CDP - what is it?
CDP (Carbon Disclosure Project) is a not-for-profit charity that works to promote transparency and accountability around environmental impact, specifically focused on greenhouse gas emissions.
CDP provides a global system for companies and cities to measure, disclose, manage and share vital environmental information. The organization operates a disclosure platform that enables companies, cities, states and regions to measure and report their environmental impacts, specifically greenhouse gas emissions.
The goal of CDP is to encourage companies and organizations to disclose and reduce their environmental impact, in order to mitigate the risks associated with climate change and to capitalize on opportunities from the transition to a low-carbon economy.
The organization’s work is supported by investors, companies, and governments worldwide and is considered as one of the most important global initiatives for companies to report on their environmental performance, including greenhouse gas emissions
Here's how it all began
CDP (Carbon Disclosure Project) was founded in 2000 by a group of investors concerned about the risks and opportunities associated with climate change. The organization was established with the goal of encouraging companies to disclose their greenhouse gas emissions and other environmental impacts in order to mitigate the risks associated with climate change and to capitalize on opportunities from the transition to a low-carbon economy.
The idea behind CDP was to create a standardized system for measuring and reporting greenhouse gas emissions that would allow investors to compare the environmental performance of different companies.
The organization’s founders believed that by providing investors with this information, they could encourage companies to reduce their environmental impact and promote more sustainable business practices.
In the beginning, CDP focused primarily on measuring and reporting greenhouse gas emissions, but over time it has expanded its focus to include other environmental impacts, such as water use and deforestation.
It works with companies and cities worldwide to disclose their environmental impact, including their greenhouse gas emissions, and to set targets for reducing their environmental impact.
CDP also works with investors, companies, and governments to promote greater transparency and accountability around environmental performance.
The motive is to encourage companies to disclose their greenhouse gas emissions helped establish it as a leading global initiative for companies to report on their environmental performance.
It is now widely recognized as one of the most important global initiatives for companies to report on their environmental performance and its database is widely used by investors, companies, and governments worldwide.
CDP is a standard or framework?
The Carbon Disclosure Project (CDP) is both a standard and a framework.
CDP is a standard in the sense that it provides a standardized questionnaire that companies can use to disclose their greenhouse gas (GHG) emissions and climate change strategies. The questionnaire is designed to provide a consistent and comparable set of data on a company’s environmental performance, including emissions, energy consumption, and water usage.
CDP is also a framework in the sense that it provides a structured approach for companies to disclose their environmental performance and progress towards sustainability goals.
The questionnaire is divided into different sections that cover different aspects of environmental performance, and it includes a set of guidelines for reporting on key performance indicators (KPIs) such as emissions, energy consumption, and water usage.
Additionally, it provide a rating system on the basis of their report and performance, which provide a benchmark for companies to improve their performance and achieve higher rating in future.
Overall, it is both a standard and a framework, providing a standardized questionnaire for disclosing environmental performance and a structured approach for reporting on sustainability goals.
Areas of Disclosures
Steps involved in reporting with CDP
The steps involved in reporting with CDP are as follows:
Register with CDP: In order to participate in CDP, companies must first register with the organization. During registration, companies will provide basic information about their operations, including their primary business activities, number of employees, and greenhouse gas emissions.
Complete the CDP questionnaire: After registering, companies will be required to complete a CDP questionnaire, which is designed to collect detailed information about their environmental performance, including their greenhouse gas emissions, water use, and energy use. The questionnaire is divided into several sections, each focused on a different aspect of environmental performance.
Collect and analyze data: In order to complete the CDP questionnaire, companies will need to collect and analyze data on their environmental performance. This may involve gathering data from internal systems, such as energy and water meters, and analyzing it to determine emissions and consumption.
Submit the report: Once the questionnaire is completed, companies will submit their report to CDP. Reports are typically due in the fall of each year.
Review and verification: After submitting the report, CDP will review it for completeness and accuracy. Depending on the company’s size and sector, CDP may also conduct an independent verification of the data.
Get the score and Feedback: After the review, CDP will assign a score to the company based on their environmental performance and provide feedback on areas for improvement. The score is based on the answers provided in the questionnaire and also includes the level of assurance provided by the company.
Communicate the results: Companies can use the score and feedback provided by CDP to communicate their environmental performance to stakeholders, such as investors, customers, and regulators.
Continual improvement: CDP encourages companies to use the information provided to identify areas for improvement and to set targets for reducing their environmental impact.
By participating in CDP, companies can access tools, resources, and guidance to improve their environmental performance and communicate it to stakeholders, as well as have an opportunity to be recognized for the efforts made towards sustainability.
Standards aligned with CDP
There are several standards that are aligned with CDP, including:
The Global Reporting Initiative (GRI): GRI is a leading organization that provides a framework for sustainability reporting. It enables companies to report on their environmental, social, and governance performance, and it is widely recognized as the most widely used standard for sustainability reporting. GRI’s framework is widely used by companies worldwide to report on their environmental performance, including greenhouse gas emissions.
The ISO 14001: This is an international standard that provides a framework for environmental management systems. The standard is designed to help companies identify, control, and reduce the environmental impact of their operations. It is widely recognized as the most widely used standard for environmental management.
The TCFD (Task Force on Climate-related Financial Disclosures): The TCFD is a task force established by the Financial Stability Board (FSB) to develop a set of voluntary, consistent climate-related financial disclosures for use by companies in providing information to lenders, insurers, investors, and other stakeholders. The TCFD’s recommendations provide a basis for companies to report on the risks and opportunities associated with climate change and to provide information on the resilience of their business models to a changing climate.
The Energy Savings Opportunity Scheme (ESOS) : This is a mandatory energy assessment scheme for large undertakings in the UK. This is a compliance scheme, which requires companies to carry out energy audits and report to the UK government on their energy use.
The Science Based Targets (SBT) : This is an initiative which helps companies set science-based emissions reduction targets that are in line with the Paris Agreement. This initiative provides companies with a clear, science-based pathway to reduce greenhouse gas emissions in line with the level of decarbonization required to meet the Paris Agreement’s temperature goals.
The Climate Action 100+ : This is an initiative by investors to engage with the world’s largest corporate greenhouse gas emitters to curb emissions, strengthen climate-related financial disclosures and improve governance on climate change.
All of these standards provide companies with frameworks and guidelines for measuring and reporting on their environmental performance and are aligned with CDP in their goal of promoting transparency and accountability around environmental impact, specifically focused on greenhouse gas emissions.
CDP Questionnaire
The CDP contains a set of questions that companies fill out to provide information on their environmental performance, including their greenhouse gas emissions, energy use, water use, and other environmental impacts.
The questionnaire is divided into several sections, each covering a different aspect of environmental performance.
In 2022, the total number of questions has gone up to 130. Since companies can take different paths, no one company will respond to all 130 questions.
The sections of the CDP questionnaire typically include:
-
Company overview and governance: This section includes basic information about the company, such as its name, location, and industry, as well as information about its governance structure and policies related to environmental performance.
-
Emissions: This section includes questions about the company’s greenhouse gas emissions, including its scope 1, 2, and 3 emissions, as well as information about the company’s efforts to reduce its emissions.
-
Energy: This section includes questions about the company’s energy use, including its consumption of fossil fuels, renewable energy, and energy efficiency measures.
-
Water: This section includes questions about the company’s water use, including its water consumption, water efficiency measures, and water stewardship programs.
-
Land use: This section includes questions about the company’s land use, including its deforestation and reforestation efforts.
-
Adaptation: This section includes questions about the company’s efforts to adapt to the impacts of climate change, including its risk management and resilience-building activities.
-
Supply Chain: This section includes questions about the company’s efforts to reduce its environmental impact through its supply chain, including its supplier engagement and sustainability programs.
The CDP questionnaire is updated each year to reflect changes in environmental performance metrics and trends. The questionnaire is designed to be completed online, and companies are given a set amount of time to complete it.
The information provided by companies in the CDP questionnaire is used to calculate a score that ranks each company based on its environmental performance.
The scores are provided to investors and other stakeholders to help them evaluate the environmental performance of different companies and make more informed investment decisions.
Is CDP mandatory?
The Carbon Disclosure Project (CDP) is a voluntary disclosure system. Participation in CDP is not mandatory, and companies can choose to participate or not. However, many companies choose to participate in CDP because it is a widely recognized and respected system for disclosing environmental performance and progress towards sustainability goals.
Participating in CDP allows companies to disclose their greenhouse gas (GHG) emissions and strategies for reducing them through a standardized questionnaire. The questionnaire is divided into different sections that cover different aspects of environmental performance, and it includes a set of guidelines for reporting on key performance indicators (KPIs) such as emissions, energy consumption, and water usage.
In addition, CDP also provides a rating system on the basis of their report and performance which provides a benchmark for companies to improve their performance and achieve higher rating in future.
Overall, CDP is a voluntary disclosure system, but many companies choose to participate because of its reputation and the benefits of increased transparency and disclosure around climate-related risks and opportunities.
High-Quality Mandatory Disclosure: CDP’s vision
One of CDP’s goals is to make high-quality, mandatory disclosure the norm for companies around the world. Vision is to create a world where all companies are transparent about their environmental performance, including their greenhouse gas (GHG) emissions and strategies for reducing them by making high-quality, mandatory disclosure the norm.
CDP hopes to increase the transparency and comparability of environmental performance data, which in turn will help investors and other stakeholders make more informed decisions about the companies they invest in.
They have been working towards this goal by developing a standardized questionnaire that companies can use to disclose their environmental performance, and by providing a rating system that allows companies to benchmark their performance against their peers.
Additionally, CDP collaborates with governments, regulators and other organizations to promote mandatory disclosure on environmental performance.
Overall to make high-quality, mandatory disclosure the norm for companies around the world, in order to increase transparency and comparability of environmental performance data, and ultimately help to create a sustainable future.
Here is why CDP is important?
The Carbon Disclosure Project (CDP) is important for a number of reasons:
Transparency: CDP promotes transparency and disclosure around climate-related risks and opportunities. By providing a standardized questionnaire for companies to disclose their greenhouse gas (GHG) emissions and strategies for reducing them, CDP helps to increase the transparency and comparability of environmental performance data.
Benchmarking: CDP provides a rating system that allows companies to benchmark their performance against their peers. This helps companies to identify areas of improvement, and to set and achieve more ambitious sustainability goals.
Investor Interest: CDP’s data is widely used by investors to assess companies’ climate-related risks and opportunities, and to identify companies that are taking action to reduce their environmental impact.
Government and Regulator: CDP’s data is also used by governments and regulators to develop policies and regulations related to climate change and environmental sustainability.
Climate Change Mitigation: CDP plays a role in reducing carbon emission by encouraging companies to reduce their carbon footprint and to set ambitious target for reducing their carbon emission.
Overall, CDP is important because it promotes transparency and disclosure around climate-related risks and opportunities, provides a benchmarking system to identify areas of improvement, and helps investors and other stakeholders make more informed decisions about the companies they invest in.
Note:
CDP is an important tool for companies to report on their environmental performance and progress towards sustainability goals, specifically on climate change and greenhouse gas (GHG) emissions.
Through its standardized questionnaire, CDP provides a consistent and comparable set of data on a company’s environmental performance and helps to increase transparency and disclosure around climate-related risks and opportunities.
This allows investors and other stakeholders to make more informed decisions about the companies’ performance and progress towards sustainability goals.
