Sustainability needs transition planning regulation: Business can make it happen

Transition planning is the single most important piece of regulation needed to tackle the climate and broader sustainability emergency systemically. In the absence of that regulation, businesses must prove transition planning works, collaborate, and lobby—for their own sake too.

Transition plans are a competitive advantage and a source of optimization, focus, and resilience. Regulation, in the long term, must tend toward the 17 UN Sustainable Development Goals (SDGs). But the immediate achievable step is transition planning policies focusing on decarbonization and the interconnected environmental, social, and economic sustainability aspects. That regulation should apply to the largest firms and financial organizations that govern the dynamics of industries and systems.

By proving that sustainable transition planning works across these interlinked outcomes, businesses can overcome the inertia in systems to change the overstory of sustainability—building a critical mass that triggers positive tipping points to pull policymaking, consumer behavior, and industry into alignment with trajectories that meet the emergency.

Clear accountability and incentives are essential in transition plans—overcoming the excuse of obscure systemic barriers and ensuring sustainability is embedded throughout an organization and its ecosystem. Successful transition plans by corporate and financial giants are already cascading through supply chains and systems, marking the beginnings of real systemic change. Being a part of the new system will always beat frantically reacting to catch up when the old one shifts.

The state of transition planning and regulation? Neither policy nor business is meeting the climate and broader sustainability emergency

Transition plans connect a future goal with the current state. We have both for sustainability, which we outline here. The SDGs are the endpoints for these roadmaps, including the aim to decarbonize by 2050 at the latest. Establishing a baseline—to the extent needed to act now and tackle an organization’s most material spheres of influence—is not only possible but also mandated by regulations such as the EU’s Corporate Sustainability Reporting Directive (CSRD, see our call for 2025 to go beyond reporting here).

From that baseline, businesses have all the tools to find the impact and value in sustainability. Collaborating throughout organizations and ecosystems will help share best practices to allow those plans to positively help peers and smaller organizations transition (not forcing change or threatening expulsion from supply chains or funding pools). Clarity based on materiality assessments helps address the barriers every organization will face to that change (see Exhibit 1 and our take on the systems change sustainability needs here).

Exhibit 1: Transition planning must identify material near-term spheres of influence and integrate them with the long-term global sustainability trajectory

Source: HFS Research, 2025

In 2021, at COP26, the UN climate summit held in Glasgow, the Transition Plan Taskforce (TPT) was established. Starting in 2026, the intention was for large financial organizations and public companies to construct and disclose transition plans aligned with the UK’s legal commitment to reaching net-zero emissions by 2050. The TPT released its final report at the end of 2024, but the regulation had already been scrapped. The new UK administration elected in July 2024 shows no signs of rekindling a transition planning mandate. The European Union’s recent ‘Omnibus’ package streamlining the CSRD also removed the need for transition plans (see our assessment of the Omnibus here). Switzerland has announced recent plans for transition planning regulation, but it is unclear whether it will become law.

Successful transition planning requires several elements, which we have covered here. They include:

• A clear link between sustainability, financial value, and incentives throughout organizations.
• A strategy aligning internal and external system dynamics. Transparent communication with stakeholders builds trust and credibility—helping them transition into a genuine partnership, not by top-down dictation.
• ‘Live’ updates to reflect industry, technology, and regulatory changes
  (see Exhibit 2).

Exhibit 2: The Transition Plan Taskforce outlines a cyclical approach to keeping transition plans ‘live’

Source: Transition Plan Taskforce, 2024

The financial sector is perhaps the furthest ahead in transition planning

Banking, financial services, and insurance (BFSI) firms cover clients across all industries. BFSI’s long-term mandate exceeds what most quarterly-focused firms (and one-term policymakers) manage. The financial sector understands the unchanged direction of sustainability—we’ve analyzed this here—and that stranded assets are inevitable: the question is when, not if.

The financial sector has developed transition plans of varying kinds. What is missing are clear red lines for what BFSI firms expect from client roadmaps. Industry insiders suggest the approach is currently ‘soft’ collaboration. But the time will come soon when client plans will be incompatible with the direction of sustainability—regulated or not.

As one recent public example, ING became the first global ‘systemically important’ bank to have its plans validated by the Science Based Targets Initiative (SBTI). The CDP (an ESG rating firm, formerly the Carbon Disclosure Project) is also increasingly focused on detailed plans, not targets and promises.

Away from finance, Ikea recently disclosed a full transition plan covering its material spheres of influence. NextEra, the energy firm, did so in 2022. In telecoms, TalkTalk has embedded supply chain engagement in its own transition plan, as we’ve studied here.

Clear, dynamic transition planning provides visibility to an organization’s investors, enabling them to assess progress against their own roadmaps—connecting sustainability to value. However, the financial sector must go further and help its clients and partners build and execute transition plans in the absence of adequate regulation. We make the case here.

Clear accountability must embed transition plans throughout an organization and its ecosystem

Long-term executive incentive plans are being modified as sustainability comes under global political attack despite the underlying progress of money, hiring, and deal volume (the services sector illustrates that here). As brief examples, HSBC reduced its percentage incentive related to ESG from 25% to 20%; UBS is retaining ‘some’ targets, but Standard Chartered claims its “commitment to sustainability is unwavering and comes right from the top”. Oil and gas firms have also unapologetically dropped targets, not that they were ambitious to begin with.

But are these targets right, or do they miss the point? Clear and transparent disclosure of transition planning answers that question.

The Bottom Line: Businesses can change the overstory of sustainability by proving transition plans work, overcoming systemic inertia by collaborating across their ecosystems, and giving regulators the confidence to mandate.

Organizations that build the transition plans that sustainability needs will lead the coming decades. Policymakers, consumers, and businesses will reward them and look to them as examples in their own transitions, while others will be dragged along, having missed their chance at leading.