What you need to know about CDP

Maikel Fontein
September 19, 2024
6
min read

CDP process of 2024 is very different than previous years. With 2,000 pages, new assessment structure and over 5,500 questions, it’s anything but simple.

With the CDP deadline fast approaching, I know how overwhelming it can feel. (Luckily and a bit unfortunately from CDP due to technical hiccups from their side), the deadline has been pushed from September 18th to October 2nd, which gives you some extra time to catch your breath and get everything organised. If you haven’t started yet, don’t worry—you still have time to put together a solid submission without the last-minute scramble.

To help you out, the team at Passionfruit has pulled together a handy guide just for you. In this blog, I'll walk you through some practical tips to make the process easier, explain why the deadline was delayed, and give you the scoop on the CDP’s 2021-2025 strategy, giving you the insights you need.

What is CDP?

CDP, formerly known as the Carbon Disclosure Project, operates the world's leading environmental disclosure system. It serves as a platform for companies, cities, states, and regions to report their environmental data in a standardized and comparable manner. This data encompasses carbon emissions, water usage, and deforestation risks, providing a comprehensive picture of an organization's environmental footprint. In essence, CDP functions as a bridge between companies and their stakeholders, facilitating informed decision-making and driving sustainable practices.‍

Why is CDP Important?

CDP's significance lies in its ability to catalyze environmental action. The data collected by CDP is leveraged by a vast network of investors, corporations, and policymakers. Over 18,700 companies representing half of global market capitalization disclosed through CDP in 2023, highlighting its widespread influence. Investors use CDP data to assess the environmental risks and opportunities associated with their portfolios, enabling them to make more informed investment decisions. Companies utilize CDP insights to benchmark their performance against peers, identify areas for improvement, and set ambitious sustainability goals. Policymakers rely on CDP data to track progress, inform regulations, and incentivize corporate environmental responsibility.

What are the benefits of CDP?

Risk Management: CDP empowers companies to proactively identify and address environmental risks. By understanding their exposure to climate change, water scarcity, and deforestation, businesses can develop robust risk mitigation strategies and build resilienceni

Benchmarking Performance: CDP provides a framework for continuous improvement. Companies can benchmark their environmental performance against industry leaders and identify opportunities to enhance their sustainability practices.‍

Enhanced Reputation: Transparency and accountability are key to building trust. CDP participation demonstrates a company's commitment to sustainability, boosting its reputation among investors, customers, and other stakeholders.‍

Access to Capital: The financial sector increasingly recognizes the importance of environmental sustainability. Investors are more likely to allocate capital to companies with strong environmental performance, as evidenced by their CDP disclosures.‍

Innovation and Opportunity: CDP can spark innovation by encouraging companies to explore new technologies, processes, and business models that contribute to a sustainable future. This can lead to cost savings, increased efficiency, and new market opportunities.

What are the challenges of the CDP process?

While the benefits of CDP participation are undeniable, companies might encounter certain challenges along the way:

Data Collection and Reporting: Gathering and organising the required data from different parts of the organization and in some cases from downstream suppliers can be a complex undertaking, particularly for companies with dispersed operations or limited resources. Ensuring data accuracy and consistency can also be demanding.‍

Resource Constraints: Smaller companies or those in resource-intensive industries might face difficulties allocating the necessary staff and budget to the CDP process.‍

Evolving Requirements: CDP questionnaires are regularly updated to reflect the latest environmental science and stakeholder expectations. This necessitates ongoing adaptation and learning to ensure compliance.

However, with careful planning, dedicated resources, and a commitment to continuous improvement, these challenges can be successfully navigated. CDP also offers various support mechanisms, including guidance documents, webinars, and workshops, to assist companies in their reporting journey.

How is the 2024 CDP cycle different from years before?

Key Changes in 2024:

  1. Integration of Questionnaires:In 2023, CDP used separate questionnaires for climate change, water security, and forests. In 2024, these have been combined into one integrated Corporate Questionnaire, streamlining the disclosure process and enabling a holistic approach to environmental impacts, risks, and opportunities.
  2. Expanded Themes: New environmental themes like biodiversity and plastics are introduced in the 2024 questionnaire, with all disclosers (except SMEs and public authorities) required to answer basic questions. In 2023, biodiversity questions were limited to climate change respondents, and plastics questions were only presented to water security disclosers.|
  3. Alignment with Reporting Standards: 2024 shows stronger alignment with IFRS S2 (ISSB), TNFD, and ESRS frameworks, supporting organizations in their regulatory compliance journeys. In contrast, the 2023 assessment was aligned mainly with TCFD recommendations.
  4. SME-Specific Questionnaire: In 2024, SMEs now have a dedicated, simplified questionnaire focused on climate change, with fewer questions tailored to their capacity. In 2023, SMEs completed a standard minimum version of the corporate questionnaire.
  5. Scoring Changes: In 2024, while climate change, water, and forest topics will still receive separate scores, biodiversity and plastics will not be scored. In 2023, scoring was based on climate, forests, and water, without integration.
  6. Focus on Deforestation and Conversion-Free Targets: In 2024, CDP has strengthened reporting on deforestation- and conversion-free (DCF) volumes. This represents a stronger emphasis on commodity-driven deforestation reporting.

How is the CDP assessment structured?

The CDP questionnaire is designed to collect comprehensive and comparable environmental data. It is structured into modules that focus on different environmental themes, such as climate change, water security, and forests. Within each module, questions delve into topics like governance, strategy, risk management, emissions, and targets. The questionnaire's depth and breadth, can vary per company and ensure that companies conduct a thorough assessment of their environmental impact and disclose relevant information to stakeholders.

Practical tips for filling out the assessment

Filling out the CDP assessment can be a complex process, but with proper preparation, it can help companies improve transparency and environmental performance. Here are some practical tips for tackling the 2024 CDP questionnaire:

  1. Start Early (although that’s more a tip for next year ;): The 2024 CDP questionnaire has introduced new questions that integrate topics like water, forests, and biodiversity alongside climate change. Begin gathering relevant data as early as possible to ensure timely completion. Companies should familiarize themselves with the updated structure and review past submissions for gaps or improvement areas.
  2. Understand the Framework: The CDP assessment now aligns with the International Sustainability Standards Board (ISSB) framework, making it essential to understand the new climate-related disclosure requirements. This alignment can also streamline reporting across multiple jurisdictions, allowing you to comply with global regulations such as the European Corporate Sustainability Reporting Directive (CSRD).
  3. Focus on Data Quality: Reliable and verified data is crucial for scoring well on the CDP. Invest in technology solutions that help automate carbon accounting and track emissions accurately. This will not only improve your reporting but also reduce auditing costs.
  4. Leverage Supply Chain Engagement: A significant part of the CDP assessment involves scope 3 emissions from your supply chain. Engage suppliers early to collect accurate data and manage your overall carbon footprint. Strong supply chain transparency can also be a competitive advantage when dealing with investors and customers.
  5. Continuous Improvement: CDP scoring provides a pathway for companies to improve their sustainability efforts over time. Companies scoring in the lower bands (D/C) can focus on raising awareness and taking incremental actions, while those in higher bands (B/A) should aim to implement best practices in sustainability management.

CDP Scoring System

CDP employs a rigorous scoring system to evaluate companies' environmental performance and transparency. Scores range from A (leadership) to D- (disclosure), reflecting a company's level of ambition, action, and disclosure. The scoring methodology considers factors such as:

Completeness of Disclosure: Companies are evaluated on the comprehensiveness and quality of their environmental data reporting.

Awareness and Management: CDP assesses companies' understanding of environmental risks and opportunities, as well as their strategies for managing them.‍

Leadership: Companies that demonstrate best practices, innovation, and ambition in their environmental efforts receive higher scores.

Improving a company's CDP score over time signifies its commitment to continuous improvement and can lead to increased recognition, investor confidence, and access to capital.

Five-Year Plan: A Roadmap Inspired by CDP's 2021-2026 Strategy

CDP's 2021-2026 strategy outlines an ambitious vision for accelerating environmental action. Let's explore a hypothetical five-year plan for a company engaging with CDP, drawing inspiration from this strategy:

Year 1: Awareness and Commitment: The journey begins with understanding CDP's requirements and committing to annual disclosure. Companies should gather baseline data, conduct a comprehensive assessment of their environmental performance, and identify key areas for improvement.‍

Year 2: Building a Strong Foundation: Robust data collection and management systems are essential for effective CDP reporting. Companies should establish clear processes for gathering, verifying, and analyzing environmental data. Setting science-based targets aligned with the Paris Agreement's 1.5°C pathway demonstrates commitment to ambitious climate action. Engaging with stakeholders and seeking external support can provide valuable insights and guidance.‍

Year 3: Deepening Engagement and Transparency: Expanding disclosure beyond climate change to include water security and forests reflects a holistic approach to environmental stewardship. Participating in CDP's supply chain program encourages sustainability throughout the value chain. Transparent communication about progress and challenges fosters trust and accountability.‍

Year 4: Driving Accountability and Action: Companies should demonstrate measurable progress towards their environmental targets. CDP insights should be integrated into broader business strategy and decision-making processes. Collaboration with industry peers and participation in initiatives can drive collective action and accelerate change.‍

Year 5: Achieving Leadership and Catalyzing Transformation: Striving for leadership status in CDP rankings showcases a company's commitment to best practices and innovation. Companies can play a vital role in influencing policy and advocating for systemic change towards a sustainable future. The journey of continuous improvement and environmental leadership is ongoing.

Why was the deadline delayed?

The deadline for CDP's (Carbon Disclosure Project) 2024 reporting was delayed to accommodate organizations needing more time to complete their submissions. Initially set for September 18, the deadline has been extended to October 2, 2024, to ensure businesses can provide comprehensive and accurate data on environmental risks and impacts. This extension is part of CDP’s effort to make the reporting process more holistic and aligned with new standards, such as those introduced by the International Sustainability Standards Board (ISSB) and other global frameworks. The new integrated questionnaire combines various environmental themes, making it easier for companies to report on climate change, water security, and deforestation in a single submission.

How Knowledge Automation can help

Knowledge automation platforms like Passionfruit make compliance easier by using machine learning and document integration to automate ESG, Quality, and Food Safety processes. These tools allow sustainability officers to avoid time-consuming manual tasks by automatically generating responses for questionnaires like CDP. Passionfruit taps into your company’s uploaded documents—policies, previous reports, or sustainability data—and can even connect with systems like SharePoint or LCA tools to create a centralized knowledge hub.

Book a demo to get started on your CDP assessment.

Conclusion

CDP stands as a powerful force for driving environmental transparency and corporate sustainability. By engaging with CDP, companies can manage risks, enhance performance, and build a strong reputation. The process may present challenges, but the rewards are significant. CDP is not merely about compliance; it's about shaping a future where businesses thrive in harmony with our planet

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Maikel Fontein
September 19, 2024
6
min read

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