CDP (formerly known as the Carbon Disclosure Project) is the most requested and widely adopted voluntary sustainability reporting system on the block. More than 23,000 companies across the globe submitted to CDP for the 2023 reporting cycle, representing a collective market-cap of $63 trillion (USD).
With such a steep increase in the amount of companies reporting via CDP for this last cycle, disclosure reports were delayed by two months. This boost in disclosures represented a 24% year-on-year increase of companies doing their CDP questionnaires for 2023. For some added context, 86% of the S&P 500 reported to CDP in 2023.
CDP reports have gotten more complex over time, building off the knowledge gained in previous questionnaires. This is how the additional thematic areas of water and forests became additions to the CDP’s climate disclosure questionnaire in the first place. Now companies can disclose to CDP how their activities relate to and impact: climate, water, forests, biodiversity, and plastics. For now, reporting for plastics is under water, with biodiversity under forests for reporting.
For 2024 and beyond, CDP’s questionnaire will now imbed all thematic focal areas into one questionnaire, this affords some interoperability - meaning companies do not have to repeat information - and also opens the door for companies to be required to disclose much more on water, plastics, biodiversity, and forests to gain an A-rating.
What do the 2023 CDP scores mean?
Once the grading of scores is complete, scores for that year are made publicly available and searchable on the CDP website. CDP scores are ranked A-F, like school grades. For a company to earn an F rating, they were likely requested to do a CDP report and failed to submit disclosures. Each year, CDP partners with financial firms to request disclosures from companies. The campaign for 2023 was supported by nearly 290 financial institutions controlling roughly $29 trillion in assets. They requested CDP reports from just shy of 1,600 previously non-disclosing companies. Only 19% of these companies requested to filed their CDP reports for 2023. The rest who failed to respond got an F rating.
Many companies make the A-list this year! For the climate questionnaire, 346 companies fulfilled the best practices and expectations of the CDP Climate Questionnaire. Another 30 companies made the A-list for Forests, with 101-companies making the A-list for Water Security. But some companies uniquely achieved the much coveted AAA-list; an A-rating in all three: Forests, Water, and Climate. Some of these companies include many household names, like Philip Morris; but many of these companies are Europe-based, like: Beiersdorf AG, Kering, Danone, and L’Oréal. It’s likely these European companies are already fulfilling required sustainability reporting via the European Union’s Corporate Sustainability Reporting Directive (CSRD).
On the whole, responding well and responding to every question is essential to building the transparency and accountability required of an A-rating for any thematic area. To achieve a AAA rating, means companies are doing the latter across the three core thematic areas of water, forests, and climate.
It’s important for companies to work with an accredited service provider, like Sustain.Life, to ensure they are fully disclosing everything they can and maximize value across their CDP disclosures.
CDP Ratings Explained
- Leadership (A and A-): These companies show environmental leadership and report on climate, forests, and/or water indicators. They develop climate and environmental transition plans, consider environmental and climate risks associated with their supply chains, and align with the TCFD, Science Based Targets Initiative, the Sustainable Development Goals (SDGs), and other ESG reporting frameworks.
- Management (B and B-): These companies address environmental impacts in their business but aren’t taking actions that would make them a leader in their industry.
- Awareness (C and C-): This measure shows how comprehensive a company’s self-evaluation is regarding activities and operations that impact people and ecosystems.
- Disclosure (D and D-): These companies answered every question but have not yet achieved core environmental indicators.
- Failure (F): Shows a failure to provide sufficient information for evaluation. Typically, these companies failed to answer every question or received requests to provide questionnaire responses but didn’t.
A company’s CDP climate score is a snapshot of its overall climate and risk strategy and performance. It can include scope 1, 2, and 3 emissions as well. It tells investors and stakeholders information on the carbon intensity, resource use, risk, and sustainability of a company’s supply chains. Companies are either asked to report to CDP by investors or customers, or do so voluntarily. Presently there are eighteen sectors covered under CDP through specific scoring methodologies.
For more on what the scores mean, see ‘What is the CDP’ here.
CDP 2023: How to make the A-list?
Making the A-list is a matter of consistency and accountability. Companies need to be considering core environmental risks across every aspect of their value chains, and need to articulate their approaches, strategies, and impact within their CDP report questionnaires; whether it’s for the climate, forests, biodiversity, plastics, or water thematic areas or for all of the above. Partnering with an accredited service provider could make the difference between an A-rating and a B-rating. Maintaining an A-rating across multiple years can also be difficult, as CDP reporting requirements expand and change based on new insights gleaned from the previous year’s reporting cycle. A-list companies range in size, geography, and across various sectors.
Regardless of what makes them different, they are all doing the following:
- Answering every question.
- Considering how climate, forests, and water impact their supply chains, risks, business strategies; and how their company’s goals align with the Paris Agreement's goal for a 1.5°C world.
- Developing climate and environmental transition plans.
- Aligning with the TCFD, Science Based Targets Initiative, the Sustainable Development Goals (SDGs), and other ESG reporting frameworks within their work.
- They are utilizing an accredited third party to help review and guide their reporting process.
2024 reporting is now
There’s no time like the present to get started on the 2024 CDP reporting cycle. Companies should anticipate new changes with an integrated questionnaire, featuring questions across: climate, water, and forests. This means it is easier for companies to disclose beyond climate, but it also means companies need to reflect on how their activities impact water and forests in ways they may have ignored in the past. On the whole, investors are increasingly interested in how a company’s activities impact nature. The ability to both address and track scope 1, scope 2, and scope 3 emissions; and relate back to how business activities, risks, and strategies impact nature will help set companies apart in subsequent CDP reporting cycles.
This means third party verification with an accredited provider is a must have if companies want to gain a top rating in future CDP report cycles.
For more on the CDP’s 2024 reporting timeline, see our article here.
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Sources:
1. CDP, "Rising disclosure numbers show more companies considering climate and nature impacts, but just under 400 reporting data aligned with CDP’s highest benchmark." https://www.cdp.net/en/articles/companies/scores-press-release-2023
2. CDP, "CDP 2023 disclosure data factsheet." https://www.cdp.net/en/companies/cdp-2023-disclosure-data-factsheet
3. CDP, "CDP scores explained." https://www.cdp.net/en/scores/cdp-scores-explained
4. CDP, "Non-Disclosure Campaign." https://www.cdp.net/en/investor/engage-with-companies/non-disclosure-campaign
5. CDP, "The A List 2023." https://www.cdp.net/en/companies/companies-scores
6. CDP, "CDP Climate Change 2022 Scoring Methodology." https://guidance.cdp.net/en/tags?cid=30&ctype=theme&gettags=0&idtype=ThemeID&incchild=1µsite=1&otype=ScoringMethodology&page=1&tags=TAG-605%2C&tgprompt=TG-124%2C
7. CDP, "Rising disclosure numbers show more companies considering climate and nature impacts, but just under 400 reporting data aligned with CDP’s highest benchmark." https://www.cdp.net/en/articles/companies/scores-press-release-2023
8. Science Based Targets, "AMBITIOUS CORPORATE CLIMATE ACTION." https://sciencebasedtargets.org
