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CDP Changes Companies Need to Know

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COP21 was successful in driving countries toward ambitious sustainability targets. Even more impressive were the commitments the business world made around the event, through the Paris Pledge, the White House Pledge and the like. The world is now aware that the fight against climate change requires immediate action. And the momentum built by COP21 is reflected in three recent and important changes to the Carbon Disclosure Project (CDP) reporting framework.

1: Separating the Innovators from the Laggards

Updates to the 2016 questionnaire aim to differentiate whether companies are actively fighting climate change or merely disclosing without improving. The first of these changes can be seen in a move to a banding system for all programs critical to environmental stewardship. The banding system is intended to identify an organization’s maturity when it comes to:

  • Disclosure of current position
  • Awareness of environmental impact
  • Management of overall impact, risks and opportunities
  • Leadership implementing best practices in their environmental realm

2: Science Based Targets to Limit Global Warming 

Target setting has considerably changed for corporations. In 2015, CDP, the UN Global Compact, the World Resources Institute and World Wildlife Fund launched the Science Based Targets Initiative (SBTI). The goal of the initiative is to raise the ambition of corporate GHG-reduction targets to support a transition to a low-carbon economy and to enable science-based targets (SBTs)
to become standard practice for businesses. Companies are invited to have their emissions reduction targets officially evaluated by SBTI for this year’s CDP submission.

SBTs are in line with the level of decarbonization required to keep the global temperature increase below 2 degrees, compared to pre-industrial averages, as described in the Fifth Assessment Report of the Intergovernmental Panel on Climate Change. This approach combines corporate practice, policy and science for producing results consistent with the target of the Paris Agreement.

Companies that choose to participate in the initiative can realize several benefits. Setting SBTs can generate innovation leading to new business models and value streams. In addition, it will allow organizations to respond to regulatory and policy changes, and to demonstrate a consistent commitment to reduce emissions to investors and clients.

It is important to note that companies can consider submitting pre-existing targets for verification.  Targets may be submitted for an official evaluation by April 15 and will be considered for CDP scoring. Targets that do not pass the review process, or that have not been submitted for review prior to the deadline, will still be evaluated using information disclosed in CDP’s questionnaire.  These companies can still qualify for a banding in leadership; however, companies will be in danger of losing points. While setting targets — and having those targets verified — is up to each organization, it is a practice that is highly encouraged.

3: More and Better Integrated Reporting

From GHG accounting rules to renewable energy support mechanisms, recent years have significantly altered the economics of renewable energy, making many approaches more viable and economically attractive.  Along with reducing energy consumption and carbon emissions, renewable energy can bring benefits in the form of bolstering an organization’s green credentials, both through a physical reduction in carbon emission and improved public perception.

The elements of renewable energy targets show how far companies can go in order to achieve emissions reductions. Businesses can play a significant role in the energy landscape by not only managing energy consumption, but also looking at their renewable production capacities and supporting green generation.

A related change in CDP’s approach is seen in new questions on “low-carbon products” and the addition of an integrated reporting option. Answers to these questions should provide information on how climate change is embedded into company’s activities, through its products and in its reporting.

Walking the Talk of Change

All of the CDP changes reflect the ambitions and action discussed at COP21. It’s yet another sign that addressing climate change requires walking (or running) as much as talking. Companies now need to show their stakeholders where and how they’re making sustainability progress. And they need to be innovative about it.

Contributed by Marientina Laina, Gabriel de Malleray and Ekaterina Tsvetkova, Schneider Electric, Energy & Sustainability Services

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