Is your company required to provide climate disclosures by a valued customer? Or are you considering climate reporting options as a way to be proactive in promoting your environmental credentials? If the answer to either question is yes, then there's a good chance that you'll be getting to know CDP — the platform that’s becoming the standard for environmental reporting.
What is CDP?
CDP is a global nonprofit organization that encourages investors, companies, and governments to voluntarily measure, disclose, and take action their environmental impact. Through its reporting system, CDP aims to drive transparency, accountability, and positive environmental change.
CDP began as the Carbon Disclosure Project in 2000, and 24 years later has become the global authority on environmental reporting. Today, it operates in approximately 90 countries, focusing on collecting data related to global greenhouse gas emissions, climate, supply chain, and other environmental indicators. Last year marked a significant rise in the number of CDP reporters, with more than 23,000 companies participating in CDP’s environmental data reporting, including over 80% of the Fortune 500.
The surge in importance of CDP scores can be attributed to several key factors: the rising demand for transparency in climate initiatives, the setting of ambitious corporate environmental targets that include comprehensive value chain emissions measurements and reductions, the tightening of sustainability reporting laws, and the intensification of environmental risks.
Navigating CDP scores and reporting
One of the key aspects in the growth of CDP reporting is its harmonization with other key reporting frameworks, notably the International Sustainability Standards Board (ISSB) and Task Force on Nature-related Financial Disclosures (TNFD), which is merging with CDP systems in 2024, and existing protocols like Global Reporting Initiative, European Single Reporting System, and Science Based Targets initiative. These integrations position CDP scores as an optimal starting point for corporations on both voluntary and regulated environmental, social, and governance (ESG) disclosure journeys.
The significance of CDP scores in supply chain dynamics
Sustainability is now a strategic imperative in supply chains. Between 2020 and 2023, the adoption of CDP disclosures and scores more than doubled — due in part to the more than 330 members enrolled in CDP Supply Chain — as they requested 47,000 companies in their supply chains to report their environmental data via CDP’s global disclosure system. There are several key drivers for these large companies to request CDP scores from suppliers.
- Raising the bar on sustainability: Large corporations are enhancing their sustainability pledges and goals and expect their suppliers to contribute to their targets.
- Anticipating reporting regulations: As sustainability reporting becomes standardized under regulations from U.S. and EU governments, companies are getting ahead of the curve and asking for support to meet anticipated compliance requirements.
- Assessing environmental risks in supply chains: To mitigate risks and ensure opportunities to operate in a more sustainable fashion are fully explored, businesses are scrutinizing their suppliers on sustainability performance.
Five top benefits of including CDP scores in your corporate sustainability goals
With the rollout of an updated, integrated CDP questionnaire and a new, more accessible version for small and medium-sized enterprises (SMEs), 2024 is poised to see a spike in entities aiming for strong CDP disclosure and scores. If you haven’t yet received a CDP request or are still undecided about the merits of participating, here are five important reasons why a proactively building a strong CDP score should be a priority.
1. CDP is a tool to strengthen supply chain ties
Last year, more than 330 leading companies solicited environmental data from around 40,000 suppliers through CDP, but achieved a relatively low 41% response rate. By responding (and aiming for a high CDP score), you can demonstrate your company’s commitment to environmental responsibility and a willingness to collaborate with your customers. This can improve relationships with key buyers and may lead to better contractual terms and sales. Corporations like Kellogg’s and Hewlett Packard Enterprise are starting to require CDP disclosures in their procurement codes of conduct and are requiring companies to report through CDP, signaling a shift towards companies mandating their suppliers to report on sustainability performance factors.
2. CDP is a way to benchmark against competitors
CDP scores — ranging from A (excellent) to F (failure) — offer insights into your environmental performance and how your company fits within your sector and geography.
- A/A represents sustainability leadership
- B/B shows proactive ESG management
- C/C indicates ESG awareness
- D/D denotes initial ESG disclosures
- F signifies inadequate sustainability engagement
Your CDP score enables a side-by-side comparison with industry benchmarks, signaling to potential business and investment partners that your company is serious about its sustainability strategy. By benchmarking your CDP score, you identify where you excel and where growth is needed, fostering continual improvement.
3. Competitive leverage
Your CDP score helps establish your company’s sustainability credentials, providing a public record of achievements that can enhance your brand image and differentiate you on products and services. This advantage can be further leveraged to increase customer and employee engagement, improve company culture and morale, and retain and attract talent. It also can position your company as an attractive investment opportunity or supplier for sustainability-minded stakeholders.
4. Regulatory compliance readiness
The alignment of the CDP’s reporting framework with other recognized frameworks, including the ISSB and TNFD (both of which are integrated into the 2024 CDP questionnaire), will enable your company to use CDP disclosures to prepare for additional reporting requirements. The majority of the global sustainability reporting regulations such as California and U.S. Securities and Exchange Commission climate-related disclosure rules and the EU’s Corporate Sustainability Reporting Directive, are built on the ISSB or TCFD standards. Considering that the CDP questionnaire is integrated with both of these reporting frameworks, CDP reporting helps you prepare for compliance with the growing number of sustainability reporting rules.
5. Climate risk evaluation
Part of obtaining a CDP score involves an in-depth examination of climate risks facing your business. This evaluation assists you in crafting strategies for mitigating physical risks, such as sea level rises and extreme weather events, and adapting to transition risks such as regulatory and market changes. By reporting these climate risks to the CDP, not only are you assessing your own climate risks and opportunities for better operational processes, but you’re also providing your key stakeholders with visibility into the climate risks that might affect them.
For more details, check the CDP website for the 2024 CDP disclosure timeline and links to questionnaires and guidance for corporations and SMEs.
Summary
As the corporate world zeroes in on the essential nature of sustainability, the role of CDP scores grows ever more crucial. CDP has become the reporting standard for the largest companies globally, marking a shift towards transparency and responsibility on environmental issues.
For many, CDP reporting will no longer be an option. In many industries it’s becoming a business necessity for maintaining customer relationships, including status as a supplier. By partnering with a trusted advisor to help you collect data, build out your report, ensure accuracy with a third-party audit, and develop data-driven strategies, you’ll make significant strides from your first disclosure to reaching your desired score, paving the way for a future of sustainability leadership and successful stakeholder engagement. If you want your organization to be scored, you must submit your report by Sept. 18, 2024. You can still submit your report after the deadline, but you’ll not be scored.
To ensure you treat CDP reporting as more than just a compliance exercise, our team of experts are standing by to help you boost your CDP rating, become a leader in environmental performance, and build a competitive edge.
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