Establish boundaries to identify relevant emissions sources and how you can account for them. To establish organizational boundaries, determine which company operations and subsidiaries to include in the GHG emissions inventory. Organizational boundaries are determined in terms of the operations that the company owns or controls, through either the equity share approach or the control approach. For more information on setting operational boundaries, please refer to chapter 3 of the GHG Protocol’s Corporate Accounting and Reporting Standard here.

After setting the company’s organizational boundaries, the next step is operational boundaries which define the Scope of emissions included. Identify the emissions associated with operations, classify emissions as direct or indirect, and categorize the emissions Scope (Scope 1, Scope 2, or Scope 3 emissions).

For more information on the emissions Scopes, please refer to Chapter 2.1 “Key sustainability concepts and terminology”. For more information on setting operational boundaries, please refer to Chapter 4 of the GHG Protocol’s Corporate Accounting and Reporting Standard here.

Following the boundaries from step 1, collect activity data and emissions factors, using primary data wherever possible. Activity data measure the level of an activity affecting GHG emissions. Examples of activity data under each Scope include:

• For Scope 1, liters of fuel from trucks directly owned by your company. 
• For Scope 2, kilowatt hours of electricity purchased from the utility company.

Emissions factors then convert activity data into emissions value, e.g., kg of CO2e emitted per liter of fuel or kg of material purchased.

If no primary data is available, companies may have to use secondary data, e.g., average industry data and other generic data not specific to activities. 

Once activity data and emissions factors have been identified, a company should select an emissions calculation approach and calculate emissions from company activities. Chapter 6 of GHG Protocol’s Corporate Accounting and Reporting Standard discusses data collection and calculation in more depth here.

As a next step, companies should aim to improve the maturity of their GHG emissions reporting to reflect recent data and enhance granularity. Chapter 5 of GHG Protocol’s Corporate Accounting and Reporting Standard discusses emissions tracking over time, and chapter 7 discusses managing inventory quality here.

Lastly, companies should verify their footprint with a third party for increased credibility before public disclosure. Chapter 10 of GHG Protocol’s Corporate Accounting and Reporting Standard discusses verification in more depth here.

Once you have established your emissions baseline, you should start to set emissions reduction targets. Corporate net-zero targets should translate into action consistent with a 2050 net-zero timeline, including setting a net-zero target by 2050 and interim targets for years in between (i.e., 2025, 2030, 2035, 2040, 2045).

For non-fossil fuel sector suppliers, science-based targets can be set for Scopes 1-3. As defined by the SBTi, science-based targets give companies a clearly-defined path to reduce greenhouse gas emissions in line with limiting global warming to 1.5°C. They outline how much and how quickly a business must reduce its emissions to be in line with the Paris Agreement goals.

The SBTi has a 5-step process to set science-based targets. The SBTi requires that targets are reviewed and, if necessary, revalidated every five years. 

For step-by-step guidance on target setting, please refer to the SBTi’s 5-step process here.

For inspiration on target setting, the Climate Drive provides case studies of non-fossil fuel companies that have set credible net-zero guidelines here. Other examples of net-zero commitments from companies can be found in the SBTi’s collected case studies here and the SBTi target dashboard here.

After setting and evaluating targets, you need to develop a systematic plan that ensures that your targets are achievable. Systematic reduction activities will ultimately tell you how you can reach your targets, that is, when to apply which decarbonization lever.

To craft your “decarbonization strategy” and prioritize the emission reduction actions, you should understand:

• Which decarbonization levers do you apply at each point in time? 
• What impacts will the levers have on total emissions? 
• What is the financial cost of implementing the levers?

The plan for systematic reduction activities is ultimately highly sector- and company-specific. For example, the decarbonization strategy for a cement production company will likely be based on raw material inputs and look very different from the strategy of a financial services company.

The Exponential Roadmap’s 1.5°C Business Playbook is one example of a framework on how to set a four-pillar climate strategy. The first pillar focuses on planning and taking action to reduce a company’s emissions, including key systematic activities such as:

• Installing on-site renewable electricity production solutions 
• Improving energy efficiency for buildings through retrofitting 
• Systematically reducing resource waste in all operations

For more information, please reference the Exponential Roadmap’s 1.5°C Business Playbook here.

For more details on systematic reduction strategies, you can refer to Step 3 “Turn your targets into action” in Chapter 3 of the Climate Drive’s Net Zero Guidebook here.

A comprehensive Net-Zero Transition Plan goes beyond systematic reduction activities and includes other elements, e.g., a holistic implementation roadmap, governance structure, or engagement strategy. A transition plan describes your overall approach to the net-zero transition and shows the credibility of your commitment, which is becoming increasingly necessary as regulatory pressure tightens.

Six commonly observed elements of a transition plan include: ambition, implantation roadmap, initiatives, governance, engagement strategy, and progress measurement and metrics.

A best-in-class transition plan should be impactful, credible, and ensure delivery. Testing your transition plan against those key criteria once developed, can help to pressure test its quality.

In addition, there are a few best practices to consider across each key element, to ensure your transition plan is complete (see guidance graphics below).

There are numerous international initiatives developing frameworks for transition plans. The Transition Plan Taskforce (TPT) Disclosure Framework is currently defining a framework for a “best-in-class” transition plan, following the three principles of ambition, action, and accountability. Disclosure elements of the TPT’s Sector-Neutral Framework cover the foundation, implementation strategy, engagement strategy, metrics & targets, and governance in a transition plan. The Framework’s steps are detailed here.

Other frameworks providing emerging guidance on how to develop a transition plan include:

1. The Glasgow Financial Alliance for Net Zero (GFANZ) has published guidance on transition plans specifically for financial institutions. For more information, please reference GFANZ here. 
2. The UN-backed Race to Zero Campaign requires entities to publish an official Transition Plan or equivalent carbon reduction plan within 12 months of joining. Ultimately, the campaign recommends that the plan be embedded within the entire strategic model. The criteria acknowledges that plans are often iterative, but outlines minimum transition plan contents here. 
3. The CDP guides how organizations disclosing through CDP can demonstrate they have a credible climate transition plan in place. Their technical note outlines principles of credible climate transition plans here, and more information on CDP’s work with transition plans can be found here.