00:00 - 00:30 Hello, welcome to Environment Matters, a podcast by the environment team at Burges Salmon. I'm Mike Barlow, the head of the environment team. Today's podcast will focus on decarbonisation and transition plans. That's a particularly hot topic given developments in the EU and the UK. This is another of our ESG topics, following on from our discussion of climate change and sustainability in supply chains.

00:30 - 01:00 In that episode, we explored expanding corporate sustainability reporting disclosure and due diligence obligations. I'm delighted to be joined by my colleague Gabi Gershuny, an associate in our team. I'm also delighted to be joined by David Desforges as our guest. David is our first external and international speaker. David is an experienced environmental counsel who practises in France as a solo practitioner and as of counsel for Almain Avocats.

01:00 - 01:30 He has over 30 years of experience in environmental law, covering traditional sectors and issues like climate change, circular economy, and ESG. Many will be watching developments in the EU's omnibus proposals, which will affect transition plan requirements under the Corporate Sustainability Due Diligence Directive. We're lucky to have David share his insight on evolving EU requirements and their transposition into French law.

01:30 - 02:00 We'll also touch on the UK's position, following the launch of a consultation on transition plan requirements. As companies navigate the divergence between jurisdictions and uncertainty in a shifting landscape, it's vital to get definitions right. Gabi, could you explain what we mean when we talk about decarbonisation and transition plans?

02:00 - 02:30 Sure. There's a patchwork of mandatory legal regimes and voluntary frameworks introducing requirements or guidance for companies to prepare plans or reports that broadly set out their strategy for transitioning to a low-carbon economy. Requirements vary across regimes and frameworks. Key features of climate transition plans include assessing climate-related risks and opportunities, metrics and targets aligned with international and national climate goals.

02:30 - 03:00 For example, the 1.5 degree goal in the Paris Agreement or the UK's net zero target by 2050. Also governance processes for assessing risks and opportunities, monitoring progress towards targets, and an implementation and engagement strategy. That's really helpful. Why are these plans important now and why should companies be thinking about producing them?

03:00 - 03:30 First, certain companies may be legally required to produce plans or reports if they meet thresholds for size and turnover. For example, the CS Triple D requires in-scope companies to adopt and put into effect a transition plan for climate change mitigation. As part of the European Commission's omnibus package, there are proposals to clarify this obligation and to postpone the requirement by two years.

03:30 - 04:00 We'll await further developments as the process progresses. Beyond the CS Triple D, there are other EU regimes imposing requirements to produce decarbonisation or climate neutrality plans. Even where not mandatory, many companies choose to produce a climate transition plan using voluntary standards like the Transition Plan Taskforce Disclosure Framework or the Task Force on Climate-related Financial Disclosures.

04:00 - 04:30 It's worth noting the IFRS Foundation recently published new guidance on what to disclose about a company's plan when reporting under the IFRS S2 standard or climate-related disclosures. The recent UK consultation helpfully sets out the benefits of transition planning, including supporting emissions reductions, increasing competitiveness, and reducing the cost of debt.

04:30 - 05:00 It highlights the importance of embedding action throughout operations and the wider value chain. Doing this strategically helps companies manage risks and seize opportunities in the transition to net zero. Thanks, Gabi. So really two reasons: one is regulatory compliance, and the other is good governance.

05:00 - 05:30 David, what are the key EU legislation pieces requiring transition decarbonisation plans? Thanks Mike. Energy transition and decarbonisation aren't new in Europe. This movement started over 15 years ago, combining macroeconomic objectives at the state level with microeconomic impacts on companies.

05:30 - 06:00 For example, Regulation 2021-119 (the European Climate Law) sets a binding net zero objective by 2050, requiring the EU and member states to adopt national climate strategies. There's also the Corporate Sustainability Reporting Directive (CSRD), which requires companies to disclose transition plans aligned with limiting warming to 1.5°C.

06:00 - 06:30 It applies to large companies and listed SMEs, implemented through the European Sustainability Reporting Standards (ESRS), especially ESRS E1. The Taxonomy Regulation establishes what qualifies as sustainable economic activity. Companies must report how their activities align with it and contribute to climate change mitigation, while avoiding significant harm to other objectives like biodiversity preservation.

06:30 - 07:00 The Sustainable Finance Disclosure Regulation (SFDR) applies to financial markets and advisers, requiring disclosure of sustainability risk integration and portfolio alignment with climate goals, including transition strategies. The EU ETS regime also plays a role, covering power, industry, and aviation.

07:00 - 07:30 It requires emissions reductions and purchasing allowances as free allocations diminish, with future allocations conditional on decarbonisation plans after 2026. The Carbon Border Adjustment Mechanism (CBAM) will require importers from 2026 to report embedded emissions and submit certificates to offset carbon content, encouraging foreign producers to develop decarbonisation strategies.

07:30 - 08:00 Thanks David, that's really helpful. There's clearly a patchwork of legislation. Are there any commonalities or differences you'd highlight? Absolutely Mike. More commonalities than differences.

08:00 - 08:30 These laws all require auditing and assessing existing situations—a challenge in itself—but also an opportunity to reconsider policies. They all require objectives or targets, plans or strategies with milestones, and verified metrics. Reporting is key: states report to the EU, companies to authorities, shareholders, clients, and stakeholders.

08:30 - 09:00 Despite complexity, transparency is a common feature. That's a really helpful way to think about it. While we've got you here, could you talk about how these EU principles and legislation are implemented in France? Are there key French laws on this topic?

09:00 - 09:30 Yes, there are many. I'll focus on mandatory ones. EU requirements are transposed into codes like the Energy Code, Environmental Code, Urban Planning Code, Monetary and Financial Code, and Commerce Code. They form a compact set of provisions not always easy to locate.

09:30 - 10:00 For example, the Energy Climate Law of 2019 aims for a 40% fossil fuel reduction by 2030, planning updated every five years, and climate considerations in all decisions. Institutional investors, banks, insurers, and asset managers must declare their exposure to climate risks, describe alignment with carbon neutrality, and report on scope 1, 2, and 3 emissions they finance.

10:00 - 10:30 France also has a National Low-Carbon Strategy with sector-by-sector carbon budgets. Companies and administrations must produce greenhouse gas reports (bilan) if they exceed employee thresholds. Since 2022, these reports must include transition plans, quantified emission reduction objectives, and scope 3 emissions.

10:30 - 11:00 The 2021 Climate and Resilience Law requires listed companies to include a transition plan in their management report, reframed with the CSRD transposition in December 2023. There are also new obligations under the Monetary and Financial Code requiring asset managers to consider climate risks and energy transition strategies, aligning with SFDR.

11:00 - 11:30 That's really helpful, David. It's interesting to see how EU-level requirements map into a single jurisdiction like France. Before we turn to the UK, what are the likely developments in the EU and in France? It's evolving as we speak.

11:30 - 12:00 The omnibus is the latest development, creating a pause but not a game-changer. France passed a law this year postponing CSRD implementation for large companies to 2028 and listed SMEs to 2029, though the substance and audit requirements remain. It's just a postponement for now, with ongoing developments.

12:00 - 12:30 Thanks for that, David. Two key points: there's complexity across the EU, and the omnibus doesn't radically change things—it just postpones them. Turning now to the UK. Gabi, could you talk us through where the UK fits into that patchwork?

12:30 - 13:00 Sure. Until now there have been no specific UK requirements to produce a climate transition plan. But there are Listing Rules for certain companies to make “comply or explain” disclosures about climate-related financial information based on TCFD recommendations.

13:00 - 13:30 Other requirements include publishing information on energy efficiency under ESOS and the Streamlined Energy and Carbon Reporting Regulations in the Directors’ Report, plus non-financial reporting under the Companies Act 2006.

13:30 - 14:00 Just recently, the Department for Energy Security and Net Zero launched three consultations: on implementation routes for transition plan requirements, on the UK Sustainability Reporting Standards (based on ISSB standards), and on assurance providers for sustainability disclosures.

14:00 - 14:30 This follows the government's commitment to mandating transition plans for banks, asset managers, pension funds, insurers, and FTSE 100 companies, aligning with the 1.5°C Paris goal. The government is seeking views on requiring entities to explain non-disclosure or mandating plan development and disclosure.

14:30 - 15:00 It's also considering mandatory implementation requirements, although that would take time to design. The consultation also asks about including climate resilience and nature over time for a holistic approach. The consultation closes on 17 September, and further detail will be consulted on in future stages.

15:00 - 15:30 The government also emphasises maintaining international interoperability and the UK's attractiveness as a listing destination. It will consider its approach alongside the FCA's consultation on UK SRS and future plans to simplify reporting requirements.

15:30 - 16:00 Overall, there's lots more detail to come, but it's a positive signal that the government is pushing this agenda forward. Thanks, Gabi. This is clearly an area with lots of change, both internationally and domestically.

16:00 - 16:30 It's important for companies, especially multinationals, to understand evolving requirements and ensure their plans are compliant, robust, and credible. That's all we have time for today. Special thanks to David for joining us and sharing your insights on transition plan requirements in the EU and France, and also to Gabi.

16:30 - 17:00 Thank you for listening to Environment Matters. We hope you enjoyed this episode on transition plans in the EU, France, and the UK. If you'd like to know more about our Environmental and Energy teams, you can contact us via our website.