Mandatory transition plans for UK businesses: UK government consults

In just under two weeks, the UK government’s consultation on mandating that UK-regulated financial institutions and large companies develop and implement transition plans to align with the 1.5°C goal of the Paris Agreement will close. This follows a manifesto commitment by the Labour Party to mandate UK-regulated financial institutions – including banks, asset managers, pension funds and insurers – and FTSE 100 companies to develop and implement credible transition plans. 

The consultation is part of a package of three consultations, which also include consultations on the exposure draft of the UK Sustainability Reporting Standards and an oversight regime for UK sustainability assurance. We have written a separate blog covering these available here. 

Companies wishing to participate in the consultation can find more information on how to do so here. Respondents have until 17 September 2025 to submit their responses.

Background

Wednesday’s announcement of the consultation marks a significant step in the UK’s journey towards placing transition plans on a mandatory footing. In April 2022, the Transition Plan Taskforce (TPT) was launched by HM Treasury to develop a gold standard transition plan disclosure framework. 

The TPT published its final version in October 2023 and the International Sustainability Standards Board (ISSB) took responsibility for its materials in June 2024. As part of its Mansion House speech in November 2024, the UK government announced that it would be considering how to take forward its manifesto commitment in relation to transition plans. 

Consultation 

The consultation is split into three sections, each dealing with a different aspect of how the UK government should approach mandating transition plans. 

Benefits and use cases of transition plans

The UK government seeks evidence on current or planned transition-plan practice; motivations, costs and obstacles to preparing such plans; reliance on TPT guidance; barriers for non-preparers; how investors and other users apply transition-plan information; and any additional use-cases or economy-wide impacts that should shape future policy and potential mandatory reporting.

Implementation of transition plan requirements

The section first explores two options for transition plan disclosures: (i) requiring entities to explain why they have not disclosed a transition plan or transition plan-related information and (ii) requiring entities to develop and disclose transition plans. 

The consultation goes on to request feedback on whether the UK government should go beyond disclosure requirements and actually mandate legal obligations on entities to take further actions consistent with their transition plan disclosures. The consultation also specifically mentions the recent developments within the European Union in relation to their omnibus package to simplify requirements in relation to transition plans under the Corporate Sustainability Due Diligence Directive.

The consultation also seeks views on how companies, pension funds and financial institutions align their transition plans with net zero by 2050 and what kind of standards and methodologies to adopt to help businesses align their transition plans with 1.5°C pathways. This builds on requests, such as from the Transition Finance Market Review,  for further clarity on what alignment with 1.5°C means and which sectoral approaches and existing mechanisms could inform such alignment.  

In addition, the consultation requests input on how transition plans can be used as a tool for companies to build resilience and adapt to climate change over a longer-term horizon. The consultation points to 2°C and 4°C scenarios, which could be used to support the development of company strategies for resilience. 

Related policy and frameworks

Finally, the consultation aims to explore the impact of a range of related frameworks on transition plans, including voluntary carbon and nature markets, the international policy landscape and guidance, support and capacity building. 

Next steps

The UK government has stated that it will consider responses to this consultation alongside the DBT’s consultation on UK SRS and the sustainability assurance market. The UK government also confirmed that it is considering the wider set of recommendations included in the Transition Finance Market review. It remains to be seen how the UK government will proceed with mandating transition plans, but the consultation indicates a potential direction of travel and key areas of focus.