Integrate a CTAP into Core Business Strategy

To integrate climate targets into your company’s core business model, you should start by conducting a robust scenario analysis that assesses the climate-related risks and opportunities that your business may face. Once you have this foundational baseline, you can then determine the actions that your specific company will take to implement your strategy. Once you identify which actions you will be taking, it is important to outline how you plan to finance your strategy and determine organizational roles and responsibilities for implementation, including strong board oversight and governance structures to ensure enforcement, as well as capacity building so that your teams are equipped to deliver results. 

Continue reading the following sections to learn how you can take each of these steps and effectively integrate climate targets into your company’s core business model.  

The below guidance from EDF aligns with other key frameworks in the ecosystem, including Ceres’ Blueprint for Implementing a Leading Climate Transition Action Plan and the TPT Disclosure Framework.   

Step 1: Conduct and publish the results of the climate scenario analysis

To get an understanding of how climate will impact your business, you should start by conducting a climate scenario analysis for physical, financial, and transition risks from various climate change scenarios (e.g., business as usual, 3-4°C, orderly or disorderly transition scenario) and opportunities from a 1.5°C scenario. Conducting a climate scenario for your company provides you with a baseline of the climate-related risks and opportunities that your business may face to help shape your unique business strategy.  

A robust assessment should include the following:  

1. The risks and opportunities that arise from a transition to a low-GHG emissions and climate-resilient economy 
2. Anticipated strategic changes to your business model and operations, as well as the timeframe over which changes are expected to occur. 
3. Potential trade-offs, synergies, or co-benefits identified between the objectives and priorities. 
4. Levers and opportunities to enhance resilience to the changing climate and respond to the risks and opportunities that arise from the transition to a low-GHG emission, climate-resilient economy. 
5. Key assumptions and external factors upon which your transition plan strategy depends. 

Once you have assessed the risks related to your company, you should then publish the results of your analysis to increase transparency. After that, you are ready to determine the actions needed to adjust your business strategy. Learn more in the next section. 

Step 2: Determine actions needed to adjust your business operations 

After your scenario analysis, you are ready to identify the short-, medium-, and long-term policies and actions needed in your business operations to achieve your transition plan goals. These may relate to: 

1. energy usage  
2. phase-out of GHG-intensive assets  
3. climate-related considerations in procurement/for suppliers  
4. climate-related considerations (e.g. thresholds, targets or restrictions) in lending or investment activities  
5. adapting and building resilience to the changing climate   
6. supplier engagement 
7. portfolio engagement 

You also should determine the short, medium-, and long-term actions needed to change your portfolio of products and services to achieve your transition plan, such as switching to renewable electricity generation or launching new products to help customers improve their own energy usage (through efficient appliances in their home, for example, or recyclable materials for beauty products). 

Step 3: Align with the external environment 

It is important to be sure your business strategy aligns with the environment outside of your company, such as any external requirements, commitments, science-based targets, transition pathways, roadmaps, or scenarios including: 

1. National or international commitments made by governments 
2. Targets your company meet by law or regulation 
3. Sectoral pathways, roadmaps, or other climate scenarios 
4. Voluntary commitments (e.g., existing public commitments, organizational and industry standards, contractual relationships, codes of practices, etc.)    

To assist you with this process, you can assess industry counterparts and potential partnerships. Partnerships are a great way to not only know what others are doing in the ecosystem but also to prioritize engagement activities and maximize your contributions towards achieving the strategic ambition of your transition plan. 

Step 4: Assess the financial impacts and identify how you plan to resource activities 

In addition to investments in emissions reduction strategies, companies should identify actions they are taking or will take in the near term to adjust investment and fundamental business model decisions to reach medium- and long-term GHG commitments, taking into account:  

1. Investment and disposal plans (e.g. plans for capital expenditure, major acquisitions and divestments, joint ventures, business transformations, innovation, new business areas, investments into research and development, and asset retirements). This includes plans to which the entity is not contractually committed. 
2. Planned sources of funding to implement its plan. 

You should also determine how the implementation of your transition plan will impact your financial permanence and cash flows over the short-, medium-, and long-term, taking into account: 

1. Any increased revenue from products and services aligned with lower GHG emissions. 
2. Expenses associated with climate adaptation or mitigation. 

Ceres recommends in their Blueprint for Implementing a Leading Climate Transition Action Plan and the TPT Disclosure Framework that, for increased transparency, investors have specifically indicated they would value companies: 

• Detailing their investments – quantitatively or minimally qualitatively – broken apart by strategies, such as renewable energy, energy efficiency, electrification, acquisitions, retirements and divestments, joint ventures, innovations, research & development, new business areas, and climate solutions  
• Sharing of capex trends over time – even year over year  
• Including feasibility studies of emerging technologies, they plan to invest in (such as carbon capture and storage and hydrogen to scale), as well as insight into the challenges and successes associated with these technologies to date and gap analysis between these technologies’ contributions and achieving 1.5 ºC.  

Step 5: Build capacity and establish organizational roles and responsibilities 

Companies need to establish governance mechanisms that create accountability across the organization and board of directors to ensure that their plan will be implemented. This includes having a clearly established process to break down silos and ensure all relevant and impacted parts of an organization are engaged in climate action: finance, government and investor relations, research and development, procurement, sales, operations, facilities, and other teams.  

It is important to consider these and other specific implementation-related concerns within holistic assessments of: 

1. The value of long-term vs, short-term financial profitability; 
2. The inclusion and assessment of risks related to reputation, social license to operate, supply chain volatility, etc. 

Establishing board oversight and reporting responsibilities is a critical part of this. You should also determine management’s role in the governance and procedures used to monitor and manage your transition plan and identify the management bodies or individuals who will be responsible for executive oversight and delivery of your transition plan.  

Incentives and accountability can help to ensure that company leadership is managing risks and opportunities and integrating those factors into core business decisions and strategies. Incentives, like tying executive compensation to reaching climate goals, should be included in your plan. 

It is likely this will be a learning curve for many teams throughout your company. You should assess what are the appropriate skills and competencies your company will need to deliver on your plan and identify and include gaps and how you will overcome them through capacity building and training.  

Continue to Action Step 4: Define Metrics to Drive Progress to learn how you can showcase and measure progress.