What is Carbon Disclosure Project (CDP) Reporting?

What is CDP reporting?

CDP reporting refers to the process where organisations disclose their environmental impact through the Carbon Disclosure Project (CDP), a global non-profit organisation. CDP collects and scores data from businesses, governments, and investors on how they manage environmental risks, including carbon emissions, water usage, and deforestation.

The process involves submitting detailed information through CDP's questionnaires, which cover areas like greenhouse gas emissions, climate change mitigation efforts, and environmental strategies. CDP scores organisations based on factors like data quality, transparency, and alignment with environmental frameworks. The goal is to improve environmental transparency and drive sustainable practices while helping stakeholders make informed decisions.

Why is CDP Reporting Important?

CDP reporting is important because it promotes environmental transparency and drives meaningful action against climate change. Here's why it matters:

1. Improves Environmental Accountability:

By disclosing environmental data, organisations gain a clear understanding of their environmental impact, including carbon emissions and resource usage, which helps them identify areas for improvement.

2. Supports Climate Change Mitigation:

CDP reporting encourages businesses to adopt more sustainable practices, set emission reduction targets, and contribute to global efforts to combat climate change.

3. Enhances Investor Confidence:

Investors increasingly prioritise sustainability. CDP ratings allow businesses to demonstrate their commitment to environmental, social, and governance (ESG) principles, making them more attractive to environmentally conscious investors.

4. Prepares for Regulatory Changes:

As environmental regulations tighten, CDP reporting helps businesses stay ahead of compliance requirements by understanding and addressing their carbon footprint proactively.

5. Boosts Brand Reputation:

Transparency in environmental practices enhances a company’s image, appealing to consumers and stakeholders who prioritise sustainability in their decisions.

CDP reporting plays a vital role in aligning corporate strategies with environmental stewardship, ensuring long-term resilience and relevance in a sustainability-driven economy.

The CDP Reporting Process: How Does it Work?

The CDP reporting process involves a structured approach where organisations disclose their environmental impact and sustainability efforts. Here's a breakdown of how it works:

1. Initial Disclosure

Questionnaires:

• CDP releases its annual questionnaires in January, covering topics like climate change, water security, and deforestation.

Voluntary or Requested Submission:

• Organisations can voluntarily disclose their data or respond to a direct request from CDP.

Preparation:

• Companies gather relevant data and metrics, ensuring alignment with CDP's reporting requirements.

2. Reporting to CDP

Submission Portal:

• All disclosures are submitted through CDP’s online platform.

Scope of Reporting:

• Organisations provide data on greenhouse gas (GHG) emissions (scope 1, 2, and 3), resource usage, and sustainability practices.

Integration with Frameworks:

• Reporting often aligns with other frameworks like Science-Based Targets (SBT) or the Global Reporting Initiative (GRI).

3. Assessment

Criteria Review:

• CDP evaluates submissions based on several criteria, including:

  • Adherence to GHG emission targets (scope 1, 2, and 3).

  • Verification and accuracy of data provided.

  • Ambition of climate mitigation and adaptation strategies.

Comparative Benchmarks:

• Submissions are assessed against industry peers and global standards.

4. Scoring

Rating Categories:

• CDP scores organisations across four key categories:

  • Leadership: Excellence in climate strategy and execution.

  • Management: Active management of environmental risks and opportunities.

  • Awareness: Understanding and monitoring of environmental impact.

  • Disclosure: Transparency and quality of disclosed information.

Final Scores:

• Scores range from A (Leadership) to F (Failure to disclose).

5. Carbon Disclosure Rating

• Final Outcome: Organisations receive a Carbon Disclosure Rating summarising their environmental performance and readiness.

• Strategic Insights: Businesses use these ratings to influence ESG strategies, improve practices, and position themselves as leaders in sustainability.

This process not only helps organisations understand and manage their environmental footprint but also provides a platform to communicate their efforts to stakeholders, investors, and the public.

Benefits of CDP Reporting for Businesses

CDP benefits businesses by providing a clear rating regarding their carbon emission reporting status. We explore the advantages of CDP reporting, both for the organisation reporting and potential new business connections.

Boosting Investor Confidence

Many businesses are now operating under what’s known as a carbon-conscious method. This means that they are assessing their carbon footprint by taking into account how the environmental behaviour of their supply chain and investments might be impacting their carbon footprint. Carbon Disclosure Ratings allow organisations to be completely transparent about their ESG activities, allowing investors or potential business connections to make informed decisions about whether or not to do business with your organisation.

Ensuring Compliance with Regulations

Carbon reduction targets are approaching, with new policies and targets always on the horizon. Many new regulations and initiatives will mandate carbon disclosure in the future, so to avoid heavy penalties, it makes sense to monitor carbon emissions now and to make changes in advance of impending targets. Reporting to a body like the CPD will allow businesses to know their current compliance and prepare them for future changes.

Enhancing Brand Reputation

Consumers are utilising purchasing power to buy from companies they believe to be attractive from a sustainability perspective, which makes the companies that consumers choose to spend their money with more appealing to potential investors. Organisations can use reporting to clarify their ESG initiatives, which improves brand reputation. This, in turn, can mean more consumers are attracted to their transparency, as consumers can see directly where their spending is going and how it impacts the environment around them.

How to Improve Your CDP Score?

Our top tips on optimising your environmental reporting:

Achieving Better CDP Rankings

Understanding is the key to good reporting - if you gain insight into the questions that are being asked as part of the CPD questionnaire, you have the potential to improve your company’s CPD rating. Be specific about the data you supply and always make sure you hit the required scoring criteria.

Enhancing Sustainability Performance

Invest in the tools that will allow you to implement the learnings and advice gathered as part of your final CPD rating, train the business to use them, and understand the recommendations. It’s difficult to impact meaningful change from a sustainability perspective if your organisation as a whole does not comprehend the data or generally understand why reducing carbon emissions is important to the organisation’s success.

CDP Reporting vs. Other ESG Frameworks

CDP reporting and other ESG (Environmental, Social, and Governance) frameworks serve complementary roles in sustainability reporting. Here's a comparison to understand how CDP stands out and aligns with others:

1. Focus Areas

CDP Reporting:

• Primarily focuses on environmental aspects such as climate change, water security, and deforestation. It emphasises carbon disclosure and environmental risk management.

Other ESG Frameworks:

• GRI (Global Reporting Initiative): Covers a broad range of sustainability impacts, including environmental, social, and economic factors.

• SASB (Sustainability Accounting Standards Board): Focuses on financial materiality and industry-specific sustainability metrics across all ESG pillars.

• TCFD (Task Force on Climate-related Financial Disclosures): Concentrates on climate-related financial risks and opportunities, often complementary to CDP.

2. Audience

CDP Reporting:

• Targets a wide range of stakeholders, including investors, businesses, and policymakers, with a strong focus on environmental transparency.

Other ESG Frameworks:

• GRI: Designed for general stakeholders like NGOs, governments, and consumers.

• SASB: Primarily aimed at investors and financial markets.

• TCFD: Specifically geared toward investors, banks, and insurers.

3. Reporting Structure

CDP Reporting:

• Uses questionnaires tailored to specific environmental categories, such as climate change, water, and forests. It scores submissions to encourage accountability and improvement.

Other ESG Frameworks:

• GRI: Offers a flexible, standardised reporting framework for all ESG aspects.

• SASB: Focuses on concise, industry-specific standards for material ESG issues.

• TCFD: Provides a framework for assessing climate-related risks and integrating them into financial disclosures.

4. Scoring and Outcomes

CDP Reporting:

• Produces a Carbon Disclosure Rating (A to F) based on data quality, transparency, and environmental performance, helping organisations benchmark against peers.

Other ESG Frameworks:

• GRI: Does not score but provides guidelines for comprehensive ESG reporting.

• SASB: Does not issue scores; focuses on presenting material data for financial stakeholders.

• TCFD: No scoring; emphasises qualitative integration of climate risks into financial statements.

5. Use Cases

CDP Reporting:

• Best suited for companies seeking to demonstrate environmental leadership, manage carbon risks, and attract sustainability-focused investors.

Other ESG Frameworks:

• GRI: Ideal for broad sustainability disclosures across diverse stakeholder groups.

• SASB: Preferred by organisations focused on investor communication and financial materiality.

• TCFD: Crucial for companies addressing climate risks in financial strategies.

While CDP reporting is highly focused on environmental transparency and carbon-related impacts, other ESG frameworks like GRI, SASB, and TCFD provide broader or more specialised reporting tools. Organisations often use CDP in conjunction with these frameworks to deliver a holistic view of their sustainability performance.