Corporate action is essential for climate mitigation

Corporate action is critical to addressing climate risks and achieving net zero. Companies influence approximately 70% of Australia’s greenhouse gas emissions, underscoring their central role. Global progress remains insufficient to meet the 1.5°C target, increasing pressure for effective corporate responses. Expanding climate-related financial disclosures across 30 jurisdictions are driving improved transparency, risk identification and strategic planning.

What is a transition plan, and why do they matter

A transition plan is a forward-looking strategy outlining emissions reduction targets, actions and governance mechanisms. It supports risk management, operational alignment and long-term value creation. For investors, these plans provide evidence of transition readiness and inform capital allocation. Over 60% of institutional investors plan to direct funds towards companies with credible transition plans, highlighting their growing financial relevance.

Momentum is growing around corporate transition plan development and disclosure

Global momentum is increasing, with new disclosure frameworks and regulatory requirements emerging. The Transition Plan Taskforce and IFRS frameworks have improved standardisation and comparability. In Australia, mandatory climate reporting under AASB S2 commenced in 2025. However, while disclosures increased by 44%, only 2% of transition plans are considered credible, indicating a gap between disclosure and effective implementation.

What credibility means for transition plans: Three defining principles

Credibility is defined by three principles: alignment with Paris Agreement goals through ambitious yet feasible targets; internal consistency and integration into corporate strategy; and comprehensive, transparent and verifiable information. These principles ensure that transition plans are actionable, realistic and decision-useful for stakeholders.

Why credibility matters: A stakeholder-focused perspective

Credible transition plans reduce legal, financial and reputational risks, including exposure to greenwashing claims. For investors, they provide confidence in a company’s ability to manage transition risks and align with net zero objectives. Regulators use credible plans to assess systemic risks and support financial stability, while improved transparency reduces market uncertainty.

More transition plan guidance and assessment frameworks are becoming available globally

An expanding ecosystem of frameworks supports transition planning. Initiatives such as Climate Action 100+, IIGCC’s Net Zero Investment Framework and the Assessing Transition Plans Collective provide methodologies and benchmarks. These frameworks help standardise expectations and enable consistent evaluation of transition plans across markets.

About Climateworks centre’s guide to credibility

The guide consolidates 34 global frameworks and resources into a unified approach tailored to Australia. It provides practical guidance for companies, investors and regulators to assess and strengthen transition plans, aligning with international best practice and supporting compliance with emerging disclosure requirements.

Credibility criteria: A best-practice checklist

The guide outlines seven criteria and 31 sub-criteria. Key elements include science-based targets across scopes 1–3, feasible and measurable action plans, prioritisation of emissions reductions over carbon credits, and integration with financial planning. Additional criteria focus on governance, transparency, and continuous improvement, enabling organisations to benchmark and enhance their plans.

Conclusion

Transition plans are becoming central to corporate strategy and investment decision-making. While disclosure is increasing, credibility remains limited. Strengthening alignment with established criteria and global frameworks is essential to ensure plans are effective, reduce risks and support the transition to a net zero economy.