Key Points
- ESRS E1-1 requires disclosure of the transition plan if the entity has adopted one; if it has not, it must state that fact and indicate whether adoption is planned.
- The Omnibus I directive (published 26 February 2026) deleted the obligation for in-scope entities to adopt a transition plan but preserved the CSRD disclosure requirement.
- The plan must link GHG reduction targets to decarbonisation levers and quantified investments on a stated timeline.
- Omitting the connection between the plan and the entity's financial planning is the most common documentation gap flagged in early CSRD reviews.
What is Climate Transition Plan?
ESRS E1-1, paragraph 16, requires an entity that has adopted a climate transition plan to provide a high-level explanation of how it will adjust its strategy and business model to ensure compatibility with the 1.5 °C pathway and with the EU Climate Law's 2050 neutrality objective. The disclosure is not a free-form narrative. Paragraph 14 specifies the content: the entity must explain how its GHG emission reduction targets (disclosed under E1-4) are compatible with the 1.5 °C limit, identify the decarbonisation levers and key actions planned (including changes to products and technologies), quantify the investments supporting implementation, and cross-reference the mitigation actions reported under E1-3.
The plan connects several ESRS disclosures. Scope 1 and Scope 2 emissions reported under E1-6 provide the baseline. Targets under E1-4 provide the destination. The transition plan shows the path and the cost. If climate change is material under the entity's double materiality assessment but no plan exists, ESRS E1-1 paragraph 16 requires disclosure of that fact and an indication of whether the entity expects to adopt one.
EFRAG published draft implementation guidance on transition plans in February 2025, clarifying how the disclosure requirements interact with the EU Taxonomy and the CSRD assurance obligation.
Worked example
Client: Danish maritime logistics company, FY2026, revenue EUR 140M, IFRS reporter. Henriksen operates 12 short-sea vessels in the North Sea and Baltic. Climate change was assessed as material (both impact and financial). The board adopted a climate transition plan in Q1 2026.
Step 1 — Establish the emissions baseline
Henriksen's FY2025 emissions total 86,400 tonnes CO2e (Scope 1: 78,200 tonnes from vessel fuel; Scope 2: 1,600 tonnes from shore-side electricity; Scope 3: 6,600 tonnes from upstream fuel production). The sustainability team documents the baseline using the GHG Protocol operational control approach.
Documentation note: record the emissions baseline by scope, the consolidation approach applied, the emission factors used (IMO 2023 factors for marine fuels), and the underlying data sources (bunker delivery notes, electricity invoices). Cross-reference to ESRS E1-6.
Step 2 — Set reduction targets aligned with 1.5 °C
The board targets a 40% absolute reduction in Scope 1 emissions by 2032 (from 78,200 to 46,920 tonnes CO2e) and net-zero by 2050. The targets are benchmarked against the Poseidon Principles trajectory for the bulk carrier segment.
Documentation note: record each target, the reference trajectory used, the base year, the target year, and the board resolution approving the targets. Cross-reference to ESRS E1-4.
Step 3 — Identify decarbonisation levers and quantify investment
Henriksen identifies two primary levers. Retrofitting four vessels with dual-fuel engines capable of running on green methanol (capital expenditure EUR 22M over 2026–2029) and installing shore power connections at the two home ports to eliminate auxiliary engine emissions while berthed (EUR 3.4M in 2027). These two levers deliver 34 percentage points of the 40% reduction target, with the remaining 6 percentage points covered by slow-steaming optimisation.
Documentation note: for each lever, record the projected emission reduction (in tonnes CO2e), the investment amount, the funding source, and the implementation timeline. Cross-reference to ESRS E1-3 (actions and resources).
Step 4 — Integrate the plan into financial planning
The CFO maps the EUR 25.4M total investment to the five-year capital expenditure forecast and models the effect on EBITDA (fuel cost savings of approximately EUR 2.1M per year from 2030, partially offset by higher methanol procurement costs of EUR 0.9M per year).
Documentation note: record the financial integration analysis, the fuel price assumptions, and the board's confirmation that the transition plan is consistent with the approved budget.
Conclusion: Henriksen's transition plan disclosure is defensible because each element traces to a documented source and cross-references the related E1 disclosure requirements.
Why it matters in practice
- Teams frequently disclose GHG reduction targets under E1-4 without connecting them to the specific actions and investments described in the transition plan. ESRS E1 paragraph 14(b) explicitly requires the entity to identify decarbonisation levers and key actions planned, cross-referenced to the mitigation actions under E1-3. A target without an action plan is aspirational text, not a disclosure.
- The Omnibus I directive's deletion of the adoption obligation has caused confusion. Some entities interpret this as removing the need to disclose anything about transition planning. The CSRD disclosure requirement under ESRS E1-1 paragraph 16 remains intact: if a plan exists, the entity discloses it; if no plan exists, the entity states that fact. Silence is not compliant.
Climate transition plan vs. climate risk assessment
| Dimension | Climate transition plan | Climate risk assessment |
|---|---|---|
| Purpose | Maps the entity's path to decarbonisation in line with the 1.5 °C target | Evaluates the financial and operational risks that climate change poses to the entity |
| ESRS reference | ESRS E1-1 (Disclosure Requirement E1-1, paragraphs 14–16) | ESRS E1-9 (Disclosure Requirement E1-9, anticipated financial effects of physical and transition risks) |
| Time orientation | Forward-looking: actions and investments the entity plans to execute | Forward-looking: exposures the entity expects to face under different climate scenarios |
| Key inputs | GHG baseline, reduction targets, decarbonisation levers, investment schedule | Scenario analysis, physical risk mapping, transition risk identification |
| Audit focus | Whether the plan is internally consistent and supported by budgeted investment | Whether the risk assessment uses reasonable assumptions and covers material exposures |
The distinction matters because the transition plan is about what the entity intends to do, while the climate risk assessment is about what the climate might do to the entity. The auditor tests different evidence for each: capital expenditure commitments and board resolutions for the plan, scenario assumptions and sensitivity analyses for the risk assessment.
Related terms
Frequently asked questions
Do I still need to disclose a climate transition plan after the Omnibus I changes?
The Omnibus I directive (Directive (EU) 2026/470) removed the obligation to adopt a transition plan. The ESRS E1-1 disclosure requirement survives: if the entity has a plan, it must disclose the content specified in paragraphs 14–16. If the entity has no plan, it must state that fact and indicate whether one is expected. The disclosure obligation is distinct from the adoption obligation.
How does the climate transition plan relate to science-based targets?
ESRS E1 does not mandate the Science Based Targets initiative (SBTi) methodology, but the plan must demonstrate compatibility with the 1.5 °C pathway (ESRS E1 paragraph 14(a)). Many entities use SBTi-validated targets as evidence of Paris-alignment. The auditor assesses whether the chosen trajectory is credible and whether the entity has documented the basis for its compatibility claim.
What happens if the entity has a transition plan but is not on track?
ESRS E1-1 requires disclosure of the plan's content, not a guarantee of success. If progress diverges from the plan, the entity discloses the deviation and explains the reasons. The assurance provider evaluates whether the disclosed progress is consistent with the underlying data. Undisclosed deviation creates an inconsistency that ISAE 3000 (Revised) paragraph 46(b) treats as a matter requiring the practitioner's attention.