A climate transition plan can be enhanced by using the IBE Business Ethics Framework

Tags: Ethics Programme issues

The challenge

In a business environment where short-term profitability often takes precedence, long-term sustainability is fundamentally discretionary and seems like an afterthought. However, integrating sustainability requires that short-term decisions are informed by enduring ethics and values.

To illustrate this, let’s examine the critical sustainability goal of reducing carbon emissions to transition to ‘net zero’. The journey to net zero necessitates a long-term vision and initiative-taking measures, given the lengthy timescales involved with implementing technology advancements. HM Treasury’s Transition Plan Taskforce (TPT) Disclosure Framework provides a robust structure to facilitate this transition. It is poised to become the benchmark for climate transition planning and is expected to be widely adopted as the ‘gold standard’ by large companies in compliance with, the EU Corporate Sustainability Reporting Directive (CSRD), and other regulations.

To add weight to this direction, in May 2024 the International Financial Reporting Standards (IFRS) Foundation announced it would assume responsibility for the disclosure-specific materials developed by the TPT. The announcement marks the beginning of the International Sustainability Standards Board (ISSB) work to harmonise disclosures about transition plans. The announcement is also significant in that it provides clarity: (i) on how and to whom ownership of the TPT framework will be transferred when the Taskforce disbands later in 2024; and (ii) indicates the possible path towards the introduction of mandatory transition plan disclosure requirements under the International Sustainability Standards Board (ISSB).

The hypothesis

This article explores how aligning a TPT-compliant climate transition plan, with the actionable steps in the IBE Business Ethics Framework, can enhance its effectiveness. The IBE Framework serves as a practical guide for fostering behaviour driven by ethics and values.

The TPT Disclosure Framework expands on its Accountability principle, and we will focus on two key sub-elements: Board Oversight and Reporting, and Culture. Our experience of working with clients on achieving net zero underscores the importance of these elements. Even the most comprehensive plan can falter if leadership is not fully committed, or if the corporate culture is not supportive of progress, then the plan stays as just that: a plan.

A TPT-aligned climate transition plan is indirectly reinforced by revisions to the UK Corporate Governance Code, published by the Financial Reporting Council. Provision 2 mandates that boards should assess and monitor culture, but also ensure how the desired culture is embedded. Consequently, cultural statements within a TPT-aligned disclosure should be backed by board oversight and engagement, amplifying the importance of the IBE Business Ethics Framework.

The IBE Business Ethics Framework

In developing a TPT-aligned climate transition plan, a few areas of the IBE Business Ethics Framework are particularly relevant:

• Build an ethical culture

Creating an ethical culture requires a critical and participatory introspective exercise that looks at purpose, values, culture and behaviours. In doing so, addressing three pivotal questions will serve as practical steps to develop the Culture component of TPT:

1. What is our culture?
2. How do we build an ethical culture?
3. How do we put it into practice?

The IBE’s approach to these questions helps sustainability practitioners break down the “Culture” requirements of the TPT framework into digestible steps, enabling the ethical foundation to be solid and actionable.

• Write a code of conduct/ethics

The IBE advises/recommends that all codes have a leadership endorsement and support teams do the right thing through ethical decision-making.

• Leadership endorsement: This emphasises the importance of leadership commitment in sustainability. The Toolkit emphasises that leaders must serve as role models and champion ethical decision-making among employees. This is crucial as carbon emissions are a result of individual choices.
• Decision-making guide: Providing employees with a decision-making guide supports them in making ethical choices. Organisations often have decision-making frameworks for strategic, financial, or performance-related decisions. Similarly, guiding principles for net zero ambitions, simplify complex decisions, enabling the organisation to rally behind them more swiftly and effectively. The IBE’s “Stop and Think” decision-making model, with questions like: “Is it in line with our values?” and “Would I be comfortable explaining the decision to my family?”, highlights these ethical considerations vividly.

The conclusion

To deliver an organisation’s long-term sustainability goals, sustainability practitioners must communicate in a way that resonates across various functions. The IBE Business Ethics Framework offers a powerful means to enhance messaging and drive effective change. By embedding ethical principles into the core of climate transition plans, businesses can not only meet regulatory standards but also foster a culture that supports and sustains their environmental ambitions.

In conclusion, the IBE Business Ethics Framework is a valuable resource for harmonising ethics into climate transition plans. It empowers leadership and culture to be aligned with net zero goals: transforming plans into real, impactful actions.

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