CDP: Everything you need to know about the Carbon Disclosure Project

CDP: Everything you need to know about the Carbon Disclosure Project

The CDP (Carbon Disclosure Project) is an international organization that manages one of the largest environmental databases for companies, cities and states, thanks to its reporting system. The score that the CDP assigns to organizations is now scrutinized by investors and buyers. How does this system work, and how can you improve your score?

Matthieu Duault

Matthieu Duault

Climate Copywriter

Update :
7/12/2023
Publication:
23/10/2023

The CDP, or Carbon Disclosure Project, is an international organization well known to carbon and CSR professionals. It is one of the leading figures in the fight against climate change and in corporate environmental performance reporting.

Operating on a system similar to that of a rating agency, it evaluates thousands of companies, cities and regions according to their level of transparency on environmental data and their commitment to reducing their carbon footprint and, more globally, their impact on the climate, water resources and deforestation.

It also supports all these organizations in their ecological transition by providing them with the keys to implementing a sustainable and effective development strategy.

What is the Carbon Disclosure Project (CDP)?

The CDP, formerly known as the Carbon Disclosure Project, is a non-profit organization created in 2000 in the UK, sharing the same philosophy as the GRI. It currently holds the world's largest database of corporate and city environmental reporting, whereas GRI focuses on governments and international organizations.

It is officially present, or has partners, in over 50 countries worldwide. For its European activities, it is headquartered in Berlin, but is also present in London, Brussels and Stockholm.

The CDP enables companies and institutions to publicly disclose information on their environmental performance. More than 18,700 companies worldwide, including 5,800 in Europe, currently report to CDP on their environmental impacts and their involvement in climate change, water security and forest preservation.

This is also the case for over 1,100 cities, states and regions, including 150 in Europe.

CDP's reporting is based on questionnaires completed each year by volunteer companies, cities, regions and states. These reports have evolved over time and currently cover 3 main areas of expertise: climate, water resources and forests.

  • 2003: CDP begins collecting data on companies' GHG emissions
  • 2010: CDP broadens its spectrum of analysis by adding information related to water resource management. It also completes its GHG survey with the addition of an "Oil and Gas" module.
  • 2013: CDP continues to broaden the range of topics covered by its surveys, adding a new analysis of the impact of companies on deforestation.
  • 2016: CDP changes its rating system, using the "Level of Engagement Score" instead of the "Climate Performance band" and the "Climate Disclosure Score".

A data collection campaign is launched each year with the distribution of questionnaires. It feeds the CDP database. This database is used mainly by 2 types of organization:

  • Investors: CDP provides financial market players with information on companies and their level of involvement in environmental issues. To date, the CDP has been called upon by 746 financial players managing a portfolio of assets estimated at over $136 billion.
  • Buyers: companies use the CDP reporting database to find out more about their suppliers. Today, more than 280 buyers, representing a combined purchasing power of $6.4 billion, have asked their suppliers to carry out CDP reporting.

CDP Intervention Sectors

As mentioned above, CDP reports currently focus on three main themes: climate change, water resources and deforestation.

Climate change

CDP's landmark analysis of the impact of companies on the climate is carried out from a number of angles, the most important of which is corporate greenhouse gas emissions.

The questionnaire sent to companies, the most comprehensive of the three, looks at corporate governance issues, their methodologies for accounting for greenhouse gas emissions, the types and quantities of energy consumed in their activities, the actions taken to reduce their carbon impact...

Sectors considered to be the highest emitters must also answer additional sector-specific questions.

Water resources

With the water crisis accelerating year on year, due to our consumption patterns and rhythms and the direct effects of climate change, the CDP has decided to include a survey on these issues in its annual reports from 2010 onwards.

It points out that only 1.2% of the planet's water is usable by humans, and that according to the United Nations, water supplies are likely to fall by 40% by 2030.

The CDP's mission is therefore not only to take an interest in the sectors that consume the most water, but also to propose alternatives and support them in changing their production methods.

Deforestation

The survey on the impact of companies on forests was launched in 2013 by the CDP. Considering the crucial role of forest ecosystems in the natural balance (regulation of carbon emissions, biodiversity, water supply), the CDP decided to analyze the impact of companies on forests and their dependence on these ecosystems.

Today, the main cause of deforestation is agriculture, with the transformation of forest land into farmland. It is therefore logical that the CDP first turned its attention to these sectors, focusing on a few key agricultural products that are the main culprits of deforestation.
They then extended this analysis to all ecosystems and will shortly be publishing reports on the impact of companies on these ecosystems and their initiatives to restore them or at least reduce this impact.

How does the CDP work?

Each year, the CDP makes new questionnaires available for companies to complete online. Once completed, these questionnaires are evaluated by partners trained by the Carbon Disclosure Project.

Companies are not obliged to answer all three questionnaires. They can answer any of them, depending on their sector of activity or the demands of their investors or customers.

As part of the climate change questionnaire, the CDP has set up a classification system, the CDP-ACS, to categorize companies according to their sector of activity, and thus assign them the sectoral questionnaires best suited to their profile. The aim of this sector-based approach is to identify the main activities of each structure, in order to gain a better understanding of the risks and opportunities they face, and their potential environmental impact.

The CDP-ACS is a three-tier classification focusing on the business sector, then the business group and finally the specific activity. For a company to be subject to a sector-specific questionnaire, the activity concerned must represent at least 20% of its revenues.

The generic climate change questionnaire consists of 15 modules:

  • Governance
  • Risks and opportunities
  • Corporate strategy
  • Objectives and performance
  • Collection methodology
  • Carbon data
  • Energy
  • Additional data
  • Check
  • Carbon price
  • Commitments
  • Biodiversity

Companies will then be evaluated on the basis of the answers given in these questionnaires. The sector-specific questionnaires are primarily designed to take account of the subtleties inherent in certain business sectors during this evaluation.

The reports can then be distributed publicly, or kept confidential and distributed to stakeholders on explicit request.

CDP score: different performance levels

At the end of their evaluation, companies will receive a grade ranging from A to D to assess their environmental performance and their level of commitment to a strategy of reducing their environmental impact.

A final rating, F, includes structures that have not provided sufficient environmental information (in terms of quantity or quality of data) to establish a performance rating.

A - Leadership: Organizations demonstrate transparency in reporting on climate change, deforestation and/or water management. They have already demonstrated good practice and have put in place a strategy to reduce their environmental impact with clear science-based targets (SBTi) and a related action plan across their operations and value chains.

B - Management : Organizations have taken into account the impact of their activity on the environment and have put in place an initial strategy and/or initiatives to reduce it. However, they do not have clear or sufficiently ambitious objectives to be considered leaders.

C - Knowledge: Organizations have become aware of the impact of their activities on climate change, deforestation and/or water resources, but have not yet integrated it into their corporate strategy.

D - Disclosure: Organizations demonstrate transparency by disclosing their activity data and environmental impact, but have not taken any concrete action or initiated any steps other than responding to the CDP questionnaire.

 

For a company to receive an A rating, it must at least achieve this level in one of the three questionnaires. In 2022, more than 330 companies, 147 of them European, were rated A by the CDPA rating, out of a total of over 15,000 respondents. The high proportion of European companies in these results also rewards the European Union's efforts in terms of environmental policy.

Why is CDP essential for companies?

The CDP is an organization renowned for its seriousness and whose expertise is now recognized internationally. Its score influences many players, and achieving the highest level represents the Holy Grail for companies that submit to its annual questionnaires. A high score means more contracts signed with customers and better relations with potential investors.

Anticipating regulatory constraints

Responding to CDP surveys enables companies to comply with the new green regulations that are spreading throughout the world. It also enables companies to anticipate the tightening of these regulations, not only by better preparing their reporting, but also by taking structural action on their business model and production methods to reduce their impact on the environment over the long term, while at the same time rethinking their relationships with the various players in their value chain.

For example, today it's hard not to see a link between the new European CSRD regulations and the way CDP surveys work. There are bound to be synergies in the environmental data collection processes and actions to be implemented. CDP scoring and CSRD reporting share common objectives, such as the financial attractiveness of environmentally virtuous companies and the need for transparency.

Strengthening its financial appeal

One of the main aims of companies responding to CDP surveys is to increase their financial attractiveness. More and more investors are scrutinizing companies' CDP scores in advance of their investment strategies. It has even become a "must-have" for many of them.

The CDP has also made available to investors a tool, Climetrics, enabling them to identify the funds that best support virtuous companies in terms of transparency of information and environmental impact.

Climetrics assigns a score from 1 to 5 to investment funds based on their environmental performance. The tool evaluates thousands of companies according to their impact, and then assigns scores to funds based on the weighted average of their positions.

Following the example of the European Green Deal, which aims, via the SFDR and green taxonomy, to redirect investments towards companies actively contributing to the goal of net zero by 2050, the CDP provides financial players with the information they need to make informed decisions as part of their investment strategy. Companies wishing to benefit from these investments therefore have every interest in demonstrating transparency and taking action to reduce their CO2 emissions and environmental impact.

Improve your brand image

Last but not least, it enhances a company's brand image. Corporate transparency and consideration for CSR issues, and climate change in particular, are increasingly scrutinized by the company's various stakeholders: customers, consumers, buyers, investors...

It's also an opportunity for the company to highlight its efforts to control and reduce its environmental impact.

Finally, beyond the CDP scores requested directly by its stakeholders, it is also an opportunity for the company to attract new customers and investors by communicating its commitments.

How can I improve my CDP Score?

Many companies embark on their CDP survey with trepidation, afraid of the possibility of obtaining a rather low score and the negative consequences this could have on their business. Others simply prefer to dispense with it when they have the opportunity to do so.

The first thing you need to tell yourself is that,with the tightening of environmental regulations, it's highly likely that this is an exercise you'll have to go through in the near future anyway, whether as part of the CDP or another such as the CSRD.

Secondly, taking part in CDP surveys will, in all cases, highlight your transparency. A quality highly valued by investors. It's also an opportunity to benefit from CDP's advice and support, to help you embark on a genuine policy of ecological transition.

Finally, don't forget that your CDP score also depends on the transparency of your approach. Providing complete, high-quality data will already have an impact on your score. There are a number of methods you can use to simplify the questionnaire exercise and improve your CDP score.

Carbon footprint

The climate change questionnaire is the most comprehensive and complex of the CDP's three generic questionnaires.

By carrying out a carbon audit, you'll already have the key data you need to answer many of the environmental questions in this Carbon Disclosure Project questionnaire. The more complete your carbon footprint, i.e. covering scopes 1, 2 and 3, and the better its quality, with a physical rather than a monetary approach, the higher your CDP score will be. While the quantities of GHG emissions are taken into account, the company's methodology and commitment are also important criteria.

Following an SBTi approach

Carrying out a carbon assessment is the first step. The next step is to set targets for reducing your greenhouse gas emissions, and to draw up an action plan within a timeframe defined in advance.

The CDP is a partner in the SBT (Science-Based Target) initiative, which aims to put in place a decarbonization plan for companies that is compatible with science, the Science Based Target Initiative, and aligned with the objectives set by the Paris Agreements. This recognized and highly valued method enables companies to demonstrate their commitment to substantially reducing global GHG emissions.

Efficiently manage your data collection

Data collection is a complex task. The data required to complete the CDP questionnaires may be difficult to access, depending on your structure, sector, organization, etc., is scattered throughout your value chain and exists in a wide variety of formats, with widely varying levels of quality.

The task of collecting data therefore requires the involvement of all the players in your company, and must be led by a dedicated person within your company who will centralize the information and monitor your action plan. This is usually the role of a CSR manager.

Relying on a dedicated tool is often the best solution. It will enable you to simplify data collection from the various stakeholders, process the data and put in place an impact reduction plan that takes into account the many variables involved.

To help you in this task, the CDP has a list of solutions it has accredited to support you in your ecological transition.

What is a CDP-accredited solution?

The CDP has identified and accredited a list of solution and service providers able to support companies participating in their surveys in their ecological transition plan: calculation of carbon footprint, implementation of emission reduction actions...

The aim is to enable these companies to benefit from the best possible support to carry out a quality analysis of their environmental impact, and to initiate actions that will enable them to take substantial action on this impact.

To join this list of suppliers, various criteria are taken into account, including certain safety requirements. The supplier must also collect 6 customer testimonials, including at least 3 large companies and 3 companies already responding annually to CDP questionnaires.

These companies must then provide the CDP with information on the type of service provided, its quality, value for money, ROI and, finally, its level of recommendation.

Traace is on the CDP list of accredited suppliers in 6 categories:

  • Greenhouse Gas Emissions Inventory
  • Data Collection & Software Services
  • Environmental Target Setting
  • Scenario Analysis - Analyse de scénarios
  • Scope 3 Services - Services related to Scope 3 emissions
  • Sustainability communication - Communication sur le développement durable

Conclusion

Taking part in CDP surveys may be time-consuming, but it offers many advantages. The growing interest in CDP scores among investors and buyers means that you'll have to take part at some point as you grow. So it's better to prepare for it and anticipate it, rather than just responding to it.

European companies have an advantage in this race. The regulations put in place under the European Green Deal, in particular the CSRD, already oblige thousands of companies to carry out a carbon footprint and an analysis of the environmental impact of their activities. As a result, they already have most of the data they need to complete the CDP questionnaires, and are now in a favorable position to implement an ecological transition strategy.

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