What is the Climate Disclosure Project?

Introduction

Climate change is a growing concern worldwide, and businesses, communities, and economies already feel its impacts. Droughts, storms, heat waves, rising sea levels, melting glaciers, and warming oceans are some ways climate change is wreaking havoc.

The world needs to reduce greenhouse gas emissions by half by 2030 and reach net-zero emissions by mid-century, as outlined by the Paris Climate Agreement, to mitigate the impacts of climate change. However, data from MSCI shows that only 3% of companies have reduced their direct and indirect carbon emissions by an average of 8% or more per year over the last five years. The collective effort of governments, companies, and investors is necessary to achieve the emissions reduction target.

In this blog, we will cover the importance of CDP reporting, how it creates value for businesses and investors, and how to get started with ESG reporting. We will delve into CDP, how it works, and the benefits of reporting through this platform. We will also discuss the challenges businesses face in reporting their ESG data and how sustainability management platforms and ESG consultants can help. Finally, we will touch on the emerging trends in ESG reporting and how companies can stay ahead of the curve in this rapidly evolving field.

What is CDP?

CDP, formerly the Carbon Disclosure Project, is an international non-profit organization based in the UK, Germany, and the US. It helps companies and cities disclose their environmental impact to make environmental reporting and risk management a business norm that drives insights, disclosures, and action toward a sustainable economy.

CDP’s ultimate goal is to help create a climate-safe and water-secure future while removing deforestation and minimizing negative biodiversity impacts. Their mission is to enable businesses, governments, and cities to understand and reduce their environmental impact by measuring and understanding the risks and opportunities of their decisions.

Since its inception in 2002, CDP has grown significantly. In 2020, a record-breaking 9,600+ companies disclosed through CDP, 14% more than the previous year and 70% more than when the Paris Agreement was signed. Over 800 institutional investors support the self-reported data from companies with about $100 trillion in assets. CDP’s database has become the world’s largest and most comprehensive dataset on environmental action.

How do companies report through CDP?

CDP provides three questionnaires on climate change, water security, and forests that companies can use to disclose information about their environmental impact. These questionnaires help companies provide environmental information to their investors, customers, and other stakeholders, including governance and policy, risk and opportunity management, and environmental goals and strategies. Investors and customers may request environmental information from companies via CDP, and these stakeholders use the data to inform decisions and drive action.

The insights gathered by CDP are crucial for incentivizing and tracking global progress toward a zero-carbon, water-secure, and deforestation-free world. Companies can disclose information through CDP’s three corporate questionnaires on climate change, water security, and forests. This helps companies provide environmental information to their investors, customers, and other stakeholders, including governance and policy, risk and opportunity management, and environmental goals and strategies. Investors and customers may request environmental information from companies via CDP, and these stakeholders use the data to inform decisions and drive action.

Why does CDP matter?

CDP reporting can bring several benefits to organizations, investors, and stakeholders. One of the key benefits is the ability to determine whether sustainability strategies are effective, identify areas for improvement, and assess business value. CDP reporting also helps organizations be transparent about their environmental impact, which can boost stakeholder confidence. Additionally, it can help identify cost-saving strategies and opportunities for both businesses and customers and improve employee morale and retention. CDP reporting also prepares organizations for future regulations by aligning with Taskforce on Climate-related Financial Disclosures (TCFD) recommendations. This can help companies stay ahead of regulations and minimize climate risk.

Benefits of CDP reporting

CDP reporting provides a range of benefits for companies. Firstly, by responding to stakeholder requests for data and disclosure, companies can show their seriousness about sustainability and prove their credibility. Additionally, by identifying cost-saving opportunities, companies can reduce operational costs and create value for their customers. Reporting also boosts employee morale, pride, and retention and improves stakeholder confidence. Moreover, CDP reporting helps keep companies up-to-date with emerging sustainability trends and ESG regulations, preparing them for a future with stricter regulations and aligning them with TCFD recommendations.

Getting started with ESG reporting

If your organization is interested in ESG reporting but isn’t sure where to begin, there are a variety of sustainability reporting frameworks to choose from. Identifying the right ones for your organization based on your specific goals and objectives is essential. Additionally, sustainability management platforms can help businesses monitor their environmental impact, reduce waste, and ensure regulatory compliance. ESG consultants can also play a key role in helping organizations develop effective reporting strategies and stay up-to-date on emerging ESG trends and regulations. By leveraging these resources, businesses can more effectively measure their environmental impact, identify opportunities for improvement, and ultimately achieve greater success in their ESG reporting efforts.

ESG materiality assessments

ESG materiality assessments are a way for companies to evaluate their current state of sustainability and outline their future initiatives. By determining the most material issues for their business, companies can identify the areas where they need to focus their ESG efforts to create the most impact. Materiality assessments are essential because they help organizations prioritize ESG issues based on their potential impact on the company’s business strategy, reputation, and stakeholder interests. Companies should involve key stakeholders in the assessment process to extract the maximum strategic value from an ESG materiality assessment, use industry-specific frameworks, and integrate the results into their ESG strategy and reporting. This helps companies identify and address their most material ESG risks and opportunities and enhance their ESG performance over time.

Conclusion & Next Steps

Reporting environmental data through CDP is essential for companies seeking to demonstrate their commitment to sustainability and gain stakeholder confidence. By reporting through CDP, companies can determine the effectiveness of their sustainability strategies, identify cost-saving opportunities, and prepare for a future with stricter environmental regulations. To get started, companies should identify the right sustainability reporting frameworks for their organization and consider partnering with sustainability management platforms or ESG consultants to help develop effective reporting strategies. It is time for companies to take action and report their environmental impact through CDP and other platforms while taking meaningful steps to address climate change and other sustainability issues.

If you want to build a more sustainable future, contact Veritrove to learn how we can help with CDP.

Additional Resources

1. https://www.un.org/en/climatechange/what-is-climate-change
2. https://www.un.org/en/climatechange/science/causes-effects-climate-change
3. https://unfccc.int/process-and-meetings/the-paris-agreement
4. https://www.msci.com/documents/10199/a7a02609-aeef-a6a3-1968-4000f1c8d559
5. https://www.cdp.net/en/
6. https://www.fsb-tcfd.org/
7.