Trend watch: net-zero strategy & transition planning in 2026

In 2024, the Science Based Targets initiative validated over 6,600 corporate science-based targets—a 57% increase from the previous year—yet only 16% of the world's 2,000 largest companies are actually on track to meet their net-zero commitments, according to Accenture's 2024 analysis. More troubling still, nearly half of these companies saw their emissions increase despite public pledges. This gap between ambition and execution defines the net-zero landscape entering 2026: commitments have reached critical mass, but credible transition planning remains the exception rather than the rule. As regulatory frameworks mature across the EU, UK, and California, organizations face mounting pressure to demonstrate not just targets but actionable, financially integrated pathways to decarbonization.

Why It Matters

The stakes for net-zero transition planning extend far beyond regulatory compliance. Climate-related financial risks are materializing faster than models predicted, with the 2024 economic losses from climate disasters exceeding $380 billion globally. Investors managing over $130 trillion in assets through initiatives like the Glasgow Financial Alliance for Net Zero (GFANZ) are scrutinizing transition plans as proxies for management quality and long-term value creation.

The regulatory landscape has shifted decisively. The EU's Corporate Sustainability Reporting Directive (CSRD) now requires companies to disclose detailed climate transition plans under ESRS E1, covering science-based targets, decarbonization levers, capital allocation, and governance structures. While the 2025 Omnibus simplification raised thresholds to 1,000+ employees, the core climate disclosure requirements remain robust. California's SB 253 and SB 261 mandate Scope 1, 2, and 3 reporting for companies with over $1 billion in revenue, affecting approximately 10,000 entities. The UK's Transition Plan Taskforce framework has become the de facto standard for financial institutions and large corporates.

Beyond compliance, transition plans increasingly determine access to capital. Green bond issuances reached $620 billion in 2024, with investors demanding credible decarbonization roadmaps as a condition of participation. Companies without validated transition plans face higher costs of capital—estimated at 50-150 basis points higher for climate laggards in carbon-intensive sectors, according to research from the Network for Greening the Financial System.

Key Concepts

Understanding net-zero strategy requires distinguishing between several interconnected frameworks and metrics that often cause confusion in practice.

Science-Based Targets (SBTs) represent emissions reduction pathways consistent with limiting global warming to 1.5°C above pre-industrial levels. The SBTi Corporate Net-Zero Standard requires near-term targets (typically 5-10 years) achieving at least 42% reduction from a 2020 baseline by 2030, plus long-term targets reaching net-zero by 2050 at the latest. Near-term targets must cover at least 95% of Scope 1 and 2 emissions, with Scope 3 targets mandatory if value chain emissions exceed 40% of the total footprint.

Transition Plans go beyond targets to articulate how an organization will decarbonize. The International Transition Plan Network identifies five core elements: objectives and priorities, implementation actions, engagement strategy, governance and accountability, and financial planning. A credible transition plan specifies which business units will transform, what technologies or operational changes will drive reductions, how suppliers will be engaged on Scope 3, what capital expenditures are allocated, and how progress will be tracked and reported.

Carbon Intensity Metrics express emissions relative to business activity rather than absolute terms. While absolute reductions remain the goal, intensity metrics (e.g., tCO2e per million revenue, per unit produced, or per square meter) help track decoupling of emissions from growth. The CSRD requires disclosure of both absolute emissions and intensity ratios aligned with sector-specific benchmarks.

Scope 3 Emissions constitute the largest and most challenging category for most organizations, often representing 70-90% of total value chain emissions. These include upstream emissions from purchased goods, services, capital goods, and transportation, as well as downstream emissions from product use, end-of-life treatment, and investments. The GHG Protocol identifies 15 Scope 3 categories, though materiality assessments typically focus reporting on the 3-5 categories representing 80%+ of value chain impact.

Sector-Specific Net-Zero KPIs

Sector	Key Intensity Metric	2024 Median	2030 Target (1.5°C-aligned)
Electric Utilities	gCO2/kWh	420	<140
Steel	tCO2/tonne steel	1.85	<1.0
Cement	kgCO2/tonne clinker	640	<520
Automotive	gCO2/km (tailpipe + upstream)	180	<80
Real Estate	kgCO2e/m²	45	<20
Aviation	gCO2/RPK	88	<55
Financial Services	tCO2e/$M invested	85	<35
Consumer Goods	kgCO2e/$1000 revenue	320	<180

What's Working

Validated Science-Based Targets with Near-Term Accountability

Organizations that commit to externally validated targets with near-term milestones demonstrate materially better emissions performance. The SBTi's 2024 progress report found that companies with validated targets reduced absolute Scope 1 and 2 emissions by an average of 4.2% annually—roughly aligned with the required 4.2% yearly reduction for 1.5°C pathways—compared to 0.4% annual reductions among companies with unvalidated pledges.

The accountability mechanism matters. When the SBTi removed 239 companies from its commitment list in 2024 for failing to submit validated targets within 24 months, including high-profile names like Microsoft, Unilever, and Walmart, the reputational consequences catalyzed accelerated action across the corporate sector. Microsoft subsequently announced enhanced near-term targets, demonstrating that enforcement mechanisms can drive behavior change.

Integration of Climate into Capital Allocation

Leading organizations embed decarbonization into investment decision-making rather than treating sustainability as a parallel track. Ørsted's transformation from a fossil fuel company (DONG Energy) to the world's largest offshore wind developer exemplifies this approach—the company divested coal assets, redirected 100% of capital expenditure to renewables, and achieved a 98% reduction in Scope 1 and 2 emissions intensity while growing enterprise value.

Financial integration manifests in several forms: internal carbon pricing (over 2,400 companies now use internal carbon prices, with an average of $72/tonne among those in heavy industry); climate-adjusted hurdle rates for investment decisions; sustainability-linked executive compensation (adopted by 68% of FTSE 100 companies); and dedicated CapEx budgets for decarbonization projects. Companies disclosing specific capital allocation to climate transition actions are 2.1x more likely to achieve their stated targets, according to CDP's 2024 analysis.

Supplier Engagement on Scope 3

Given that Scope 3 emissions dominate most corporate footprints, effective transition plans increasingly emphasize supplier engagement. Apple's Supplier Clean Energy Program has enrolled over 300 manufacturing partners committed to 100% renewable energy for Apple production, driving measurable reductions across the electronics supply chain. IKEA's supplier sustainability initiative provides financing and technical assistance for renewable energy installations at supplier facilities in developing markets.

Effective supplier programs share common elements: clear expectations communicated through procurement requirements, technical assistance for emissions measurement and reduction, preferential sourcing for suppliers meeting decarbonization milestones, and collaborative innovation on lower-carbon materials and processes.

What's Not Working

Targets Without Implementation Roadmaps

The most pervasive failure mode is the target-without-plan problem. Of the over 1,000 net-zero targets among Forbes 2000 companies, only 7% meet the UN Race to Zero's minimum integrity criteria, according to Net Zero Tracker analysis. Common deficiencies include: absence of near-term milestones, no specification of how reductions will be achieved, reliance on unspecified future technologies, and failure to address Scope 3 emissions.

The EY 2025 Climate Action Barometer found that while 75% of surveyed climate leaders claim to have a transition plan, only 17% disclose the financial impacts of climate risks and only 32% specify capital allocation for climate solutions. The gap between stated intention and disclosed specificity suggests many "plans" are aspirational documents rather than operational roadmaps.

Over-Reliance on Carbon Offsets

Transition plans that depend heavily on purchasing carbon credits rather than achieving direct emissions reductions face increasing scrutiny. Investigative reporting and academic research have challenged the integrity of major offset registries, with studies suggesting that 90% of rainforest offset credits may not represent genuine emissions reductions. The SBTi's net-zero standard permits carbon credits only for neutralizing residual emissions after achieving at least 90% absolute reductions—a threshold few companies have articulated pathways to reach.

Scope 3 Measurement Paralysis

Many organizations remain paralyzed by the complexity of Scope 3 accounting. The SBTi noted that 54% of companies removed from its commitment list cited Scope 3 challenges as the primary obstacle, with 53% pointing to technological uncertainty. This paralysis often manifests as either ignoring Scope 3 entirely (making any net-zero claim inherently incomplete) or reporting incomplete estimates without improvement plans.

Practical approaches exist—using spend-based estimates as starting points, focusing on the 3-5 highest-impact categories, engaging priority suppliers for primary data—but require sustained investment in data infrastructure and supplier relationships that many organizations have not prioritized.

Misaligned Time Horizons

Organizations frequently set ambitious 2050 targets while deferring meaningful action until technology matures or regulatory requirements crystallize. This "back-loading" approach conflicts with climate science, which emphasizes that cumulative emissions determine warming outcomes. A 2050 net-zero target achieved through aggressive 2040s reductions produces more cumulative emissions than one achieved through steady annual reductions beginning immediately.

Key Players

Established Leaders

Microsoft — Despite losing its SBTi net-zero commitment status in 2024, maintains ambitious 2030 carbon-negative target with $1 billion Climate Innovation Fund and pioneering carbon removal procurement program.

Schneider Electric — Achieved carbon-neutral operations in 2020 and supports over 2,000 customers with sustainability consulting and technology solutions for transition planning.

Iberdrola — Spanish utility company that has invested €150 billion in renewable energy since 2001 and achieved 73% reduction in Scope 1 emissions intensity since 2000.

Ørsted — Completed transformation from fossil fuel company to pure-play renewable energy, now targeting net-zero emissions across the entire value chain by 2040.

Emerging Startups

Persefoni — AI-powered carbon accounting platform automating Scope 1, 2, and 3 measurement with PCAF and GHG Protocol compliance built in.

Normative — Swedish startup providing automated emissions calculations for SMEs, recently acquired by IBM to strengthen sustainability software capabilities.

Watershed — Enterprise climate platform backed by Kleiner Perkins and Sequoia, enabling companies to measure, report, and reduce emissions with supply chain traceability.

Plan A — Berlin-based sustainability platform offering automated carbon accounting, science-based target setting, and transition plan development for mid-market companies.

Key Investors & Funders

Generation Investment Management — Co-founded by Al Gore, manages over $45 billion with rigorous net-zero requirements for portfolio companies.

Breakthrough Energy Ventures — Bill Gates-founded fund investing in climate technologies critical for achieving net-zero, including direct air capture, green hydrogen, and sustainable aviation fuel.

TPG Rise Climate — $7.3 billion fund focused on climate investing, with portfolio companies required to develop credible decarbonization pathways.

Examples

Maersk's Green Methanol Fleet Transition

The world's largest container shipping company committed to net-zero by 2040—ten years ahead of industry norms—and is operationalizing this through the world's first fleet of container vessels capable of running on green methanol. Maersk has ordered 25 dual-fuel methanol vessels, with the first entering service in 2024. The company secured green methanol offtake agreements totaling 730,000 tonnes annually by 2027 and invested in six green methanol production facilities globally. The transition plan specifies interim targets: 25% reduction in Scope 1 emissions intensity by 2030 and net-zero emissions from all ocean transport by 2040. Critically, Maersk engaged its 100 largest customers on the cost-sharing required to fund the transition, with over 200 companies now participating in ECO Delivery programs that cover the green fuel premium.

Holcim's Decarbonization Roadmap for Cement

As one of the largest cement manufacturers globally, Holcim operates in a sector responsible for 7% of global CO2 emissions. The company's transition plan targets 475 kg CO2 per tonne of cementitious material by 2030 (down from 555 kg in 2020) and full net-zero by 2050. Implementation levers include: expanding clinker substitutes (calcined clay, slag) from 50% to 68% by 2030; deploying carbon capture at flagship plants beginning with the Ste. Marthe, Quebec facility capturing 1 million tonnes annually by 2027; and scaling low-carbon product lines like ECOPact, which already represents 24% of ready-mix sales. The plan allocates CHF 2 billion to decarbonization CapEx through 2030 and links 30% of executive compensation to sustainability targets.

Tesco's Scope 3 Supplier Program

UK grocery giant Tesco has committed to net-zero across its value chain by 2050, with Scope 3 representing 95% of its footprint. The transition plan centers on supplier engagement: requiring the 350 largest suppliers (representing 74% of Scope 3) to set science-based targets by 2025; providing Supplier Sustainability Academies with training on emissions measurement and reduction; preferential shelf placement for products with verified lower carbon footprints; and joint investment in regenerative agriculture pilots covering 50,000 hectares by 2026. By 2024, 87% of targeted suppliers had set or committed to science-based targets, and Tesco reported a 14% reduction in Scope 3 intensity per £1 of sales compared to the 2015 baseline.

Action Checklist

• Conduct comprehensive Scope 1, 2, and 3 emissions inventory using GHG Protocol methodology, prioritizing primary data for material categories
• Submit near-term science-based targets to SBTi for validation within 24 months of commitment
• Map decarbonization levers by business unit with quantified abatement potential and implementation timelines
• Allocate specific CapEx and OpEx budgets to transition plan implementation with annual tracking
• Engage top 80% of Scope 3 emissions sources (typically 30-50 suppliers) on measurement and reduction programs
• Establish board-level governance with quarterly progress reviews and management incentive alignment
• Integrate climate scenario analysis (1.5°C and 3°C+ pathways) into strategic planning and risk management
• Prepare for regulatory disclosure requirements (CSRD, SEC climate rule, California SB 253) with auditable documentation

FAQ

Q: What's the difference between a net-zero target and a transition plan?

A: A net-zero target is a commitment to achieve balance between emissions produced and emissions removed by a specific date—typically 2050 for most sectors. A transition plan is the detailed roadmap specifying how that target will be achieved: which emissions sources will be addressed, what technologies or operational changes will be deployed, how suppliers will be engaged, what capital will be allocated, and how progress will be governed and tracked. The SBTi, CDP, and regulatory frameworks increasingly require both—targets without credible plans are viewed as greenwashing.

Q: How should companies prioritize Scope 3 categories when resources are limited?

A: Focus on materiality and influence. First, conduct a screening analysis across all 15 GHG Protocol categories using spend-based estimates or industry averages to identify the 3-5 categories representing 80%+ of your Scope 3 footprint. For most manufacturers, this typically includes purchased goods and services, upstream transportation, and use of sold products. For retailers, it's often purchased goods, downstream transportation, and end-of-life treatment. Then prioritize categories where you have meaningful influence—typically direct suppliers rather than distant upstream activities. Annual calculation and target-setting should focus on material categories, while a comprehensive rescreening every 5 years ensures you capture shifting patterns.

Q: Are carbon credits acceptable in a credible transition plan?

A: Carbon credits have a legitimate but limited role in credible transition plans. The SBTi's Corporate Net-Zero Standard requires companies to achieve at least 90% absolute emissions reductions before using credits to neutralize residual emissions. Credits cannot substitute for direct reductions during the transition period. When used, high-quality credits—verified under standards like Verra or Gold Standard, with strong additionality and permanence—are preferable. Companies should disclose gross emissions separately from any claimed neutralization, and offset purchases should focus on carbon removal (e.g., direct air capture, afforestation with robust monitoring) rather than avoided emissions claims.

Q: How does the EU CSRD affect non-EU companies?

A: Non-EU companies with substantial EU presence are directly captured. If a company generates over €150 million in EU revenue and has either an EU subsidiary meeting size thresholds or a large EU branch, it must report under CSRD standards. More broadly, CSRD affects non-EU companies through supply chains: EU companies subject to CSRD must obtain sustainability data from their suppliers worldwide for Scope 3 reporting. This creates de facto global reach even for companies without direct EU obligations. The 2025 Omnibus simplification delayed Wave 4 (non-EU companies) to FY 2028 reporting, but preparation should begin now given data collection requirements.

Q: What's the business case for transition planning beyond compliance?

A: Rigorous transition planning delivers value through multiple channels. Access to capital improves—green bond investors and sustainability-linked loan providers require credible plans, and research indicates climate laggards face 50-150 basis point cost-of-capital premiums. Operational efficiency gains often emerge from decarbonization initiatives, with energy efficiency measures typically delivering 15-30% reductions with attractive payback periods. Supply chain resilience increases through early identification and mitigation of climate-related disruptions. Customer and employee preferences increasingly favor companies with demonstrated climate leadership—79% of global consumers consider sustainability when purchasing, and climate commitment ranks among top three factors for Gen Z job seekers. Finally, regulatory preparedness reduces compliance costs and reputational risks as mandatory disclosure frameworks expand globally.

Sources

• Accenture, "Climate Leaders: Only 16% of Largest Companies on Track for Net Zero," October 2024
• Science Based Targets initiative, "SBTi Progress Report 2024" and "Corporate Net-Zero Standard V1.3," September 2025
• Net Zero Tracker, "Net Zero Stocktake 2025," Oxford Net Zero and Energy & Climate Intelligence Unit, January 2025
• European Commission, "CSRD and ESRS Standards: Final Delegated Acts," December 2023, and "Omnibus Simplification Package," February 2025
• CDP, "Are Companies Developing Credible Climate Transition Plans?" Global Climate Report 2024
• EY, "2025 Global Climate Action Barometer," January 2025
• NewClimate Institute and Carbon Market Watch, "Corporate Climate Responsibility Monitor 2025," February 2025
• Transition Plan Taskforce, "Disclosure Framework and Implementation Guidance," October 2023