With the 2023 CDP reporting deadline now behind us, corporations have less than five months to develop enhanced policies and programs to advance their sustainability progress and become well-positioned for enhancing their CDP score into the next year. To arm your team for the next reporting cycle, our sustainability reporting experts have pulled together three reasons why you should enhance your CDP reporting strategy now, and three considerations to help optimize your response.
CDP, formerly known as the Carbon Disclosure Project, is a global non-profit organization that encourages companies, cities, and regions to measure and manage their environmental impacts. Reporting through CDP allows organizations to demonstrate their commitment to transparency and sustainability, while garnering a variety of additional benefits, such as: improving stakeholder trust, attracting investment, reducing risk, driving innovation and cost savings, demonstrating leadership, and enhancing reputation.
So, why is reporting to CDP such a critical opportunity? Here are three reasons we believe companies should proactively plan to either respond as first time reporters to CDP, or take the necessary steps to improve scores in future years.
Regulations across the globe are aligning with CDP.
- In the U.S., the Securities and Exchange Commission’s proposed climate disclosure rule has several parallels with CDP, as it’s aligned with the TCFD framework (Task Force on Climate-Related Financial Disclosures). Simply put, corporations who report to CDP will be well-positioned for the S Securities and Exchange Commission’s (SEC) pending ruling for climate disclosure, as that final rule is put into place. Learn more.
- The United States government announced in late 2022 that they will now require federal contractors to disclose environmental data through CDP and set science-based decarbonization targets.
- The EU Commission adopted ESRS on 31st July 2023. Companies located inside and outside the European Union will now have to report their impact on climate change, pollution, water, oceans, and biodiversity, including forests and circular economy. Companies disclosing through CDP show a level of preparedness on some of the critical information required under the ESRS such as governance, risks and opportunities, metrics and targets.
- CDP's 5-year strategic plan includes a significant shift and expansion by 2025 to include new categories of disclosure such as oceans, freshwater and biodiversity. This expansion covers a wider, more holistic approach to disclosing, analyzing and improving environmental performance. While specific changes and timelines have not yet been announced, it is recommended to begin collecting your data now in preparation for what’s coming.
- CDP has updated its A-list criteria, making earning an A more complex than ever. For instance, companies now need to report a transition plan that is 1.5°C aligned and publicly available, inclusive of board-level oversight and management responsibility, and provides either a feedback mechanism currently in place or plans to implement one, within the next two years. Additionally, companies must report a near-term emissions target that has been validated by the Science Based Targets initiative (SBTi) or meets the following criteria: the target must be company-wide, cover at least 95% of Scope 1 and 2 base year emissions, and have a goal date of 5-10 years from the base year. Beginning in 2024, CDP will also assess the presence of a viable net-zero target.
CDP updates its scoring methodology each year, making it necessary for companies to not only stay at the current level of sustainability leadership, but also continue to increase their ambitions and actions to maintain the same score.
If a company chooses to not report at all, they could receive an “F” score, which could signal the wrong message to investors and stakeholders.
How does an organization take its CDP reporting strategy to the next level?
Collecting the right data and insights that CDP requests as part of their questionnaire can be very time-consuming and resource intensive. In lieu of tackling this in-house, many organizations choose to partner with a sustainability reporting firm to ensure that they’re optimizing their response, and developing a strategic approach to manage their entire ESG program. As you think about the best approach for your organization, here are three steps to consider taking:
Determine what level of support your organization requires to disclose to CDP.
For organizations that are drafting their first response, we recommend selecting a partner that can provide a turnkey CDP service. In order to develop a comprehensive response, a third-party partner will support managing information collection to populate sections of the CDP questionnaire that ask for approaches around strategy, climate risks and opportunities, and quantitative data, such as emissions and energy information.
For companies that have reported to CDP in prior years, a turnkey CDP service could also be valuable to ensure that CDP responses are being optimized from a scoring perspective, and internal resources can focus on other areas of sustainability program development.
Evaluate and select a partner that has demonstrated experience with CDP.
Successful CDP drafting comes with experience, so we recommend not only finding a partner that has demonstrated success supporting other company’s responses, but also has successfully managed their own CDP response. This ensures a working knowledge of the various challenges that can come from data collection for a questionnaire that covers a variety of sustainability topics and input required from various stakeholders within the organization.
"Schneider Electric drives companies on their journey from disclosure to environmental leadership by delivering high-valued expertise on managing risks and reducing impacts" said Paul Robins, Head of Partnerships at CDP. "We are delighted to continue our partnership in 2023 with one of CDPs most long-standing Accredited Solutions Providers."
Determine appropriate internal stakeholders to engage with. This includes reporting and developing a strategic approach to developing disclosures, and also aiming to continuously improve CDP scores. Involving key stakeholders in the development of a strategic approach helps to ensure that sustainability goals are aligned with the organization's overall objectives and that progress is regularly reviewed and updated. Additionally, involving all necessary stakeholders in the reporting process promotes transparency and trust, both internally and externally.
This article has been compiled by our sustainability reporting experts from Schneider Electric Sustainability Business, a global, CDP Gold Accredited Provider. If you’re ready to connect with one of our experts, request an appointment here.