Decoding CDP: The global standard in sustainability reporting

CDP (formerly known as the Carbon Disclosure Project) is the most widely adopted voluntary sustainability reporting framework in the world. CDP is also the most widely requested disclosure mechanism, with 740+ investors with $136+ trillion in assets, requesting corporate entities to disclose across consistent and comparable metrics. Over 23,000 companies filled out their CDP reporting questionnaires for the 2023 cycle, representing two thirds of global market capitalization. That cycle ended in July 2023. In fact, so many companies and cities reported to CDP that the 2023 scores, which were set to be released in December 2023, were released in early 2024.

This past year’s COP28 set a clear signal on a transition away from fossil fuels and towards net zero pathways. And since companies contribute 70% of all global emissions it’s clear we should anticipate increased ambition by national governments and increased sustainability reporting criteria across both voluntary and mandated disclosure schemes. The transition is underway, and businesses with existing reporting efforts are best positioned to minimize the shocks and risks borne from new regulatory requirements. The latest CDP scores report may very well form the basis for a more nuanced aggregate understanding of emissions at the global policy level, and could open the door to additional questionnaire considerations for future CDP disclosure cycles.

Historically, companies have been able to opt into three distinct questionnaires centered on climate, water, and forests. Once submitted, reports are assessed by CDP-trained and accredited partners, and scored across a range from A-F. These scores convey to requesting investors and customers, as well as broader stakeholders the strength of corporate sustainability initiatives across each theme. The scoring approach taken by CDP is a sharp contrast to the suite of other voluntary reporting tools, like Global Reporting Initiative (GRI), International Financial Reporting Standards (IFRS) Sustainability Disclosures, and its underlying Task-force on Climate-related Financial Disclosures (TCFD) where sustainability reports are made publicly available, but lack an accredited review grade.      

For 2024 and beyond, CDP is transitioning to an integrated questionnaire across climate, water, and forests. This means companies can avoid repetition in CDP questionnaires and afford some interoperability within CDP’s voluntary reporting mechanisms.

Why choose CDP?

So why should businesses select CDP over other reporting frameworks? The short answer is they may not have an option, as CDP is the most heavily prescribed climate reporting standard in the world, with investors, customers, and soon to be governments requiring corporate entities to disclose. Adoption of CDPs disclosure has grown steadily since the initial launch of the climate questionnaire in 2000. Over 23,000 corporate entities disclosed in 2023, driven by 740+ requesting investors with $136+ trillion in assets, and 300+ large corporate buyers driving supply chain decarbonization. Under a recently proposed  White House directive, large U.S. federal contractors would also be required to disclose through the CDP questionnaire as part of government effort to decarbonize supply chains and assess climate related risks. As the largest purchaser of goods and services in the world ($6.13 trillion in 2023), this proposed government mandate would require thousands of companies to disclose. Adopting CDP now could save companies time and resources later in the dash to meet critical customer data requirements.

With so many acronyms crowding the alphabet soup of sustainability disclosure, CDP has emerged as a central crux for climate reporting, aligning with popular voluntary frameworks such as TCFD, now officially incorporated into the International Financial Reporting Standards (IFRS) sustainability reporting criteria. Alignment across climate frameworks allows companies to maintain interoperable reporting, streamlining onerous requirements in an increasingly regulated environment.

What are the CDP reports?

A company’s CDP climate score is a snapshot of its overall climate strategy and performance. It can include scope emissions as well. It tells investors and stakeholders information on the carbon intensity, resource use, and the sustainability of a company’s supply chains. Companies are either asked to report to CDP by investors or customers, or do so voluntarily.

Once respondents submit the questionnaire, responses are graded on a span of A through F, similar to a school grade. For a company to fail a CDP report, they must either have not responded at all, or leave responses. Scores are weighted, and failing to respond to different questions can result in a dramatic grade drop. 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 the disclosure. Presently there are eighteen sectors  covered under CDP via specific scoring methodologies. On the climate questionnaire, CDP asks for information on governance, business strategies, risks, energy use, and biodiversity impacts, among quantitative metrics including emissions, science-based targets, and progress made towards a 1.5°C future. CDP reports encourage companies to promote transparency and consider environmental impacts and risks to their business strategies and investments.

For more on what the scores mean, see “What is the CDP?”

Scores are made publicly available and searchable via the CDP website, typically every December for the preceding year. The 2022 scores were made available that December, and so on. In 2022, only 299 companies out of all those reporting made CDP’s climate ‘A List’. That’s just 1.5% of all companies reporting. Most in the ‘A List’ are top listed companies we’ve all heard of, like L’Oreal, AstraZeneca, and AT&T. Climate ‘A List’ companies span a variety of sectors, one thing they typically share in common is repeated reporting over many years, and reporting on CDP’s additional areas for water and forests.

When you get your score, what should you do next?

• With an unprecedented volume of respondents, CDP’s 2023 scores will be reported in early 2024 (likely in February). Companies do not have to wait for their scores; the period for 2024 reporting has already begun. Companies should move forward with their climate strategies, keeping in mind that some reporting criteria, like scope 3 and supply chain reporting, can be time-consuming to process. Taking action now could improve a company’s 2024 CDP reports (now due in September 2024) and potentially move up a letter grade. Incorporating scope 3 emissions and utilizing accredited partners is a solid start. Doing all of the below points won’t automatically result in an A, but it could be the points needed to meaningfully improve in grade. Answer every question: Companies who fail to answer every question will often receive a failing grade. Companies like Amazon are known for consistently scoring an F on CDP report cards because they fail to respond to every question. This is despite a swift switch to EVs for deliveries and a $1.3 billion deal with Rivian to supply new delivery trucks. Even if the response to a question is a statement on how this indicator is under development, it is better than a non-answer.

• Include Scope 3 emissions: Scope emissions are largely optional within CDP reports. Including Scope 3 emissions effectively gives respondents ‘extra points.’ This, in turn, helps elevate transparency and connection to ESG-focused investors and stakeholders.
• Use accredited partners: Seek out business partners who specialize in CDP reporting.

2024 CDP reporting timeline for companies

The delay in launching 2023 scores has also impacted the timeline for 2024 reporting.

How do CDP questionnaires adapt each year?

Each year's CDP report questionnaire helps inform and build future questionnaires for subsequent years. While the CDP started with its climate questionnaire, which has the largest number of respondents, other CDP questionnaires on water and forests were created after responses to the CDP’s climate questionnaire. In 2023, CDP started including a special report criterion on plastics within their water questionnaire. It’s possible that CDP will begin to pivot towards requiring suppliers’ climate reports as a part of scope 3 emissions criteria in questionnaires now that the EU and U.S. are beginning to incorporate Scope 3 into required sustainability and climate reporting and recent commitments out of COP28. While in the past, companies had to elect to submit separate reports for water, forests, and climate, respectively, from 2024, companies can anticipate reporting across all three via an integrated survey.

For more on mandatory disclosures, see our articles on the European Union’s CSRD and SFDR and our article on the newly proposed SEC rule in the United States.

To CDP or not to CDP, that is the question

Investors and governments are increasingly interested in ESG targets, particularly sustainability and climate risk in supply chains, scope emissions, and overall national emissions targets. The Global Stocktake, which concluded at COP28, showed us that we are far from reaching our Paris Agreement emissions and climate action goals. Companies should plan for increased transparency and reporting criteria in the New Year. CDP’s climate questionnaire should be the first port of entry for companies.

To support these national ambitions, corporate actors require suppliers to report emissions, often to CDP and directly to the requesting entity. From 2024 onwards, Amazon will require third parties to track their scope emissions. Salesforce also requires suppliers to track their scope 1, scope 2, and scope 3 emissions. AstraZeneca is specifically requiring their suppliers to do scope reporting via CDP. This is all in an effort to respond to consumer demand for more transparency around sustainability and climate impact indicators. These new self-mandated transparency efforts also afford companies the opportunity to comply with federal supplier rules on sustainability reporting.        

Sustain.Life is an accredited solutions provider for CDP, providing unique tools and software that can help companies provide critical data for their CDP climate reports, and other interoperable sustainability reports with scope emissions top of mind. With more accuracy in scope reporting, particularly around scope 3 reporting, science-based targets, and mitigation pathways, Sustain.Life can help companies meet the sustainability reporting needs of today and tomorrow.

Sources:

1. CDP, "Guidance for companies." https://www.cdp.net/en/guidance/guidance-for-companies

2. CDP, "CDP works with companies to catalyze action towards a sustainable net-zero, deforestation-free and water-secure world." https://www.cdp.net/en/companies

3. CDP, "CDP 2024 Disclosure Transformation." https://help.cdp.net/en-us/knowledgebase/article/KA-01072

4. CDP, "How CDP is aligned to the TCFD." https://www.cdp.net/en/guidance/how-cdp-is-aligned-to-the-tcfd

5. CDP, "CDP scores explained." https://www.cdp.net/en/scores/cdp-scores-explained

6. CDP, "The A List 2022." https://www.cdp.net/en/companies/companies-scores

7. CDP, " How to disclose as a company." https://app.grammarly.com/ddocs/1893876140

8. CDP, "Plastics." https://www.cdp.net/en/plastics

9. CNBC, "Amazon reveals 20% stake in electric-vehicle maker Rivian." https://www.cnbc.com/2021/10/29/amazon-reveals-20percent-stake-in-electric-vehicle-maker-rivian.html

10. CNBC, " A big climate change stress test is coming for Amazon sellers and suppliers." https://www.cnbc.com/2023/10/14/a-climate-change-stress-test-is-coming-to-amazon-sellers-and-suppliers.html

11. GreenBiz, "Carbon disclosure becomes mandatory." https://www.greenbiz.com/article/carbon-disclosure-becomes-mandatory

12. IFRS, "IFRS Foundation welcomes culmination of TCFD work and transfer of TCFD monitoring responsibilities to ISSB from 2024." https://www.ifrs.org/news-and-events/news/2023/07/foundation-welcomes-tcfd-responsibilities-from-2024/

13. The White House, "FACT SHEET: Biden-⁠Harris Administration Proposes Plan to Protect Federal Supply Chain from Climate-Related Risks." https://www.whitehouse.gov/briefing-room/statements-releases/2022/11/10/fact-sheet-biden-harris-administration-proposes-plan-to-protect-federal-supply-chain-from-climate-related-risks/