In 2022, CDP reported a record year, with more than 18,700 companies representing half of global market capitalization disclosing their environmental data, making it the highest number since its inception in 2000. Despite this progress, three in five firms, totaling more than 29,500 companies, have yet to respond to requests for disclosure in 2022.
In response to this data, CDP's Chief Stakeholder Officer, Mercedes Tallo, asserted that it’s time for laggards in the environmental disclosure space to join the wave of transparency sweeping across all industries and geographies; "with mandatory disclosure on the horizon, we're calling on the nearly 30,000 non-disclosing companies to report and take action to prepare themselves for the future."
With the release of the SEC’s climate disclosure rule looming, and mandatory reporting rules in place already in many regions, now is the time to start strategizing to prepare your business for increased scrutiny and pressure to disclose. Reporting to CDP is an excellent preparatory step for compliance with reporting mandates and there are many actions that businesses can take today to get ready for a successful 2023 CDP reporting season.
1. Automate data to make informed business decisions
One of the most significant challenges facing businesses concerning reporting is insufficient, unreliable, or incomplete data. Access to accurate, comprehensive data is a must-have to create robust reports that enable transparency, accelerate decision-making, and drive results across your enterprise.
However, according to a survey completed by Schneider Electric and Greenbiz Research, 52% of companies reported using basic spreadsheets to track increasingly complex energy and sustainability data, and 20% of organizations still needed to share related information and insights across departments.
Case in point: internal and external stakeholders not only need more – but more importantly, better – corporate sustainability and energy reporting data to effectively communicate on progress. No matter the audience, utilizing energy-management technology such as Schneider Electric’s award-winning, cloud-based software, Resource Advisor, will drive efficiencies and forge greater connections across the business. Tools such as this provide value by bringing all of an organization’s ESG data into one place, making visualization, reporting, and confident decision-making easier than ever before.
2. Conduct a materiality assessment to guide your strategy
Materiality assessments can help companies identify what matters to them and their stakeholders and so what they should focus on building their sustainability strategy around moving forward. They help identify the issues most relevant to a company’s sustainability performance and risks and determine what data is most critical to report. Material issues include the economic, environmental, and social risks that could affect your reputation and ability to create value over the short-, medium-, and long-term.
Beyond better understanding, materiality assessments create a great opportunity to engage with internal and external stakeholders.
Early in your company’s materiality assessment exercise, it is a good idea to bring in key stakeholders (i.e., finance, risk managers, procurement, operations & facilities, and sustainability specialists) and even members of the C-suite or board for a focused discussion to pin down essential topics and develop a matrix (like the one below). This list of issues becomes particularly useful in the next steps of building and deploying a survey to broader groups of stakeholders.
3. Immediately and continuously engage your internal stakeholders
Energy and sustainability data come from many places within an organization and from many different data owners. To ensure you can determine what information is available and access data when needed, it is essential to involve stakeholders in collaborative dialog from the start. Forging these cross-functional relationships within your company will enable you to identify and quickly resolve any disconnects that may arise during the reporting process. Further, transparently communicating goals and involving data owners early in the reporting process will instill in stakeholders a sense of ownership, which leads to increased engagement, motivation, and accountability.
4. Involve stakeholders across the value chain to understand Scope 3 impact
Scope 3 – or the indirect emissions associated with an organization’s value chain – often represent the most significant percentage of a company’s total emissions as they account for 75% of total Scope 1,2, and 3 emissions. These emissions are controlled not by the company but by value chain stakeholders, meaning they can be difficult to measure and address. As a result, organizations must engage key stakeholders across the value chain to understand the extent of their Scope 3 emissions and the challenges they may present.
Value chain stakeholders, who could be your customers, distributors, or suppliers, hold data that will be critical to your long-term reporting efforts. To establish trust and cooperation, an organization should intentionally nurture relationships with external stakeholders. Further, performing data availability studies will help narrow down the gaps in collecting accurate and decision-useful data.
In order to set meaningful Scope 3 goals, it can be helpful to conduct a screening assessment of all 15 categories of Scope 3 to ensure that are targeting the sources with the largest emissions. For one of our clothing and accessories retailer clients, we found the largest emitters were in the Purchased Goods & Services category, which includes the embodied carbon of materials (such as cotton, polyester, leather, etc.) as well as the energy required to dye, cut, and sew products. Our consultants then worked with the company to assess the quality of this primary data, remove outliers, and calculate a comprehensive carbon footprint. Given these stakeholders' wide range of responsibilities, we have found that it is important to note that they might require different engagement approaches.
5. Set ambitious ESG goals
Consistent and reliable data is a prerequisite to any goal-setting exercise. Case in point: in March of 2022, CDP reported that fewer than 35% of companies' emission reduction targets are credible, and only 1,164 organizations have goals validated by the Science Based Targets initiative (SBTi). Further, only 1% (135) of companies reported through the total 24 key indicators associated with a credible climate transition plan.
More than 3,000 businesses and financial institutions are working with the SBTi for target-setting resources and guidance in achieving net-zero goals. With this in mind, it is crucial that your business first focuses on the issues that you can track and create SBT-aligned goals around.
Beyond simply setting ESG goals, research finds that organizations looking to accelerate their action on energy and sustainability initiatives find greater success when they set ambitious, public goals.
6. Get your data third-party verified
Becoming third-party verified – also known as the process of “assurance” – refers to verifications conducted by an independent external organization accredited and competent to perform GHG (Greenhouse Gas) verification. The third-party verifier must also be independent of the organizations that have gathered or provided the data and those that will use the data.
Beyond having the confidence knowing unbiased professionals have verified that your data is correct, there is a significant chance that the SEC climate disclosure rule in the U.S. and other global reporting mandates will require limited or reasonable third-party assurance. It is important to note that the verification process takes a standard 6-16 weeks to get a certification. This means you will need to start the contract close to the beginning of the calendar year to have verified data by the next CDP reporting deadline.
Start now and get ahead of CDP 2023 reporting
As increased attention is placed on a company’s environmental performance, reporting to CDP is more than simply a box to check; it is a strategic business exercise. Having a strong understanding of your reporting will pay dividends as the stakes are raised with incoming climate disclosure regulations.
To make the most of the 2023 reporting season, start thinking about the processes you can put in place now that will lead to a more robust CDP response. To achieve incremental progress, we advise our clients to engage with CDP data early and often to get the best results.
And, as CDP continues to make changes to its questionnaires in the coming years, it is more important than ever to stay on top of your data, connected to your stakeholders, and in tune with the latest in corporate sustainability.
If you want more hands-on assistance, consider scheduling a consultation with one of our sustainability consultants. Schneider Electric has the experience to elevate your CDP score to new heights. As a long-time partner, a CDP-accredited provider, and an A-list CDP respondent, we know what it takes to craft a successful CDP response. In fact, 88% of our clients earned an A, A-, or B in 2021.