CDP Reporting: Three Things to Know and Five Things to Do NOW!
CDP, formally known as the Carbon Disclosure Project, started in 2000 and over the past 20 years, the non-profit has grown to become the largest global reporting system for environmental impacts. It is used by investors, companies, cities, states and regions.
The CDP disclosure system is currently comprised of three questionnaires that enable companies to disclose their environmental impacts on a) Water Security, b) Forests, and c) Climate Change. 2024 will see the launch of a new questionnaire focused on Plastics impacts.
The CDP global disclosure system is increasingly being leveraged by business, financial markets, and governments. In 2022, over 280 major brands whose annual procurement spend totals $6.4 trillion US dollars, leveraged CDP to request supplier reporting through the system, thus creating a reporting requirement for additional companies, both private and public, that may not have had to report through CDP before.
To help companies of all sizes better understand CDP reporting for 2023, SCS Consulting has narrowed down eight key items that every company should consider.
Three Key Things to Be Aware of About CDP in 2023
1. Climate Transition Planning
The CDP climate questionnaire is increasingly critical to your organization’s work on climate transition planning. Climate risk questions are fully aligned to the Taskforce on Climate Financial Disclosures (TCFD), providing continuity between multiple climate standards.
CDP released a climate transition plan report in February 2023 that provides key insights derived from 2022 CDP disclosing organizations, which is essentially the best global data set to understand where we all are in terms of global action on climate change. One of the biggest insights is a preview as to where CDP climate scoring is headed. CDP determines the level of credibility of an organization’s climate transition planning through analysis of responses to 21 key indicators across 9 sections within their questionnaire. This offers great insight into how to build your organization’s climate roadmap.
According to CDP’s analysis, only 81 companies out of 18,700 reporting in 2022, less than 1%, reported full data to demonstrate a credible climate transition plan. Another 22% disclosed having a 1.5C-aligned plan. Simply put, 78% of reporting organizations have the opportunity to improve their CDP disclosures and scores by developing a 1.5C climate transition plan.
For the 2023 disclosure cycle, SCS Consulting directs clients to focus on the key elements of the climate transition plan. These are the topics that will require increased action towards building credibility into their existing climate transition plan, as well as increased demands to disclose to CDP (and elsewhere) in a transparent manner.
2. CDP Disclosures for SMEs
Small and Medium Enterprises (SMEs) functionally have less capacity and capital to invest in large-scale investments and initiatives, yet because the majority of businesses globally are in fact SMEs, their role and participation towards achieving a Net Zero future cannot be understated.
As such, CDP has recently launched an SME Framework to provide a more standardized set of opportunities, as well as expectations, for (SMEs) to focus their disclosures on a core set of questions that are most relevant to the size of their organization and focused on addressing their operational climate impacts.
The SME framework includes core modules that measure operational emissions, commit to targets, and track progress on action and impact with 4 supporting modules on specific disclosure topics. This framework is currently being piloted and offers a 3-year process for increasing disclosures by SMEs. Click here to learn more about the CDP SME framework.
3. Supply Chain Engagement
Participating CDP members are able to request information of their suppliers through a request to disclose. More and more companies every year are requesting CDP disclosure of their suppliers, and any company that is part of a major supply chain needs to be aware that they may be requested to disclose through CDP at some point in the near future.
Supplier disclosures generally cover a number of reporting questions that relate to a company’s emissions, commodities, or water intensity metrics that:
- Are related to or allocated to a requesting customer,
- Detail the challenges to disclosing that information,
- Detail methods for improving abilities to disclose,
- Include project collaborations that have been implemented due to these requests,
- Include product level intensity metrics, and more.
If your company has been requested to provide supplier disclosure, you can expect to see a Supply Chain section added on to the end of your CDP Climate, Water, or Forests Questionnaire within the CDP portal.
5 Key Things to do NOW to Ensure Successful CDP Reporting in 2023
1. CDP Reporting Support & Planning
CDP reporting is not something to take lightly, especially if you are a supplier being requested by a customer, and it will save you a lot of stress if you start preparing early. Engage with your in-house resources now to set up expectations for each milestone along the CDP timeline. CDP season tends to be a very busy time for sustainability consultants, so if you are looking for reporting support or leadership in your reporting process, we recommend booking your consultants now to ensure you will have the support you need in order to file your disclosure by the July 26, 2023, deadline.
2. Start your GHG Inventories
Make sure your inventory boundaries are aligned with the GHG Protocol standards to eliminate the chance of double counting emissions. If your organization has not yet carried out any GHG inventory, it is recommended to begin your Scope 1 and 2 inventory. Once your organization has tackled its own operational emissions, you will be better prepared for the larger Scope 3 inventory.
Gathering GHG data is the most time-consuming task and can potentially impact other tasks, and we recommend starting this process sooner rather than later. Types of data to gather include:
- Any fuel combustion for mobile vehicles or stationary combustion needed for things like boilers or generators.
- Refrigerant recharge amounts for AC units or industrial refrigerators.
- Utility bills for electricity and gas, and water usage if you are completing a CDP Water Questionnaire.
- Scope 3 emissions (where relevant). There are 15 categories that could be relevant for your operations, and you will need to develop methodology for calculating these emissions. This tends to be very customized to your operations and can be very time consuming.
Following these activities, you can now begin to calculate your emissions. Many companies seek third-party consultants to support carrying out their GHG inventory to ensure that the result is accurate and able to stand up to verification activities. We recommend a close data quality and review process for all in-house inventory work to avoid any necessary future revisions.
3. Gather Company Sustainability Governance Documentation
The third recommended task for CDP reporting success is to gather company sustainability governance documentation. These resources often necessitate collaboration with various departments from procurement to finance to operations.
Important Note: Those leading your company CDP reporting activities should engage early on with internal leadership to understand what your company is willing to disclose and any processes for sign-off and approvals to ensure your ability to meet the CDP July 26th filing deadline.
4. Consider Your Sector Specific Questionnaire Requirements
CDP has additional sector specific questions that are included in your disclosure if you fall within one of the 13 sectors CDP monitors. These include sectors such as biotech/healthcare, food and agriculture, materials, manufacturing, fossil fuels, hospitality, retail and more. If your company falls within any of the sectors listed, your questionnaire will be longer and more labor intensive. We recommend checking out past questionnaires and CDP guidance for your specific sector to help you prepare your disclosure materials accordingly.
5. Get Your Inventory Verified
Assurance verification of your GHG inventories can be a critical component of CDP score improvement. Verification showcases the accuracy of your reporting and point to any potential errors in your calculations.
Inherently your GHG inventory is a complex system. It’s the integration of accounting (i.e. did we put the correct input values into our reporting) and engineering (i.e. did we transform them into GHG emissions appropriately). Because your stakeholders only see the output of the system in your disclosures, it is critical to ensure that the data can be verified as accurate and error-free.
The verification process is aligned with ISO requirements and takes a systematic look at your GHG inventory and samples data throughout your inventory system to evaluate its proper functioning.
If you are considering verifying your GHG inventory, you will want to consider the following factors:
- Verification requires a minimum of 8 weeks. More complex inventories can take longer.
- Peak demand is from February – July with heavy demand immediately before the CDP deadline.
- Transparent documentation of methodology and calculations, knowledgeable staff and timely corrective actions all are factors you can control to improve the efficiency of the process.
- CDP currently allows one verification process to be scored for two disclosure years.
Whether you are starting out on your CDP journey or have years of CDP disclosure experience, understanding the milestones and best practices listed above can help your organization better prepare for a successful CDP disclosure in 2023. Reach out to us if you have any additional questions about CDP reporting or developing your GHG inventory.
If you enjoyed this article, you may be interested in our webinar that further discusses this topic.