CSRD: EFRAG publishes Transition Plan guidance

On 4th November 2024, EFRAG – the European Financial Reporting Advisory Group – published draft implementation guidance for transition plans, specifically targeting climate change mitigation (TPIG 4).

The guidance is designed to help companies comply with the EU’s Corporate Sustainability Reporting Directive (CSRD. It accompanies but does not form part of the European Sustainability Reporting Standards (ESRS).

The guidance focuses on transition plans specifically for climate change mitigation as outlined in ESRS E1-1. It covers areas including:

• Target compatibility: undertakings must ensure that their climate targets align with the 1.5°C target set by the Paris Agreement.

• Decarbonisation levers: undertakings must identify strategies and actions (levers) e.g. operational and product adjustments that will enable them to reduce carbon emissions.

• Investment and funding: undertakings must outline the investments and funding mechanisms that support their transition plans e.g. EU Taxonomy-aligned CapEx.

• Supporting disclosures: undertakings must provide detailed information to support the transition plans, e.g. those involved in activities covered by the EU Taxonomy must disclose their alignment with Taxonomy criteria.

• Governance: undertakings must explain how their transition plans are embedded into their wider corporate strategy and what oversight is in place to govern this.

• Reporting progress: undertakings must report on their progress in implementing their transition plans, including monitoring of the effectiveness of planned actions and their contribution toward emissions reduction targets.

• IROs connected to transition plans: undertakings must consider the environmental and social impacts, risks and opportunities (IROs) linked to their climate transition plans, including how plans may affect workers, communities and ecosystems.

Next steps

The draft guidance will now be reviewed by EFRAG’s Sustainability Reporting Technical Expert Group and Sustainability Reporting Board before it can be approved. A consultation will follow. The final guidance is expected in 2025.

For more information on this and other CSRD related topics, please get in touch.