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CDP Reporting: The Business Case for Companies

Article Overview

The world is in a hurry to decarbonize. 

Extreme weather is spurring political consensus and accelerating the transformation of business practices as companies race to cut their greenhouse gas emissions. 

Ninety percent of global GDP is now committed to net zero emissions by 2050. The European Union has adopted hefty carbon taxes. In the US, the Inflation Reduction Act is directing $370B USD to climate solutions. 

Businesses need to be ready to respond to this shifting global landscape. They increasingly have to answer to investors and customers who want to know precisely how they’re drawing down carbon and mitigating climate risk. 

Reporting to CDP is one of the most important steps you can take to keep up. Below, we cover why CDP disclosures matter — and the benefits, challenges, and best practices for reporting. 

What is CDP Reporting? Why Does it Matter?

CDP, originally known as the Carbon Disclosure Project, runs an international sustainability reporting system that helps investors, companies, and governments manage their environmental footprints. 

In 2023, approximately 23,000+ companies — including some of the largest in the world — submitted reports to the CDP. A growing number of stakeholders now look to the organization for reliable information about corporate carbon footprints and other environmental data.

The nonprofit was established in 2000 by Paul Dickinson (a founding member of Persefoni's Sustainability Advisory Board) and Tessa Tennant, who wanted to empower investors to press for corporate disclosure. 

CDP allows customers and investors to formally ask a company to disclose its environmental data. When a company receives a request through CDP, it can respond by filling out online questionnaires about climate, deforestation, and/or water security. CDP reviews the completed questionnaires and assigns a score based on how the business affects people and the planet, as well as the thoroughness and transparency of its response. CDP then shares the evaluation with the stakeholder(s) who requested the disclosure, along with the reporting business, which has a chance to identify opportunities to improve its impact. 

You don’t have to wait for a CDP request to begin reporting — you can also submit a voluntary disclosure, which helps signal to investors and consumers that you’re committed to environmental action. 

As the world shifts to a low-carbon economy, CDP reporting is becoming a norm. The number of disclosure requests on Climate received by CDP grew by 42% between 2021 and 2022, and that trend will likely continue. Meanwhile, businesses are seeing a push for mandatory reporting on a global, national, and state level. 

cdp graph with number of disclosing companies since 2003

Source: CDP - Companies Scores

Creating a detailed assessment of your company’s carbon inventory can prepare you for investor requests and looming regulations. It can also help you reduce your footprint and ensure you’re leading on climate action rather than falling behind. 

For information about the CDP framework and scoring, you can read our CDP Beginner’s Guide

Why is CDP Reporting Important? 

Over the past two decades, CDP has come to represent the gold standard for environmental reporting. In a report published by the SustAinability Institute by ERM in March 2023, CDP emerged as the top-rated provider according to both corporate and investor respondents, who regarded it as the most valuable. In terms of quality, it secured the first position among corporate respondents and the second position among investor respondents.

Founder Paul Dickinson compares the system to EDGAR, the central database for the US Securities and Exchange Commission. “Assuming you’ve made your disclosure publicly available, it can be seen by the whole financial market,” he explains. 

Enterprises like Bloomberg, STOXX, and Goldman Sachs regularly use information distributed through CDP’s platform. 

The data gives investors valuable insight into which companies are good long-term bets. It also allows them to manage the climate risks within their portfolios and gauge their own carbon footprints. In 2023, the European Investment Bank, Aviva, BlackRock, and New York State Common Retirement Fund were among the hundreds of financial institutions requesting disclosures through CDP. 

The point of this enhanced transparency is to inspire change. 

CDP’s reporting system sparks climate ambition and enables businesses to publicly commit to meaningful action. Over the past two decades, CDP’s influence has become undeniable; the organization works closely with programs like RE100, a corporate renewable energy partnership, and the Science Based Targets Initiative, which aids companies in setting and meeting data-backed emissions goals.

It’s not just investors who rely on the information — it also shapes climate policy and consumer choices. For example, the United Nations Framework Convention on Climate Change (UNFCCC) features CDP data on its Global Climate Action Portal, where it can influence lawmakers to take action.  

Is CDP Reporting Mandatory? 

While CDP disclosure isn’t mandatory, it’s in your best interest to do it. 

The consequences of not reporting can be detrimental. If investors request environmental data and you fail to respond, you receive an “F” score. This score indicates that you “failed” to provide the requested information and does not necessarily reflect your company’s environmental track record. However, CDP will notify requesting authorities that you’ve declined to participate, and anyone will be able to view your score on the CDP website.

You can choose whether or not to make your questionnaire responses public, but all companies that receive disclosure requests from investors are listed on the CDP website, and scores are made widely available whether or not your response is public. 

The Benefits of Reporting to CDP

Sharing data through CDP provides several advantages for businesses — from enhanced reputation to readiness for regulatory compliance. CDP disclosure can help you meet stakeholder expectations, uncover hidden risks and opportunities, and improve your sustainability performance. 

One of the biggest benefits of reporting is that it can quickly elevate your climate efforts. Disclosure signals to consumers that you’re serious about protecting the planet. And because CDP’s process exposes emissions hot spots in a company’s operations and supply chain, it makes it easier to problem-solve and follow through on your climate commitments. 

Reporting to CDP makes good business sense because: 

  1. You can’t manage what you don’t measure. The CDP reporting process requires businesses to reconsider how they track performance and manage risks. If you’re in the early stages of your climate journey, answering CDP’s questions will help you identify gaps and opportunities so you can create a roadmap for effective emissions reductions.
  2. Investors are asking for it. The link between sustainability performance and financial performance is not lost on investors. In 2023, CDP represented 680 investors with assets of more than $136T USD. These investors want to know companies’  greenhouse gas emissions and other environmental impacts — and they trust CDP to provide an accurate assessment. 

CDP also represents customers with purchasing power: More than 280 large purchasers with $6.4T USD in spending have requested disclosures from thousands of companies through CDP

  1. It future-proofs you against growing regulation. An increasing number of regulators and financial institutions are compelling businesses to share their environmental data, following recommendations from the Task Force on Climate-related Financial Disclosure (TCFD). Because CDP’s framework aligns with TCFD guidelines and other disclosure frameworks, reporting helps you get ahead of regulations. 
  2. Disclosure rates are rapidly increasing. The number of disclosures on Climate received by CDP grew by 42% between 2021 and 2022, and that trend is expected to continue. Disclosure is quickly becoming an expected business norm, demanded by regulators, capital markets, and consumers alike. 
  3. It helps you communicate with stakeholders. Reporting enables you to share data with investors and customers and manage expectations about your environmental performance. 
  4. It can save you money. Disclosure frequently leads to increased efficiency in operations. The steps you take to shrink your carbon inventory — like reducing waste generation and energy use — often deliver significant cost savings as well.
  5. It can boost your reputation and competitive advantage. Disclosure sends a signal that you’re genuinely committed to sustainability and transparency. CDP’s framework allows you to benchmark yourself against other businesses and gain a competitive advantage through decisive carbon-cutting measures. 

The Challenges of Reporting to CDP

Businesses responding to CDP disclosure requests — especially for the first time — can face some challenges. Despite the growing number of requests from investors, many companies are still not reporting, or are providing only basic information and therefore earning low scores. In 2021, 58% of reporting companies scored between a C and D-, indicating they are just beginning to recognize their environmental impact. 

The urgency of the climate crisis demands much higher engagement. Though the reporting process is far from easy, it’s worth the time and effort. “Climate leadership is a journey,” Dickinson explains. “You want to be on that journey.” 

Neglecting to address climate not only leads to reputational risk; it also creates material financial risk. A CDP report showed that a group of the world’s biggest companies valued risks to their businesses from climate change at roughly $1T USD. Climate-related opportunities were estimated at $2.1T USD. And environmental transparency correlates with financial success — over the past decade, CDP’s high-scoring “A-List” companies outperformed a reference index by 5.8% per year

To create a quality CDP disclosure report and establish your company as a climate leader, you’ll likely need to overcome several hurdles: 

  1. Data Complexity. Carbon accounting is a dynamic field with rapidly evolving regulations and standards. The calculations required to meet these standards and accurately report emissions are highly complex; they can demand thousands of data points from a company’s operations and supply chain. This is particularly true when it comes to reporting scope 3 emissions because it relies on cooperation and data-sharing with many other organizations. 
  2. Resource Constraints. Gathering and analyzing climate information can tax a company’s budget and staff. Manual carbon calculations eat up employee time — managers often end up passing spreadsheets back and forth, which makes it difficult to ensure accuracy and monitor numbers for quality. 
  3. Capability Gaps. GHG emissions measurement is still a relatively new field, and many teams aren’t fully prepared to manage data gathering and reporting. Often, they resort to augmenting their teams with costly outsourced support.
  4. Lack of Support from Internal Stakeholders. The complexity and resource intensity of CDP reporting can make it tough to cultivate buy-in within an organization. And because reporting requires cooperation from many different teams, this internal support is crucial. 

A sound carbon accounting system can address these challenges and lay the groundwork for a solid CDP score. Using software like Persefoni’s Carbon Management and Accounting Platform (CMAP) allows you to cut through complexity and streamline data collection — including from multiple organizations within a supply chain. It builds confidence in your reporting and expands your in-house capacity, which can make it easier to cultivate internal support.

Preparing for CDP Reporting

Gathering and analyzing climate data takes time, and CDP urges disclosing entities to begin the process well before the reporting deadline. 

It takes an average of 12-18 months to prepare for partial disclosure and two to three years for full disclosure, according to CDP estimates

To help you get started, here are steps to start preparing for CDP reporting:

  1. Understand CDP requirements: Familiarize yourself with the specific CDP questionnaire relevant to your sector or the Climate Change, Water Security, or Forests program. Review the scoring methodology and guidance documents provided by CDP.
  2. Develop an execution plan early: Create a detailed timeline and strategy well in advance of the reporting deadline. Outline key milestones, responsibilities, and deadlines to ensure a smooth and timely completion of the CDP reporting process. A well-structured plan helps manage tasks efficiently and reduces last-minute rush.
  3. Assemble a cross-functional team for data collection: This team should include representatives from sustainability, finance, operations, supply chain, and any other relevant areas. Collaboration among diverse teams ensures comprehensive data collection and insights from different perspectives.
  4. Document policies and actions: Clear documentation of the accounting and reporting process provides visibility to all stakeholders and supports your reporting responses.
  5. Take advantage of software and technology for carbon reporting: Embracing technology can simplify the reporting process and enhance data accuracy and transparency.

CDP Reporting Deadlines

The window to submit responses to the annual CDP Climate Change questionnaire can vary from year to year, so companies are advised to regularly check CDP's website for the most up-to-date reporting timelines for that given year.

For 2024, the response window for companies to submit their disclosure will be from early June 2024 to September 2024. CDP has also announced that, from 2024, it will incorporate the ISSB climate disclosure standard [S2] into its disclosure system.

Best Practices for CDP Reporting

If you’re reporting to CDP for the first time or hoping to raise your score, you can set yourself up for success by creating a detailed plan of action, building internal support, and investing in the right carbon accounting tools. 

One of the best ways to upgrade your submission and boost your score is by voluntarily reporting on scope 3 emissions from your supply chain. These emissions often constitute the bulk of a company’s carbon inventory; on average, they account for 11.4x the direct emissions

CDP has launched a supply chain program to encourage businesses to manage their scope 3 emissions, and the organization is working with more than 280 sustainability leaders on supply chain upgrades. For example, one of CDP’s “A-List” companies, AstraZeneca, has set an ambitious target of halving the footprint of its entire value chain by 2030, which will lead to a projected 90% reduction in emissions by 2045. But they can’t do it alone. AstraZeneca team member Jenny Perrie explains, “We rely on our suppliers’ CDP submissions to gain consistent insight into our scope 3 emissions.” 

When one company discloses, it ignites changes throughout the whole corporate ecosystem. Last year, 16,462 suppliers disclosed supply chain emissions to CDP at the request of their customers. They reported saving 70 million tC02e — equivalent to the annual energy use of 9.8 million homes — due to engagement by members of the supply chain program. 

For a step-by-step guide to measuring, managing, and disclosing emissions, read our Climate Disclosure Starter Guide.

As companies await new US regulations that will mandate GHG emissions reporting, preparing for disclosure through CDP makes even more sense. You can build a strong report and increase your odds of earning a high score by following these best practices:

  • Build a culture of sustainability. Solid reporting relies on collaborative data collection and coordination of efforts across departments. It’s important to get internal buy-in early on. You can encourage stakeholder engagement by demonstrating how disclosure advances business interests and primes a company for regulatory compliance.
  • Turn risk into opportunity. If you want your company to receive a high score from CDP — and benefit from the transition to a low-carbon economy — you’ll need a robust climate action plan. It should include a clear strategy for managing climate-related risks and opportunities in the long run. A plan that features board-level oversight, scenario analysis, financial planning, and policy engagement will be more compelling. 
  • Prioritize suppliers with the biggest emissions. Typically, 20% of suppliers in a value chain account for roughly 80% of the impact. To quickly improve your footprint, focus first on the highest emitters. Doing so will allow you to decarbonize more efficiently. 
  • Define clear and measurable targets. Be as specific as possible when responding to CDP — detailed responses demonstrate your commitment to climate action. To ensure your organization has measurable and realistic goals, you should set a science-based target using the most current data. CDP offers some companies the option of using a shorter reporting questionnaire with its own scoring framework, but Dickinson recommends using the longer, more comprehensive form whenever possible
  • Invest in the right tools. Using the appropriate technology to calculate and track your greenhouse gas inventory will save time and money in the long run. Good carbon accounting software cuts down on the need for staff time and consultants. It also eliminates errors, which means you don’t have to plan for labor-intensive quality control. 

The Role of Technology in CDP Reporting

After more than 20 years of working on climate disclosure, Dickinson says one of his biggest concerns is that companies aren’t using the right tools and technology to track their emissions. 

“We can’t deal with the world’s biggest problem using Excel spreadsheets,” he says. “It’s not the way to run things in the 21st century.” 

Right now, many companies hire expensive consultants to compile their responses to CDP disclosure requests. The problem with that, according to Dickinson, is that organizations become dependent on outside firms, and data is not necessarily widely available and understood within the company. 

“You don’t want to be dependent upon a consultancy firm that will charge you money to keep you carbon-backward,” Dickinson says. “You want to be carbon-forward and build that capacity within your organization.” 

A reliable carbon accounting tool like Persefoni’s can help with the CDP reporting process in several ways: 

  • It makes data calculations and reporting easy. Carbon accounting software streamlines the process of identifying, defining, and collecting business activity data, making carbon accounting approachable for anyone. Persefoni’s platform and team of climate solutions experts give your organization the confidence you need to build accurate, reliable, and audit-ready carbon reports.
  • It increases transparency and consistency. You can analyze data from many different sources to create a comprehensive picture of your carbon inventory, which can be easily shared with stakeholders.  
  • It minimizes errors from manual calculations. Streamlining data collection and formatting leads to fewer mistakes and more time for analysis. Our software ensures that users are well-prepared to pass stringent audit and assurance processes. 
  • It provides a single source of truth. Cloud-based software enables different teams to collaborate using the same reliable data, which improves communication and decision-making and helps your organization become self-sufficient. 
  • It complies with global standards. All calculations on our platform adhere to the Greenhouse Gas Protocol, the global gold standard of carbon accounting, and a framework aligned with CDP. 

As the world speeds toward a low-carbon economy, more and more investors and consumers are coming to expect environmental disclosure through CDP. To earn a high score, you need to submit detailed, accurate information about your greenhouse gas inventory. 

The right carbon accounting software can cut down significantly on the time needed to gather data and prepare these reports. It can also help you build your in-house capacity and accelerate progress on emissions goals. 

Providing a robust report to CDP — with or without a disclosure request — signals a solid commitment to climate action, and is an important step you can take to establish your company as a sustainability leader.  

Learn more about how Persefoni can help you prepare for CDP disclosure.

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