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The 2025 Preview: The transition to net-zero
The 2025 Preview: The transition to net-zero
If 2024 was spent looking back over shoulders and collecting data to appease stakeholders, then 2025 should hopefully kickstart the mainstreaming on ambitious, robust Transition plans and strategies that create certainty for businesses to decarbonise and reach net-zero.
There’s little doubt that 2025 will be a massive year for corporate sustainability. Many businesses will have been working toward 2025 targets that will need re-evaluating and resetting as we move towards the 2030s.
The SBTi is set to unveil an influential update to its Net-Zero Standard, which is already being adhered to by thousands of businesses, and more and more guidance is coming on how to deal with Scope 3 and interact with the voluntary carbon market.
Couple this convergence of strategy and standards with the UK’s green policy revamp, which will attempt to overcome cumbersome green project approvals and the next 12 months could unlock a lot of doors for companies. From greater green energy access, increased political certainty and more rigorous guidance to follow, 2025 could be the year that the foundations for climate action are firmly set into place.
For many businesses the priorities of 2024 will spill over, with many gearing up to publish their first CSRD reports. However, edie’s Business Tracker found that Climate Transition Plans are becoming a critical piece of work for many businesses, and the focus will only ramp up next year.
Transition plans go beyond stating emissions goals for business’s operations and their value chains. They also outline how firms intend to deliver decarbonisation, covering factors such as changes in business models, innovation investments and staffing and skills.
The Government has supported a Transition Plan Taskforce (TPT) in defining what a robust plan should include. Its overarching ‘Gold Standard’ guidance was finalised in the latter half of 2023, with more detailed sector-specific guidance having been provided earlier this year.
For companies seeking to get ahead of the regulatory curve, the good news is that CDP believes companies can develop and disclose a credible plan within two years.
Kate Levick, who headed up the UK’s Transition Plan Taskforce until its work concluded last month, used her platform at COP29 to announce a new International Transition Plan Network (ITPN).
The Network aims to enable international collaboration and dialogue on the creation of frameworks and resources to enable businesses to develop climate transition plans. Such plans go beyond stating emissions targets, detailing how they will be achieved. They should outline investment plans for decarbonisation solutions and measures for engaging key stakeholders, among other key aspects.
Early moves were made in anticipation of a transition plan mandate – something the EU and several other markets are now considering. Nonetheless, transition plans are a relatively new market practice, and only a handful of companies are moving entirely voluntarily.
Currently, 40% of businesses have developed a 1.5C-aligned climate transition, meaning almost two-thirds of businesses will start to explore whether they need to or not over the coming months. With the survey also finding that 30% of businesses have “no plans” or need to develop a Climate Transition Plan, it means that around 30% will likely be starting the process shortly.
Proportion of companies in our survey with 'no plans' to develop a Climate Transition Plan
Carbon markets
One aspect that should assist with the long-term trajectory of corporate climate plans is the upcoming update from the SBTi. The organisation announced earlier this year that updates to its Standard would come towards the end of 2025. Operational since 2021, the Standard requires firms to aim for a 90% reduction in absolute emissions across their operations and value chain. Many businesses have struggled to plot a path to cut this level of emissions, especially from Scope 3 (indirect) sources.
the SBTi indicated in April that it could relax its rules on ‘environmental attribute certificates’ including carbon credits, potentially allowing businesses to offset Scope 3 emissions in place of delivering direct reductions.
That announcement sparked a heated debate within the SBTi and across the global corporate sustainability space. Additionally, the UK Government will unveil its principles for carbon credit usage following a consultation in 2025.
The UK Government sees a “clear and appropriate role” for corporates to utilise carbon and nature credits as part of efforts to reach net-zero, and has published its draft principles and guidelines to do so. These principles, which form the basis of the consultation, align with other “best practice approaches” to carbon markets, namely using high integrity credits to compliment, rather than replace actual decarbonisation.
Speaking of high-integrity, key operators within the VCM are working on new standards and codes to ensure that corporates can invest in credits that are demonstrative in their decarbonisation and removal impacts.
The Integrity Council for the Voluntary Carbon Market (ICVCM) has confirmed that more than 230 million carbon credits classed under renewable energy methodologies will not be able to use its new high integrity labelling initiative. The same council also approved three methodologies for issuing forest carbon credits, which were revamped by REDD+ following concerns about potential loopholes in previous methodologies.
Previous Business Tracker surveys found that more than 60% of businesses feel the VCM is “too risky” to invest in. Will that stance change if the Government gives its backing and the SBTi relaxes its allowance threshold?
Currently, the most common approach cited by businesses is to “wait” until emissions have been reduced as much as possible before investing in the carbon markets. This was the approach stated by 30% of businesses. A further 23% are using credits now, 21% do not intend to use them at all and 16% are awaiting fresh guidance on how to use them in a meaningful way.
The corporate perspective on carbon markets will also need to change – swayed by the forthcoming changes – if investment is to speed up. Currently, 84% of businesses agree that carbon offsetting should only be used for unavoidable emissions, while 53% believe that the market is too risky to invest in (a slight decrease compared to our last Business Tracker).
More than one-third (37%) of businesses view carbon credits as an “integral part” of achieving long-term climate targets and could well be incorporated into the aforementioned Climate Transition Plans.
Q. To what extent do you believe with the following about carbon offsetting?
edie also asked respondents what their main sustainability ambition was for 2025, with responses collected in written form. Disclosure, reporting and CSRD are all referenced multiple times, and transition plans and internal engagement are evidently high on the agenda.
Here is a summary of some of the most common responses:
- Staff engagement and buy-in to support strategies
- Better understanding and data on Scope 3
- Disclosing and reporting against CSRD
- Embedding climate risk across the business
- Formulate carbon reduction plans and implement decarbonisation processes
- Focusing on nature and biodiversity.
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