T
Transition Plan
Definition
A transition plan is a time-bound, company-specific strategy for achieving a significant transformation of a company’s business model and operations to align with a low-carbon economy, specifically the 1.5°C pathway of the Paris Agreement. Transition plans must include: current GHG emission levels and absolute reduction targets (Scope 1, 2, and 3); actions and investments to achieve targets; capital allocation plans; governance and risk management for climate-related risks; and interim milestones. Under IFRS S2, transition plan disclosure is a requirement. Under ESRS E1 (Climate Change), transition plan disclosures are required for CSRD-scoped companies. The Omnibus I provisional agreement specifies that CSRD transition plan reporting requirements remain unchanged.
Source
IFRS S2, paragraphs 14–25; ESRS E1 (Climate Change); Glasgow Financial Alliance for Net Zero (GFANZ) Transition Plan Guidance (2023); UK Transition Plan Taskforce (TPT) Disclosure Framework (2023).
Practical Explanation (Compliance Context)
Transition plans are one of the most operationally demanding IFRS S2 and ESRS E1 requirements. A credible transition plan requires: SBTi-validated emission reduction targets; a detailed capital expenditure roadmap; scenario analysis outputs demonstrating 1.5°C alignment; and board-level accountability. Companies without validated science-based targets or detailed decarbonisation roadmaps face significant preparation challenges before their first IFRS S2 or CSRD disclosure deadline.