If you have read reporting literature, you must have come across the name CDP, which is not another reporting standard. CDP used to be referred to as the Carbon Disclosure Project and it is a not-for-profit organisation that provides information about cities, companies, and government’s engagement in sustainability. Businesses would under their CDP pledge disclose their climate impacts and measurement.
CDP was founded in 2000 in the United Kingdom to make environmental information more transparent. Many companies are facing requests from investors and clients to disclose their environmental impacts. With CDP, they get a score based on a questionnaire that the company completed covering topics such as climate change, deforestation, and water security. The score encourages companies to do better and to identify environmental risks. Since its foundation, information about 5’500 companies and 500 cities have been collected.
How does it work?
Companies and cities submit information about their environmental impacts through the annual reporting process (a questionnaire) upon which CDP bases its scoring. This score follows the Taskforce for Climate-Related Financial Disclosures (TCFD) and major sustainability standards.
A CDP score provides a snapshot of a company’s disclosure and environmental performance
Source : https://www.cdp.net/en/scores/cdp-scores-explained
If provided every year, companies and cities can monitor their journey to a more sustainable planet. The score goes from D to A and divides as such:
- D for Disclosure: the company has provided information for every question of the questionnaire. It’s usually the first step for environmental management.
- C for Awareness: a company shows comprehensiveness on how the environment impacts its business operations and vice-versa.
- B for Management: a company addresses their impacts on the environment and implements a more sustainable management.
- A for Leadership: a company shows environmental leadership on climate change, water security, and deforestation. It has a very strong reporting procedure and puts in place a climate plan etc. However, it could still do better. The company has a more transparent attitude towards disclosing performance on sustainability. Examples of companies are Volkswagen or eBay.
- F for Failure to disclose: a company has failed to provide the relevant information
In order to get a score, the company or the city must to complete a questionnaire, providing information on the following topics: governance, risks and opportunities, business strategy, targets and performance, metrics and methodology for CO2 emissions, energy, water consumption…), engagement of stakeholders and value chain, verification. The deadline is at the end of July.
Advantages
The score does push companies and cities to do better in terms of environmental conservation.
In 2021, about 13’000 companies completed the questionnaire, an increase of 37%, representing 64% of market capitalisation
Source : https://www.apiday.com/blog-posts/carbon-disclosure-project-reporting-what-is-it-and-how-does-it-work
By encouraging companies to complete the questionnaire, it promotes transparency for stakeholders. It gives an opportunity to companies to demonstrate their ecological engagement, which is a value-added for their investors, clients, customers and communication. Through gentle competition to get a higher score, CDP triggers innovation. Moreover, businesses stay ahead of regulations because CDP follows the Task Force on Climate-related Financial Disclosure that offers climate risks analysis in finance.
Downsides
As with science-based targets, CDP presents disadvantages too. It may be complicated for businesses that work in silos and have no clue about their environmental data. They might even have no expertise on the topic. Finally, the main criticism is that it is time-consuming to get all the information for the questionnaire, which is about 88 pages with more than 200 questions.
In my opinion, CDP is a good third-party endorsement of a company’s engagement and climate action. It provides with additional credibility as I wrote in my article on CSR communication.
Ana
Find all chapters of the CSR ABC series:
- What on Earth is CSR?
- What on Earth is the materiality assessment?
- Who on Earth are my stakeholders?
- Why on Earth should I use ISO 26000?
- What on Earth is the Swiss regulation on CSR?
- What on Earth are scope 1,2,3 emissions?
- What on Earth does GRI mean?
- What on Earth are ESG?
- What on Earth are science-based targets?
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