CDP Climate Change 2022 Reporting Guidance

(C3.1) Does your organization’s strategy include a transition plan that aligns with a 1.5°C world?

Change from last year

Modified question (2021 C3.1, C3.1a, C3.1b, and C3.5)

Rationale

Developing a climate transition plan provides certainty to data users that a company is aligning to the long-term climate goals and that its business model will continue to be relevant in a net-zero carbon economy. Collecting feedback on the transition plan allows shareholders to review and raise resolutions related to progress. This question allows companies to demonstrate transparency on their transition plans and associated feedback mechanisms.

Connection to other frameworks

TCFD

Strategy recommended disclosure b) Describe the impact of climate-related risks and opportunities on the organization’s businesses, strategy, and financial planning.

SDG

Goal 13: Climate action

Response options

Please complete the following table:

Requested content

General

• Note for financial services sector companies: Questions C-FS14.3 and C-FS14.3a ask about actions to align your portfolio with a 1.5°C world, and whether you assess if your clients/investees' business strategies are aligned with a 1.5°C world.

Transition plan (column 1)

• You should select “Yes, we have a transition plan which aligns with a 1.5°C world” if you have developed a plan for how to transition your company to a business model compatible with the level of decarbonization required to keep global temperature increase to 1.5°C compared to pre-industrial temperatures. See “Explanation of Terms” for more information. If you select this option, you will be asked to provide further details on your transition plan in subsequent columns.
• You should select “No, but our strategy has been influenced by climate-related risks and opportunities, and we are developing a transition plan within two years” if climate-related risks and opportunities have already influenced your strategy and/or financial planning and you either:
  • have not developed a transition plan but intend to develop one which aligns with a 1.5°C world within two years; or
  • have developed a climate transition plan which does not yet align with a 1.5°C world (as per the definition in “Explanation of terms”) and intend to align it within two years.
• If you select “No, and our strategy has not been influenced by climate-related risks and opportunities”, you will have the opportunity to explain further in column 8 “Explain why climate-related risks and opportunities have not influenced your strategy”.

Publicly available transition plan (column 2)

• This column is only presented if “Yes, we have a transition plan…” is selected in column 1.

Mechanism by which feedback is collected from shareholders on your transition plan (column 3)

• This column is only presented if “Yes, we have a transition plan…” is selected in column 1.
• You should select “Our transition plan is voted on at Annual General Meetings” if you hold AGMs (as defined in the Explanation of Terms) during which shareholders vote on your organization’s climate transition plan. Note that this option is applicable even if your transition plan is already in progress, as it should be continually adjusted and voted on by shareholders (rather than a one-time sign-off). Furthermore, shareholders should be given the opportunity to provide feedback on progress made against your transition plan.
• You should select “We have a different feedback mechanism in place” if your transition plan is not voted on at AGMs, but there is another way shareholders can provide feedback on the contents and progress of your climate transition plan.
• You should select “Not applicable as our organization does not have shareholders” if, for example, your organization is privately held.

Description of feedback mechanism (column 4)

• This column is only presented if “We have a different feedback mechanism in place” or “Our transition plan is voted on at AGMs and we also have an additional feedback mechanism in place” is selected in column 3.
• Briefly describe the process shareholders use to provide feedback on the contents and progress of your climate transition plan. You may also provide any additional information to clarify your selection in column 3, for example, why you do not hold AGMs, or why you have more than one feedback mechanism in place.

Frequency of feedback collection (column 5)

• This column is only presented if “We have a different feedback mechanism in place” or “Our transition plan is voted on at AGMs and we also have an additional feedback mechanism in place” is selected in column 3.

Attach any relevant documents which detail your transition plan (optional) (column 6)

• This column is only presented if “Yes, we have a transition plan…” is selected in column 1.
• You may attach one or more documents which include your climate transition plan e.g. your annual report, your sustainability report, and/or a separate transition plan document.
• Note that CDP considers a credible transition plan to be succinctly integrated into an organization’s existing mainstream filings. Please refer to the CDP Climate Transition Plan technical note for more details.

Explain why your organization does not have a transition plan that aligns with a 1.5°C world and any plans to develop one in the future (column 7)

• This column is only presented if “No, but our strategy has been influenced by climate-related risks and opportunities, and we are developing a transition plan within two years” or “No, our strategy has been influenced by climate-related risks and opportunities, but we do not plan to develop a transition plan within two years” is selected in column 1.
• Explain why you have not developed a climate transition plan, or why your transition plan is not aligned with a 1.5°C world (as per the definition in “Explanation of terms”).

Explain why climate-related risks and opportunities have not influenced your strategy (column 8)

• This column is only presented if “No, and our strategy has not been influenced by climate-related risks and opportunities” is selected in column 1.
• Your answer should be company-specific and include:
  • Why climate-related risks and opportunities have not influenced your business strategy and/or financial planning; and
  • Whether you expect them to in the future. For example, climate change may have little effect on your business because of the nature of your goods/services. In that case, please give as complete an explanation as possible.
• [Oil and gas only] Discuss whether you have considered integrating regulatory and physical climate change risks into your business strategy, investment decisions and risk management. You should also discuss whether you have considered the diversification of your portfolio into lower-carbon and non-fossil fuel products (e.g. natural gas, biofuels, renewable energy), and development of carbon capture and sequestration technology. If relevant, provide the methodology used for any integration of future carbon prices into your hydrocarbon exploration strategy and investment decisions, and the assumptions used. Where possible, provide illustrative examples of the assumptions made in specific investment decisions.
• [Electric utilities only] Discuss any considerations to incorporate renewable energy, carbon capture & sequestration, cleaner coal technologies and energy storage into your strategy.
• [Transport OEMs only] Discuss whether you have considered the impact of climate-related issues on your strategy for your products at group level and, where relevant, for specific markets, including the impact of existing regulatory drivers. Discuss expansion into hybrid/fully electric vehicles and fuel cell technology, if relevant.

Explanation of terms

• Climate transition plan: a time-bound action plan that clearly outlines how an organization will achieve its strategy to pivot its existing assets, operations, and entire business model towards a trajectory that aligns with the latest and most ambitious climate science recommendations, i.e., halving greenhouse gas (GHG) emissions by 2030 and reaching net-zero by 2050 at the latest, thereby limiting global warming to 1.5 degrees Celsius. Please refer to the CDP Climate Transition Plan technical note for more details.
• Strategy: In line with TCFD recommendations, refers to an organization’s desired future state. An organization’s strategy establishes a foundation against which it can monitor and measure its progress in reaching that desired state. Strategy formulation generally involves establishing the purpose and scope of the organization’s activities and the nature of its businesses, taking into account the risks and opportunities it faces and the environment in which it operates.
• Financial planning: In line with TCFD recommendations, refers to an organization’s consideration of how it will achieve and fund its objectives and strategic goals. Financial planning allows organizations to assess future financial positions and determine how resources can be utilized in pursuit of short- and long-term objectives. As part of financial planning, organizations often create “financial plans” that outline the specific actions, assets, and resources (including capital) necessary to achieve these objectives over a 1-5 year period. However, financial planning is broader than the development of a financial plan as it includes long-term capital allocation and other considerations that may extend beyond the typical 3-5 year financial plan (e.g., investment, research and development, manufacturing, and markets).
• Annual General Meeting (AGM): (or annual shareholder meeting) is a yearly gathering between the shareholders of a company and its board of directors. It is primarily held to enable shareholders to vote on company issues, including the selection of the company's board of directors.
• Alignment with a 1.5°C world: refers to the Paris Agreement long-term temperature goal, as expressed in relevant IPCC reports, in particular the IPCC Sixth Assessment Report (AR6) and the IPCC Special Report on Global Warming of 1.5°C (SR1.5). According to the Science-based Targets initiative, aligning with a 1.5°C world currently means reducing Scope 1, 2 and 3 emissions to zero or close to zero and neutralizing any residual emissions by 2050 at the latest.