Disclose a CTAP and Track Progress
Environmental Defense Fund
At this stage, your company has done the heavy lifting of identifying your transition strategy and you are beginning to implement your climate transition action plan (CTAP). It is now important to disclose your work so investors, regulators, customers, and other stakeholders can understand your goals and climate strategies. This action step will take you through the ins and outs of the disclosure and the overall climate reporting process.
In addition to annual reporting, companies should disclose their CTAPs as a tool to communicate with stakeholders about how they are reducing emissions and assessing, managing, and mitigating climate risk.
Similar to standard business and financial reporting, CTAPs should be disclosed on an annual basis. CTAPs will often be updated every few years to showcase evolving strategies and achievements. CTAP disclosure can take multiple forms – the following guidance will walk you through expectations and best practices.
Step 1: Select a framework
The landscape for Climate Transition Action Plan guidance is ever-evolving and can often be difficult for companies to navigate. Several leading frameworks outline clear and robust metrics and disclosure guidelines. It is most important that you select one framework and use it consistently throughout your disclosure.
An important note: leading organizations in the CTAP space are becoming increasingly collaborative and pushing to align existing frameworks to standardize disclosure guidance. For example, the Transition Plan Taskforce, a non-profit organization that has generated CTAP guidance that is widely considered the gold standard, is expected to be integrated into the International Sustainability Standards Board (ISSB).
Step 2: Compile and publicly release your CTAP
The best practice is to compile a standalone report that outlines and expounds all elements of your CTAP. Companies that have not yet compiled and released a standalone report should utilize a CTAP index, which points stakeholders to the location of each CTAP element in other existing reports, documents, and filings. The most robust disclosures will include both a standalone report and an index to help stakeholders easily locate information of interest.
Both public and private companies should make their CTAPs freely available on their public-facing websites. Many companies choose to disclose their CTAP on an existing sustainability webpage, while others create a dedicated page for their CTAP. Companies can attach their CTAP to other stakeholder resources, including annual reports, CDP reports, or shareholder communications. The CTAP strategy and document should be updated every few years to showcase evolving ambition, business needs, progress, and accomplishments.
Take a look at some of the leading examples of robust climate transition action plans: Ball’s CTAP, Nestle’s Net Zero Roadmap, and Citi’s 2023 Climate Report.
For more information, visit the NZAA’s “Report Through Voluntary Frameworks” Pathway.
Recommendations from Ceres
Disclosing forward looking information
Disclosing forward-looking information is key to robust transition planning and execution, but companies are sometimes hesitant to publish forward-looking information with the necessary level of detail that climate transition action plans suggest. Companies cite regulatory, legal, competitive, and reputational risks.
The United States’ Congress provided legal protection or a “safe harbor” for forward-looking information in the Private Securities Litigation Reform Act of 1995 (PSLRA). This legal protection extends to private securities lawsuits for false or misleading information about future plans or events. Accordingly, companies routinely publish information about sales targets, financial projections, strategic plans, market outlook, and risk factors as part of core business planning. To obtain the legal protection, forward-looking statements must be accompanied by meaningful cautionary language that identifies factors that could cause actual results to differ materially. The involvement of legal counsel in the drafting of such statements is essential.
There has been some uncertainty whether transition plans constitute “forward-looking information” that would qualify for the PSLRA’s safe harbor. That is because transition plans may include, in addition to forward-looking information, historic factual information, which the safe harbor explicitly does not cover.
The SEC directly addressed this issue in its climate disclosure rule and decided to provide a new safe harbor in addition to the PSLRA’s expressly for transition plans (along with disclosures relating to scenario analysis, internal carbon pricing, and targets and goals). The SEC said it was doing so “to avoid having to disentangle the information to claim protection for forward-looking statements under the PSLRA safe harbors, which would increase the compliance burden under the final rules and potentially reduce the usefulness of those disclosures for investors. We also believe that a safe harbor for these disclosures will help incentivize more comprehensive disclosures on these matters to the benefit of investors.” The SEC’s rule is currently subject to a stay order, but the safe harbor will be applicable once the stay is lifted, assuming the rule is upheld by courts.
As case studies, companies may find useful the disclaimers in HSBC’s Net Zero Transition Plan and Unilever’s Climate Transition Action Plan.
Source: Ceres’ Blueprint for Implementing a Leading Climate Transition Action Plan Report
Step 3: Track your progress
Once you are ready to begin implementing your plan, it is important you use the metrics and targets you developed during Action Step 4 to monitor and share your progress. You should report on progress annually, and detail any changes you make to your original CTAP.
For more information, visit the NZAA’s “Report Through Voluntary Frameworks” Pathway