In a world more focused on environmental responsibility than ever before, businesses are turning towards CDP to showcase their commitment to sustainability. This movement isn’t just about ticking boxes for investors; it’s a key step towards a more sustainable future.
In this guide, we’ll simplify what CDP is, discuss the value of a CDP score, highlight new changes for 2024, and explain how effective CDP reporting can be a game-changer for your business.
What is CDP?
CDP, formerly known as the Carbon Disclosure Project, is a global non-profit that runs a disclosure system for companies and governments to report on their environmental performance .
Since its start over 20 years ago, CDP’s role in driving environmental accountability and transparency has been supporting the move towards a more sustainable world and is now cited as the global gold standard for environmental disclosure.
Much like other ESG frameworks, the CDP framework predominantly centres on disclosure, transparency, and accountability. CDP uses a scoring system to encourage companies to track and manage their impact on the environment. This is done through CDP’s questionnaires on climate change, forests, and water security.
What is a CDP score?
A CDP score is like an exam grade for a company’s work in looking after the environment and their ability to communicate it. These scores range from A, which is the best, to D-. An F score signals a company has failed to disclose. These scores are calculated from the information provided by businesses to CDP in the questionnaire(s) they complete.
Scores from CDP: sustainability road markings
CDP scores play a crucial role in guiding organisations and their stakeholders towards a greener future, offering a snapshot of where a company stands in its sustainability journey towards leadership. Higher scores not only reflect a company’s dedication to environmental responsibility but also can significantly influence investor trust and decision-making, motivating companies to strive for better performance.
Benefits of CDP reporting for businesses
A business’ participation in CDP reporting and achieving high CDP scores offers several tangible advantages:
Protect & Improve Reputation
Reporting to CDP and scoring highly shows a business’s commitment to sustainability, enhancing its reputation among investors, customers, and other stakeholders who are increasingly prioritising sustainability. Businesses with higher CDP scores also tend to attract more investor interest.
Boost Competitive Advantage
Achieving high CDP scores helps companies stand out in their market as proactive leaders in sustainability. This can be a major differentiator, especially in industries where customers are making choices based on companies’ environmental footprints. Excelling in CDP reporting positions these businesses as industry frontrunners in sustainability, winning the trust and loyalty of stakeholders.
Track & Benchmark Progress
CDP reporting enables companies to monitor their environmental performance over time. CDP’s scoring system provides valuable insights into where a company excels and where it can improve. It’s an effective tool for setting and achieving realistic environmental goals, as well as for benchmarking against industry peers.
Faye Bennett-Hart, Co-Director of Morelli Consulting and former Associate Director at CDP, highlights the internal benefits too:
“Scoring isn’t just about competition between organisations, it also presents competition within the organisation itself. The goal of achieving a higher CDP score, or even maintaining a high score can actually drive better performance within organisations and help gain internal buy-in for improvement initiatives. Organisations can utilise the scoring to compete with what previously was achieved, not just competitors.”
Uncover Risks & Opportunities
CDP reporting aids businesses in reporting on environmental risks and opportunities, aligned with the TCFD (Taskforce for Climate-related Financial Disclosure) recommendations. Thus, keeping on top of, or ahead of regulation.. By conducting a detailed assessment of their impact on areas outlined in CDP questionnaires, companies can develop strategies to avoid risks and take advantage of opportunities. This forward-thinking approach opens doors to innovation.
The Rise in Disclosure Numbers
The recent years have seen a remarkable surge in CDP disclosure reporting, marking a significant shift in business attitudes towards environmental transparency. In 2023 alone, over 23,000 companies reported to CDP, a 24% increase from the previous year.
Driving this surge in disclosure numbers are investors, who are increasingly applying pressure on businesses to be transparent about their environmental impact.
Despite this positive trend in reporting, the path to achieving the highest standards of environmental stewardship remains challenging. The number of companies globally making it to the A List rose by just 14%. Of all the companies that reported, only 10 managed to receive a triple A score across the board in climate, water, and forests.
This indicates the need for more companies not just to participate in CDP reporting, but also for those reporting to continue to raise the bar in terms of performance.
Upcoming Changes to CDP Reporting
For 2024, CDP is implementing several significant changes to its reporting processes, aiming to streamline the experience for businesses and enhance the overall quality of disclosures:
New Disclosure Timeline
Questionnaires were made available on the CDP website in the first week of May, though submissions are not yet allowed. The portal fully opens for disclosure submissions from June 4. The scoring deadline is now September 18, 2024, and the portal closes on October 2.
New Platform
To modernise and improve the user experience, CDP has built a new platform for environmental disclosure. This updated platform is designed to be more user-friendly, with enhanced features that simplify the process of entering and managing data.
A New Integrated Questionnaire
In a move towards a more holistic approach, CDP is offering all three key themes – climate, water, and forests – integrated into a single questionnaire. The questionnaire will be aligned with the standards set by the International Sustainability Standards Board (ISSB).
This reflects the interconnected nature of these environmental issues and simplifies the reporting process, reducing the complexity and duplication of efforts for companies that were previously required to respond to each of these areas separately. This consolidation means businesses can now report on all three areas in a more streamlined manner.
How Morelli Consulting Can Help
At Morelli Consulting, our team understands that navigating the complexities of CDP reporting can be challenging. Our tailored CDP services are designed to assist clients in this process, ensuring they can confidently and effectively complete their CDP disclosures, whilst optimising their responses.
Conclusion
In summary, CDP reporting goes beyond mere compliance; it’s a significant step towards more sustainable business practices, tangible benefits to businesses and a better world for us all.
As disclosure rates rise and reporting evolves, it’s essential for businesses to keep up and adjust. Morelli Consulting can help navigate this complex journey. Is your business ready to take on the rewarding process of CDP reporting?
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