Transition Plans for Industrial Companies: Decarbonization Roadmaps

Whether you’re a small manufacturer, supplier or subsidiary in a European industrial supply chain, the shift toward low-carbon production is accelerating. Some companies are preparing transition plans because they fall directly under CSRD scope, while others use the VSME Standard voluntarily to respond to customer and financier expectations. In both cases, documenting a clear decarbonization roadmap is becoming a strategic requirement for maintaining competitiveness, securing long-term contracts and strengthening trust across the value chain.

CSRD requires large companies to disclose climate transition plans aligned with scientific targets and explain how these plans will influence business models, investment decisions and operational processes (ESRS E1). The Directive emphasises that organisations rely on the sustainability information of their value-chain partners to evaluate risks and impacts . For SMEs, the VSME Standard supports proportionate disclosure: companies may explain environmental practices, policies and future initiatives (B2) — a natural home for simplified transition plans strengthening credibility with customers and lenders .

This guide helps small-to-medium industrial companies create a practical transition plan focused on real decarbonization progress, realistic targets, and transparent reporting.

1. What a Climate Transition Plan Is — and Why Customers Expect One

A climate transition plan sets out how your organisation will reduce emissions over time, invest in cleaner technologies and adapt operations to a low-carbon economy. Even if SMEs are not legally required to publish CSRD-aligned plans, customers and financiers increasingly request them because:

Scope 3 emissions from suppliers often dominate a manufacturer’s footprint
OEMs use transition plan quality in supplier scoring
Banks apply sustainability criteria in lending decisions
Investors and customers want evidence of long-term resilience

CSRD’s requirement for reliable, comparable and verifiable sustainability information means companies must explain not just today’s emissions, but the trajectory toward reduction — and they expect suppliers to contribute data supporting these assessments.

For manufacturing-specific context on emissions, the Energy & GHG topic hub provides helpful background.

2. Core Components of a Transition Plan for Industrial SMEs

Even a short transition plan should address the following five elements.

1. Baseline emissions

Include your Scope 1 and Scope 2 emissions, plus major upstream drivers (materials, scrap, energy-intensive processes). Baselines should be:

Annual
Evidence-based (utility bills, fuel receipts)
Comparable year over year

2. Long-term reduction targets

Targets should be realistic and proportionate for smaller manufacturers. Typical SME examples:

20–30% reduction in Scope 1 emissions over 5–7 years
40–60% reduction in electricity-related Scope 2 emissions by switching to renewable supply
Reduction in energy intensity (per unit or per tonne) by 10–25%

Targets do not need to be science-based for SMEs unless requested by customers, but they should be numerical, time-bound and achievable.

3. Planned actions and investments

Concrete actions carry more weight than high-level language. Manufacturing examples include:

Replacing compressors, pumps or ovens
Installing variable-speed drives
Upgrading lighting and insulation
Expanding sub-metering to identify inefficient production lines
Replacing LPG/diesel forklifts with electric units
Integrating heat recovery into ovens or compressors
Switching to low-carbon materials or coatings where possible

These actions align with VSME B2 disclosures on environmental policies and improvement initiatives that support GHG reduction strategies .

4. Financing and resource allocation

Transition plans should show how improvements will be funded, for example:

CAPEX for machinery replacement
OPEX for energy-efficiency programmes
Grant applications (e.g., national energy innovation schemes)
Expected payback or ROI

Clear financial planning improves credibility with lenders and customers.

5. Monitoring and reporting progress

Your plan should outline:

Annual emissions tracking
Energy intensity metrics
Internal responsibilities (energy manager, facilities lead)
Annual narrative explaining what changed

Transition plans are not static — they evolve as technologies, processes and business conditions change.

3. Establishing a Baseline Emissions Profile for Industrial Sites

To set a meaningful transition trajectory, you need strong baseline data.

Step 1 — Collect annual energy and fuel data

Natural gas for heating and ovens
LPG/diesel for forklifts
Electricity for machinery and compressors
Refrigerant losses (where applicable)

Step 2 — Calculate Scope 1 and Scope 2 emissions

Use activity data × emission factors. If unfamiliar, see the practical guide on Scope 1 & Scope 2 emissions for manufacturers: Scope 1 & 2 Emissions for Manufacturing SMEs

Upstream materials such as steel, aluminium, chemicals or plastics often dominate manufacturing Scope 3 (though SMEs are not required to fully report this). Including estimates enhances your plan’s completeness.

Step 4 — Reflect process-specific realities

Manufacturing emissions depend heavily on:

Thermal processes
Compressed air systems
Machine runtime
Scrap rates
Cooling and HVAC loads

Your plan should include commentary on how these drivers influence your footprint and reduction opportunities.

4. Setting Realistic, Actionable Emission Reduction Targets

Targets should strike a balance between ambition and feasibility.

Types of targets suitable for SMEs

1. Absolute emissions reductions

E.g., reduce total Scope 1 + 2 emissions by 25% over seven years.

2. Intensity reductions

E.g., reduce emissions per unit of production by 15% by 2030. This is particularly useful when production fluctuates.

3. Energy-efficiency targets

E.g., cut electricity use of compressors by 10% within three years.

4. Technology-switch targets

E.g., electrify all forklifts by 2029.

5. Renewable electricity procurement

E.g., source 80–100% renewable electricity via PPAs or green tariffs.

CSRD requires targets for in-scope companies to be consistent with limiting global warming to 1.5°C (ESRS E1), but SMEs using VSME are simply encouraged to define meaningful improvements supported by evidence.

5. Identifying High-Impact Decarbonization Measures

Industrial facilities benefit from focusing on areas with the highest energy and emissions share.

Equipment & process upgrades

Replace gas ovens with electric or hybrid systems
Install high-efficiency air compressors
Upgrade drive motors to IE3/IE4 efficiency
Optimise heat-treatment cycles

Energy management improvements

Sub-metering for major lines
Compressed air leak detection
Idle-mode automation for machinery
Heat recovery from compressors or exhaust systems

Onsite and procurement-based solutions

Install rooftop solar where feasible
Purchase renewable electricity (location-based emissions still required under VSME, but market-based figures can be disclosed voluntarily)
Electrify material handling equipment

Circular economy and material efficiency

Reducing material waste often reduces embedded emissions. Scrap reduction initiatives can be integrated with your transition plan. For broader circularity guidance, see the resource use & circular economy hub.

6. Communicating Your Transition Plan to Customers and Financiers

A strong plan does more than list actions — it demonstrates credibility.

Include a clear narrative

Explain:

Why specific actions were prioritised
How reductions will be achieved
How financial risks are managed
How the plan aligns with customer or sector expectations

Provide transparent supporting data

SMEs can attach:

Annual energy and emissions tables
Evidence of equipment upgrades
Waste and material efficiency improvements
Year-over-year performance charts

Highlight long-term resilience

Customers evaluating supply-chain risk want to know how:

Energy price volatility is mitigated
Emission reductions reduce long-term operating costs
Investments position the factory for low-carbon markets

A well-structured transition plan strengthens contract negotiations and financing applications.

7. Reporting Progress Annually

Transition plans become meaningful only when updated regularly. CSRD emphasises reliability, comparability and verifiability of information across reporting periods, and VSME requires SMEs to provide comparable information after the first reporting year (paragraph 12) .

Best practices

Track energy monthly and summarise annually
Use consistent emission factors unless methods change
Provide explanations for major deviations
Note improvements in equipment, processes or material efficiency

For help building your emissions tracking approach, see: Scope 1 & 2 Emissions for Manufacturing SMEs

Frequently Asked Questions

Do SMEs need a formal CSRD transition plan?

Not legally unless they fall within CSRD scope, but many customers now require suppliers to demonstrate credible decarbonization plans. VSME allows SMEs to disclose environmental policies and planned initiatives (B2), making it a suitable structure.

How ambitious should SME emission reduction targets be?

Targets should reflect your production processes, equipment condition and financial capacity. Absolute and intensity-based targets are both acceptable. Consistency and transparency are more important than ambition for SMEs.

Can SMEs include only Scope 1 and Scope 2 emissions?

Yes. While CSRD requires in-scope companies to assess Scope 3, SMEs using VSME can focus on Scopes 1 and 2 and optionally describe major upstream drivers. Many OEMs accept this as long as the methodology is clear.

How often should a transition plan be updated?

Annually. Updates typically include revised emissions, progress on initiatives, new investments and any changes in operational boundaries. This aligns with CSRD’s comparability expectations and VSME’s requirement for year-to-year information.

Key Terms

Transition plan: A roadmap outlining how an organisation will decarbonise over time.
Baseline emissions: The reference year used for future reduction comparisons.
Absolute target: Reduce total emissions.
Intensity target: Reduce emissions per unit of production.
CAPEX measures: Investments in new equipment to reduce energy or emissions.
Operational measures: Behavioural or optimisation changes that improve efficiency.

Conclusion

Transition plans help industrial SMEs turn energy and emissions data into a long-term strategy. With clear baselines, realistic targets and credible actions, your organisation can demonstrate resilience and competitiveness while supporting customers’ CSRD disclosures. A plan does not need to be lengthy — it needs to be consistent, transparent and grounded in your actual operations.

With a clear structure and consistent effort, CSRD becomes an advantage — not an obstacle.