From policy to practice: transition planning as a boardroom imperative

For many boards, climate-related disclosures have been the catalyst for grappling with a new set of systemic risks and opportunities. Yet disclosure is not the destination, it is the starting point. The real work lies in transition planning: embedding credible, actionable and dynamic strategies that enable businesses to operate and thrive in a low-emissions, climate-resilient economy.

Transition planning is often framed as a compliance requirement. But as the Chapter Zero New Zealand Transition Planning Guide makes clear, it is far more than that: it is business planning at its core. Done well, transition planning not only reduces risk exposure and liability but also builds competitive advantage, attracts capital and positions organisations for resilience in the face of accelerating change.

Globally, momentum is building, but so too are the gaps. Research by CDP and Oliver Wyman shows that while 87% of disclosing companies report adopting emissions reduction targets, only 40% say they will have transition plans in place within two years.

This implementation gap highlights a critical challenge for directors: moving from ambitious pledges to credible pathways backed by governance, capital allocation and execution discipline.

As Alec Tang, Partner, Sustainable Value KPMG in New Zealand has argued, boards must confront the trade-offs between short- and long-term priorities. Bridging the say–do gap means linking strategy to delivery and recognising that inaction carries its own risks – legal, financial and reputational.

The regulatory context differs between jurisdictions, but the expectations are converging. In New Zealand, climate-related disclosures are already mandated under the External Reporting Board standards, with an emphasis on financial impacts and the allocation of capital to low-emissions, climate-resilient activities.

In Hong Kong, firms are facing a new regulatory horizon: voluntary adoption of the new HKFRS Sustainability Disclosure Standards aligned with ISSB and, more immediately, new climate requirements in Listing Rules from January 2025 (these will become mandatory for large-cap issuers in 2026, with further phasing planned through to 2028).

These timelines offer both opportunity and challenge: time to build capability and readiness, but also heightened expectations from investors and stakeholders who increasingly view credible transition plans as the benchmark for good governance.

A credible transition plan cannot sit in a standalone report or sustainability annex. It must be integrated into the organisation’s overall strategy, risk management and decision-making.

That means embedding climate oversight into governance structures, stress-testing assumptions through scenario analysis and ensuring accountability through interim targets and milestones.

A distant ‘net zero by 2050’ commitment is insufficient without clear steps along the way, linked to performance incentives and capital decisions. Transition planning is not about predicting the exact pathway to 2050, but about building an adaptive, resilient strategy that can flex as uncertainties evolve.

This was a strong theme at the recent Transition Planning in Action workshop convened by Climate Governance Initiative Hong Kong. Directors and practitioners stressed that transition plans must be living documents, reviewed regularly, shaped by stakeholder engagement and capable of evolving as policy, technology and market conditions change.

The lesson is clear: transition planning is not a one-off exercise but an ongoing governance responsibility.

For boards, this requires both competence and confidence. Directors must be able to interrogate management’s assumptions, understand the implications of different climate scenarios and challenge whether transition strategies are sufficiently ambitious and credible.

This may mean investing in board education, drawing on external expertise, or revisiting governance frameworks to ensure climate oversight is embedded rather than bolted on. The most effective boards are those that treat transition planning as a matter of strategic foresight and resilience, not just regulatory compliance.

Importantly, transition planning is about both mitigation and adaptation. While emissions reduction pathways are central, boards must also anticipate and manage the physical impacts of climate change.

Questions about asset resilience, insurance availability and supply chain vulnerability are just as critical as energy transition pathways. Integrating these considerations into strategy ensures businesses are positioned not only to reduce emissions but also to withstand the disruptions of a climate-changed future.

Although regulatory requirements differ across jurisdictions, the direction of travel is unmistakable – investors and markets are demanding credible, actionable plans. Transition planning is becoming the yardstick by which companies are judged, not only on climate leadership but also on financial resilience and governance quality.

Transition planning is not about having a perfect plan, but about demonstrating progress, transparency and accountability. It is about setting a credible direction of travel, acknowledging uncertainties and showing how strategy will evolve in response to new information.

Ultimately, transition planning is about enabling informed capital allocation, strategic clarity and market confidence. It asks boards to consider how decisions made today will shape resilience tomorrow.

The questions directors should be asking are not abstract – they go to the heart of business strategy: What competitive advantage does early transition create? Where are our supply chain vulnerabilities? How do our capital allocation decisions align with our transition plan?

By embedding transition planning into the heart of board decision-making, directors can help turn climate ambition into credible action. That is what moving from policy to practice looks like and it is where board leadership will make the defining difference.

For boards, some immediate actions include:

• • Build board and management capability by prioritising climate education and scenario-based training
  • Embed transition considerations into core strategy and financial planning, not siloed in sustainability reporting
  • Request scenario analysis and stress testing to assess resilience under different climate and policy pathways
  • Set interim targets and integrate climate metrics into oversight, ensuring progress is measured and monitored
  • Treat transition planning as a living process, with regular updates as technology, policy, and market expectations evolve