Case study: Net-zero strategy & transition planning — a pilot that failed (and what it taught us)

In 2023, a consortium of three mid-sized European industrial manufacturers launched an ambitious net-zero transition pilot across their combined operations in Germany, the Netherlands, and Belgium. The €47 million initiative aimed to reduce Scope 1 and 2 emissions by 45% within 24 months while maintaining production output. By Q3 2024, the pilot had achieved only 12% emission reductions, burned through 68% of allocated capital, and faced mounting regulatory scrutiny under the Corporate Sustainability Reporting Directive (CSRD). The consortium quietly wound down the initiative in January 2025, writing off €31 million in stranded assets and failed technology integrations. Yet the lessons from this failure—documented through internal post-mortems and regulatory filings—offer a roadmap for what sustainability leads must get right when designing transition plans in the current European regulatory environment.

Why It Matters

The stakes for net-zero transition planning in Europe have never been higher. According to the European Environment Agency's 2024 assessment, EU greenhouse gas emissions declined by only 2.1% between 2022 and 2023, falling short of the 4.5% annual reduction rate required to meet 2030 targets. The gap between corporate net-zero pledges and credible transition pathways continues to widen: a 2025 analysis by the Transition Pathway Initiative found that just 17% of European companies in high-emitting sectors have transition plans aligned with 1.5°C warming scenarios, down from 24% in 2022 as scrutiny methodologies tightened.

The regulatory landscape has fundamentally shifted. CSRD reporting requirements, which became mandatory for large European companies in fiscal year 2024, now require detailed disclosure of transition plan elements including capital expenditure allocation, interim targets, and governance mechanisms. The EU Taxonomy Regulation's technical screening criteria demand that companies demonstrate how activities contribute to climate change mitigation, with non-aligned activities increasingly subject to green finance restrictions. For companies operating across European markets, failure to develop credible transition plans translates directly into higher cost of capital, reduced access to green bonds, and potential exclusion from sustainable investment indices.

The failed pilot described in this case study reflects a broader pattern identified in Net Zero Tracker's 2024 assessment: companies that announce aggressive targets without corresponding operational frameworks achieve, on average, 60% lower emission reductions than those with integrated transition planning. Understanding why well-funded, well-intentioned initiatives fail is essential for sustainability leads navigating the complex intersection of decarbonization technology, regulatory compliance, and financial planning.

Key Concepts

Net-Zero Strategy refers to a comprehensive organizational plan to achieve a balance between greenhouse gas emissions produced and emissions removed from the atmosphere. In practice, this requires setting science-based targets (typically validated through the Science Based Targets initiative), developing interim milestones, and integrating decarbonization into capital planning. The failed pilot struggled because its net-zero strategy existed as a communications document rather than an operational framework—targets were set by marketing teams without consultation with plant engineers or procurement specialists.

Extended Producer Responsibility (EPR) encompasses regulatory frameworks that hold manufacturers accountable for the environmental impact of their products throughout the lifecycle, including end-of-life disposal. While EPR schemes in Europe (particularly for packaging, electronics, and batteries) have matured significantly, the pilot consortium underestimated how EPR compliance costs would compound when combined with transition investments. Their Scope 3 calculations failed to account for shifting EPR fee structures in France and Spain, adding €4.2 million in unplanned costs.

Corporate Sustainability Reporting Directive (CSRD) represents the EU's comprehensive sustainability disclosure framework, requiring companies to report against European Sustainability Reporting Standards (ESRS). The pilot consortium discovered mid-implementation that their transition plan disclosures under ESRS E1 (Climate Change) would expose inconsistencies between stated targets and actual capital allocation, forcing a strategic pivot that delayed technology deployment by seven months.

Capital Expenditure (CAPEX) Planning for Decarbonization involves integrating climate investments into traditional capital budgeting processes. Best practice benchmarks suggest that companies in hard-to-abate sectors should allocate 15-25% of annual CAPEX to decarbonization through 2030. The pilot consortium allocated 8.3% of CAPEX to transition investments but structured these as discretionary rather than strategic expenditures, making them vulnerable to budget cuts when quarterly earnings pressure intensified.

Transition Plan Credibility Indicators encompass the metrics that external stakeholders—investors, regulators, rating agencies—use to assess whether net-zero commitments will translate into actual emission reductions. Key indicators include the ratio of committed vs. announced investments, the granularity of interim targets (annual vs. five-year intervals), governance mechanisms (board-level climate oversight vs. delegated responsibility), and alignment with sector-specific decarbonization benchmarks.

What's Working and What Isn't

What's Working

Integrated Transition Planning with Financial Materiality Assessment: Companies that embed transition planning within enterprise risk management frameworks demonstrate significantly higher implementation rates. Ørsted's transformation from a fossil fuel-dependent utility to a renewable energy leader exemplifies this approach: by quantifying the financial risks of maintaining legacy assets against the growth opportunity in offshore wind, Ørsted secured internal alignment that enabled €30 billion in strategic investment between 2017 and 2024. The key differentiator is treating transition planning as financial strategy rather than sustainability compliance.

Sector-Specific Decarbonization Roadmaps with Technology Milestones: The Science Based Targets initiative's sector-specific pathways provide credible frameworks that individual companies can adapt. In the European steel sector, the Green Steel Tracker documents how companies like SSAB (Sweden), ArcelorMittal (Luxembourg), and Salzgitter (Germany) are deploying hydrogen-based direct reduction iron (H-DRI) technology with specific commissioning timelines. These roadmaps work because they translate abstract emission reduction percentages into concrete technology deployment decisions with defined decision gates.

Internal Carbon Pricing as Capital Allocation Mechanism: Companies implementing internal carbon prices above €80 per tonne CO2-equivalent report higher transition plan execution rates, according to CDP's 2024 Carbon Pricing Report. Schneider Electric applies a €100/tonne internal carbon price to capital investment decisions, systematically directing resources toward lower-carbon options. This mechanism works because it creates a consistent decision framework that doesn't require sustainability teams to advocate for each individual project.

Supply Chain Engagement Programs with Shared Investment: Scope 3 emissions typically represent 70-90% of a company's carbon footprint, yet the failed pilot treated supplier decarbonization as an external dependency rather than a managed transition element. Successful approaches, such as IKEA's supplier engagement program, combine technical assistance, shared investment in renewable energy procurement, and graduated expectations over multi-year timelines. The key is structuring supplier relationships around capability building rather than compliance enforcement.

What Isn't Working

Top-Down Target Setting Without Operational Integration: The failed pilot established a 45% reduction target based on peer benchmarking rather than bottom-up assessment of technical feasibility at each facility. Plant managers received targets without corresponding capital allocation authority, creating a principals-agent problem where incentives misaligned. Post-mortem analysis revealed that achieving the target would have required technology that wasn't commercially available at the necessary scale during the pilot period.

Treating Transition Plans as Static Documents: The consortium developed its transition plan in Q4 2022 and treated it as a fixed roadmap through 2024, despite significant changes in technology costs (green hydrogen production costs fell 40% in key European markets between 2023 and 2025), regulatory requirements (CSRD implementation timeline acceleration), and carbon market dynamics (EU ETS prices fluctuated between €55 and €95 per tonne). Successful transition plans incorporate annual review cycles with explicit revision triggers.

Underestimating Scope 3 Data Collection Requirements: The pilot initially focused on Scope 1 and 2 emissions, which companies can measure with reasonable accuracy from utility bills and fuel consumption records. When CSRD disclosure requirements forced attention to Scope 3, the consortium discovered that its supplier data infrastructure was inadequate—primary data was available for fewer than 15% of purchased goods and services. Scrambling to implement supplier surveys mid-pilot diverted resources and created friction with key suppliers.

Misalignment Between Short-Term Financial Incentives and Long-Term Transition Goals: Executive compensation at the consortium companies remained tied to quarterly EBITDA performance without climate-related adjustments. When production disruptions from technology integration threatened Q2 2024 earnings, plant managers faced pressure to delay decarbonization investments. This dynamic is widespread: the Institutional Investors Group on Climate Change found in 2024 that only 26% of European companies in high-emitting sectors link executive compensation to climate performance metrics.

Key Players

Established Leaders

Siemens AG (Germany) has committed €15 billion in R&D investment for decarbonization technologies through 2030 and achieved carbon neutrality in its own operations (Scope 1 and 2) in 2024. The company's transition plan includes detailed technology roadmaps for electrification, digitalization, and sustainable automation across its portfolio.

Ørsted A/S (Denmark) transformed from DONG Energy (Danish Oil and Natural Gas) to become the world's largest offshore wind developer. The company reduced its carbon intensity by 87% between 2006 and 2024 and targets full Scope 3 carbon neutrality by 2040.

Iberdrola S.A. (Spain) has invested over €75 billion in renewable energy and networks since 2000 and plans to invest an additional €41 billion through 2026. The company's SBTi-validated targets include an 86% reduction in Scope 1 and 2 emissions intensity by 2030 (versus 2017 baseline).

BASF SE (Germany) has committed €4 billion to low-carbon technologies by 2030, including carbon management and renewable energy procurement. The chemical giant's transition plan incorporates carbon capture integration at its Ludwigshafen site and innovative chemical recycling technologies.

Holcim Ltd (Switzerland) leads in low-carbon cement production, targeting net-zero emissions by 2050 with a 2030 interim target of 475 kg CO2/tonne cementitious material (compared to industry average of approximately 610 kg). The company deploys carbon capture technology and circular construction materials at commercial scale.

Emerging Startups

Normative (Sweden) provides carbon accounting software that automates Scope 1, 2, and 3 emissions calculations, enabling companies to establish baselines for transition planning. The platform serves over 1,000 companies and raised €10 million in Series A funding in 2023.

Sweep (France) offers an enterprise carbon management platform that connects emissions data, supply chain engagement, and transition planning in an integrated workflow. The company secured €73 million in funding by 2024 and serves major European corporations.

Plan A (Germany) delivers AI-powered decarbonization software that helps companies measure emissions, set science-based targets, and implement reduction strategies. The startup has raised over €25 million and partners with major automotive and industrial clients.

Sylvera (United Kingdom) provides carbon credit ratings and analytics that help companies assess offset quality as part of transition planning. The company raised $57 million in Series B funding in 2022 and has evaluated thousands of carbon projects globally.

Greenly (France) offers carbon footprint management software tailored to SMEs, democratizing access to transition planning tools. The company serves over 2,000 clients and raised €49 million in Series B funding in 2024.

Key Investors & Funders

European Investment Bank (EIB) has committed to unlocking €1 trillion in climate and environmental investment between 2021 and 2030 through its Climate Bank Roadmap. The EIB provides favorable financing terms for companies with credible transition plans.

Breakthrough Energy Ventures (founded by Bill Gates) invests in climate technology companies across Europe and globally, with a portfolio exceeding €2 billion. BEV investments focus on hard-to-abate sectors requiring breakthrough technologies.

Lightrock manages over €4 billion across sustainability-focused strategies and actively invests in European companies driving the net-zero transition, including carbon accounting platforms and sustainable materials producers.

Eurazeo has committed €1 billion to climate transition investments through its dedicated sustainable investment strategy, targeting European growth companies with credible decarbonization pathways.

European Circular Bioeconomy Fund (ECBF) is a €300 million fund backed by the European Investment Bank and European Commission, investing in circular economy and bioeconomy companies that contribute to net-zero transition objectives.

Examples

Example 1: HeidelbergCement's Brevik Carbon Capture Project (Norway): HeidelbergCement (now Heidelberg Materials) is implementing the world's first full-scale carbon capture project at a cement plant in Brevik, Norway. The project will capture 400,000 tonnes of CO2 annually—representing 50% of the plant's emissions—and store it beneath the North Sea. The project received €1.6 billion in funding, including substantial support from the Norwegian government's Longship initiative. Scheduled for operation in 2025, the Brevik project demonstrates that carbon capture in heavy industry is technically feasible at scale. Key metrics: capture rate target of 95%, operational by 2025-2026, and potential for replication across Heidelberg's 12 European plants.

Example 2: Volkswagen Group's Decarbonization Pathway (Germany): Volkswagen committed €180 billion in total investment through 2027, with over 50% allocated to electrification and digitalization. The company's transition plan includes interim targets: 70% BEV sales in Europe by 2030, carbon-neutral production at all European sites by 2030, and full Scope 3 supply chain decarbonization by 2050. VW has implemented internal carbon pricing, supplier engagement programs (reaching 75% of direct material suppliers), and renewable electricity procurement covering 95% of European production. The transition plan was validated by SBTi and integrates with CSRD disclosure requirements.

Example 3: Maersk's Green Methanol Fleet Transition (Denmark): Shipping giant A.P. Møller-Maersk has ordered 25 methanol-capable container vessels and secured green methanol supply agreements with multiple European producers. The company invested over $1.4 billion in the first batch of dual-fuel vessels, with the first vessels entering service in 2024. Maersk's transition plan targets net-zero operations by 2040—a decade ahead of industry standards—and includes detailed fuel transition milestones, green corridor development with major ports, and customer engagement programs. Key metrics: 25% of cargo transported on green fuels by 2030, 19 methanol-capable vessels in operation or on order by end of 2025.

Action Checklist

• Conduct bottom-up technical feasibility assessment before setting emission reduction targets, ensuring plant-level achievability
• Integrate transition plan milestones into capital planning cycles, with dedicated CAPEX allocation (target 15-25% for high-emitting sectors)
• Implement internal carbon pricing at €80-100/tonne CO2e to systematically direct investment toward decarbonization
• Establish annual transition plan review cycles with explicit revision triggers for technology cost changes, regulatory updates, and carbon price movements
• Map Scope 3 emissions and begin supplier data collection 18-24 months before CSRD disclosure deadlines
• Link 20-30% of executive compensation to climate performance metrics validated by external third parties
• Develop sector-specific technology deployment roadmaps with clear decision gates for emerging technologies (hydrogen, carbon capture, electrification)
• Engage key suppliers through capability-building programs with shared investment rather than compliance mandates
• Stress-test transition plan under multiple carbon price scenarios (€80, €120, €180/tonne) and technology adoption rates
• Establish board-level climate governance with quarterly reporting on transition plan execution metrics

FAQ

Q: What percentage of CAPEX should companies in hard-to-abate sectors allocate to decarbonization through 2030? A: Best practice benchmarks suggest 15-25% of annual CAPEX should be dedicated to decarbonization investments for companies in sectors such as steel, cement, chemicals, and heavy transport. This range accounts for the significant technology deployment required to meet 2030 interim targets. Companies allocating less than 10% of CAPEX to transition investments typically show plan execution rates 40-60% below stated targets, according to Transition Pathway Initiative analysis. The allocation should be structured as strategic rather than discretionary expenditure to protect against short-term earnings pressure.

Q: How should companies handle the gap between internal transition planning and CSRD disclosure requirements? A: CSRD disclosures under ESRS E1 require companies to report on transition plan elements including targets, actions, resources, and governance mechanisms with a level of granularity that exceeds typical internal strategy documents. Companies should conduct a gap analysis between existing transition plans and ESRS E1 requirements at least 12 months before disclosure deadlines. Key areas requiring attention include quantified Scope 3 emissions by category, CapEx allocation to taxonomy-aligned activities, and the connection between climate targets and financial planning. Working backward from disclosure requirements often reveals internal inconsistencies that should be resolved before external reporting.

Q: What internal carbon price level is effective for driving investment decisions toward decarbonization? A: Research from CDP and the High-Level Commission on Carbon Prices suggests that internal carbon prices must exceed €80/tonne CO2e to meaningfully influence capital allocation decisions. Leading European companies implementing effective transition plans typically apply internal prices between €80-150/tonne. However, the mechanism design matters as much as the price level: shadow pricing (used for sensitivity analysis but not actual budgets) has less impact than direct integration into business case calculations. Companies should also consider escalating internal carbon prices over time to reflect expected EU ETS price trajectories.

Q: How long before CSRD disclosure deadlines should companies begin Scope 3 supplier data collection? A: Companies should begin Scope 3 supplier engagement 18-24 months before their first CSRD disclosure deadline. Primary data collection from suppliers—rather than reliance on industry averages—significantly improves disclosure quality and provides a foundation for supplier decarbonization programs. Initial efforts should prioritize the 20-30% of suppliers typically responsible for 70-80% of purchased goods and services emissions. Companies underestimating this timeline often resort to estimation methodologies that expose them to regulatory scrutiny and investor concerns about transition plan credibility.

Q: What governance mechanisms distinguish credible transition plans from greenwashing? A: External assessments from organizations like Climate Action 100+, Transition Pathway Initiative, and Science Based Targets initiative evaluate transition plans against specific governance criteria. Credible plans feature board-level climate oversight (ideally through a dedicated committee), executive compensation linked to climate metrics (20-30% of variable pay), annual third-party verification of emission data, and transparent reporting on plan execution including missed targets. The failed pilot in this case study had climate oversight delegated to a mid-level sustainability manager without board reporting, contributing to misalignment between targets and operational decisions.

Sources

• European Environment Agency (2024). "Trends and Projections in Europe 2024." EEA Report No 10/2024.
• Transition Pathway Initiative (2025). "State of Transition Report 2025: Assessing Corporate Climate Action in Key Sectors."
• CDP (2024). "Putting a Price on Carbon: The State of Internal Carbon Pricing."
• Net Zero Tracker (2024). "Net Zero Stocktake 2024: Assessing the Status and Trends of Net Zero Target Setting Across Countries, Sub-National Governments and Companies."
• Science Based Targets initiative (2024). "SBTi Corporate Net-Zero Standard Version 1.1."
• European Commission (2023). "Commission Delegated Regulation (EU) 2023/2772: European Sustainability Reporting Standards."
• Institutional Investors Group on Climate Change (2024). "Net Zero Standard for Banks: Implementation Report."
• International Energy Agency (2024). "Net Zero by 2050: A Roadmap for the Global Energy Sector—2024 Update."