, such as investing in new technologies, switching to renewable energy, raising reduction targets in other significant supply contracts].

For further drafting, see Griff’s Clause (Template Board Paper for Significant Contracts or Transactions).

Publish an annual progress report

The organisation should put in place a mechanism to ensure that the transition plan is reviewed and/or updated annually and that progress towards the targets set is reported on in connection with such review. A transition plan is a living document. It should be iterative and responsive to changing factors. Ideally, an organisation will publicly publish an annual report on its progress to reduce emissions. The organisation should outline the minimum requirements of what the report must include.

Check the latest guidance and any mandatory legal requirements that apply in your organisation’s jurisdiction regarding greenhouse gas emissions reporting (as well as international frameworks and standards) to make sure your reporting complies with such requirements.

Example wording

[The Company] confirms that it will report on its emissions-reduction progress annually and publicly. The report must include:

industry best practice on managing and reducing scope [1 and 2] [and 3] emissions used by [the Company] during the [Reporting Period]
total scope [1 and 2] [and 3] emissions measured during the Reporting Period
any reduction in the total scope [1 and 2] [and 3] emissions for the Reporting Period measured against the total scope [1 and 2] [and 3] emissions in the year preceding the Reporting Period
the difference (if any) between the total scope [1 and 2] [and 3] emissions for the Reporting Period and the emissions-reduction targets [and the reasons for this]
the potential and actual barriers of policy, legal, technology or market nature hindering the success of the [Transition Plan] and the actions and remedies that the Company intends to implement to address them
[insert any further steps that the company will take in light of the annual report to ensure that it stays on track to meet its targets including contract policies].

Ensure contracts are aligned with the transition plan

To deliver the transition plan, emissions-reduction targets and the actions called for should be integrated into contracts and legal documents. If this is not done then there is a significant risk that the transition plan will not be delivered. In certain jurisdictions, a failure by the organisation to deliver its transition plan may create a risk of failing to comply with legislation.

To align contracts with the transition plan:

Commit counterparties to decarbonisation: use supply contracts to require counterparties to implement decarbonisation measures that align with the organisation’s own transition plan.
Set emissions-reduction targets and reporting standards: use supply contracts to require counterparties to measure, manage and report on their contract-related emissions. Read our guide Get information on contract emissions.
Include employee training in contracts: use supply contracts to require counterparties to provide training for employees and contractors.