By: Louis Christopher, Sustainability Specialist, Schneider Electric Energy & Sustainability Services
CDP scores are out, and while companies are determining how to message their 2019 scores with stakeholders, ultimately, the thing that matters most is how they take the feedback on the score they received and improve upon that in 2020.
Last week, BlackRock announced a series of moves to divest in investments that generate more than 25% of revenues from coal to address risks related to climate change and continue pushing companies to act on climate risk. More and more, companies are being pressured to take the lead on climate action. Climate action pays dividends, not only in ensuring a sustainable business, but also by attracting investors. Setting targets and showing commitment to climate action are table stakes. Investors, consumers and employees all demand for corporate transparency, and CDP disclosure is key avenue for companies to address this need.
Investors today are far from silent on climate change. Trillions of dollars represented by the investors behind CDP has motivated thousands of companies to disclose their carbon emissions and climate action plans for more than a decade. But it’s time to take CDP scores to the next level.
Here are three ways companies can get a jump start on 2020 reporting for CDP.
1. Engage with Your Suppliers
Supply chain engagement will continue to be a bigger talking point with companies who are looking to gain a better view on their sustainability impact. While a company may not know today what it’s supply chain is doing in terms of its sustainability practices, or even all the vendors and data it needs to collect, one thing is for sure: deeper engagement is needed. Supply chain engagement can take many forms; from setting an emissions reduction target with vendors to developing additional criteria to screen out unsustainable vendors to incrementally green the supply chain. To paraphrase a popular Chinese proverb, the best time to start having these conversations with suppliers was ten years ago. The second-best time is now.
Jump Start Supplier Engagement
- Educate: CDP has many resources on its site to support companies in their efforts around supply chain engagement.
- Connect: Trade associations or industry associations are becoming more knowledgeable and sophisticated on supply chain engagement (i.e., the Sustainable Apparel Coalition for apparel manufacturers and retailers). Companies can partner with such associations to support engagement and get data from their suppliers.
- Survey: Surveying your supply chain can provide a base-level of understanding for how sustainably your suppliers are operating. For example, you can learn how they source materials, any certifications they may put on their product(s) or safe labor practices and fair trade. All these considerations play into how the supply chain affects your own CDP score and ensure you company is sourcing from responsible suppliers.
2. Set or Align Targets to 1.5°C Scenario
This may be old news to some, but in 2019, the IPCC released its 1.5°C Special Report, stating that our climate change scenario is much more severe than initially thought at the 2° scenario set out by the 2015 Paris Climate Accord. One way emissions can be brought to zero by the mid-century is by setting Science-Based Targets (SBTs). Companies who set targets based off the 2° scenario will need to re-evaluate or set new targets based on the latest science by 2022. The market is moving beyond a 2° scenario, and there are new rules and considerations to include in setting targets.
CDP acknowledges companies who set SBTs by awarding points dependent on where the company is in its target-setting process. For instance, those who have set and approved SBTs by the Science-Based Target Initiative (SBTi) will receive the most points. If a company notes in its disclosure that it has started to engage on setting a target according to SBTi criteria, CDP recognizes this as a serious commitment from the company even if the target has yet to be approved. This would result in more points for that CDP question than a company who hasn’t set any targets.
Jump Start 1.5°C SBTs
- Inform: Become familiar with SBTi and its criteria for setting an SBT.
- Engage: Some thresholds companies have to factor into their SBT can be quite large, especially in terms of their Scope 3 emissions. If your company’s Scope 3 emissions is 40% or more of its total emissions, you must set a Scope 3 target. This calls for more insight into supply chain data, which can take time to collect.
- Advance: Companies should recognize that their initial assessment of Scope 3 emissions should be quick and accurate, but not necessarily precise. With Scope 3, think about orders-of-magnitude accuracy, not decimal-point accuracy. A high-level assessment can still drive a lot of value. From there, companies can determine where to put the most resources to addressing Scope 3 emissions.
3. Invest in Climate Change Scenario Analysis
In the upcoming 2020 CDP questionnaire, climate change Scenario Analysis questions may be more qualitative in terms of the diversity of risks that exist due to climate change. Some of these risks could be transitional (i.e., economic in nature, changes in market trends, etc.) or physical (i.e., cutting operations by 2% due to closures, floods, blackouts, etc.). Companies looking to increase CDP scores in 2020 should explore and invest in Scenario Analysis. While this may be a foreign concept to some, CDP rewards groups who have taken the steps to do these analyses as it shows forward-looking planning to enable a low-carbon future.
Jump Start Scenario Analysis
- Collaborate: Open the conversation across stakeholders. While new trends in sustainability reporting and risk management are calling for risk and sustainability teams to work together in ways they haven’t in the past, the conversation will only make companies more resilient.
- Understand: Get familiar to what scenario options are out there as listed in CDP guidance. It’s important to understand the difference between IEA and WWF scenarios and know what resources you may need to draft or compile scenarios which align with your business.
- Opportunity: This exercise should be viewed as an opportunity to understand more about risks in your organization. By including energy managers, facility managers, investor relations, risk managers and others, your company can gain a clear view of your goals and how to become more resilient.
With the start of the new decade, now is the time for companies to up-level their sustainability initiatives, and one way to show that work is through reporting to CDP. Learn how Schneider Electric can help take your CDP score to new heights. Contact us today.