Last update on November 09, 2023
In a nutshell:
- CDP is an environmental impact disclosure platform where companies can report their practices, compare their status with other companies and create actionable goals
- CDP disclosures are done through online questionnaires with three main topics: climate change, forests and water security (the topics are gradually expanding according to CDP’s 5 year plan)
- CDP aligns with other international standards like GRI, TCFD, ISSB, EU Taxonomy, and the CSRD
As a European company, the pressure is on, if you haven’t already started reporting on sustainability. As new laws, regulations, and standards are coming into force in the EU, such as the Corporate Sustainability Reporting Directive (CSRD), your company will be required to report extensively on your sustainability efforts, including both past performance and future goals.
While the CSRD creates a new set of requirements in an attempt to standardize sustainability reporting across companies in the EU, many companies are likely already using existing sustainability frameworks to disclose sustainability-related information to their stakeholders. One common framework is CDP, to which 18,700 companies around the world disclosed environmental information in 2022. CDP’s platform offers a place for companies, cities, and public authorities to disclose their environmental impact, and in return, receive a verified sustainability score.
This blog article will take you through the basics of CDP reporting, and how you can optimize your reporting practices through the use of automated systems, thus doubling your efficiency when it comes to the new implementation of EU laws and regulations like CSRD.
The Scope and Mission of CDP
CDP, originally called the Carbon Disclosure Project, was established in the UK in 2000 as a platform where companies could disclose their carbon footprint. It has since expanded its scope to include disclosures not only on climate impact, but also on forests and water security.
The CDP process can be broken down into three steps: disclosure, insight and action. Companies, cities, public authorities, and states and regions are encouraged to disclose their environmental impacts. With this information, performance can be compared against that of their peers and further evaluated by investors, cities, policymakers, and other companies. Based on these insights, CDP uses campaigns to facilitate and advance meaningful action, tackling issues related to climate change.
Through these three steps, CDP promotes its mission to encourage companies and cities to disclose their environmental data, thus furthering transparency and accountability with regards to sustainable practices, aiding in the creation of a more sustainable future.
The Process of Disclosing as a Company
CDP is a voluntary reporting framework, to which any organization, regardless of size or industry, is invited to disclose. Companies report to CDP by responding to questionnaires through CDP’s Online Response System (ORS). The portal for corporate disclosure opens each year in April, although CDP makes the questionnaires public on their guidance page in advance to the opening date and recommends businesses start preparing their responses prior to the portal’s opening. The deadline to submit your questionnaires is in July to receive a score, or September without a score.
Reported data is then made publicly available through the CDP's database, allowing investors, customers, and the general public to access and analyze the information. Companies who submit by the July deadline will receive their CDP score which can range from D (lowest) to A (highest).
The Questionnaire
When a company is requested or chooses to complete the CDP questionnaire(s), they are able to access and download the questionnaire as a PDF even in advance to the official portal opening date from the CDP website. These PDFs are often over 100 pages, and thus begins the preparation process, which takes the bulk of a company’s time.
CDP offers three questionnaires, all of which are made available to the public:
- 2023 climate change questionnaire;
- 2023 forests questionnaire;
- 2023 water security questionnaire.
Not every company must answer all three questionnaires, depending on their size, location and investor needs.
To prepare for the questionnaire, you typically need to gather data from various departments such as quality control, human resources, finance, etc., requiring extensive collaboration and coordination within your company. CDP also requires you to review and reflect on your existing initiatives, targets and policies, and create future goals for improvement, ensuring you are aligned with global standards.
The length of the questionnaire can vary depending on your response to particular questions. For example, there could be a sequence of follow-up questions, after you answered “yes”. The questions can ask for both quantitative and qualitative data. Ultimately, the more advanced you are in your sustainability journey, the longer and more extensive your questionnaire is likely to become.
Thus, advanced preparation and having an efficient response system in place is helpful to completing your yearly CDP questionnaire(s).
CDP’s Disclosure Topics: Upcoming Changes to Expect
In 2021, CDP launched a five year strategy to expand their disclosure topics to cover all planetary boundaries, such as biodiversity, plastics and oceans, recognizing the interconnectedness of nature and earth’s systems, and more.
CDP also wishes to enhance the involvement and role of stakeholders in the reporting and analysis process, as well as place a stronger emphasis on the formation of future targets and actionable tasks.
While all CDP questionnaires have a main focus on environmental issues, they are increasingly including linkages to social and governance issues.
CDP’s Alignment with International Standards and Frameworks
CDP aims to adopt, align, or integrate with impactful, high quality international sustainability disclosure standards. This includes existing standards and recommendations, like GRI (Global Reporting Initiative), TCFD (Task Force on Climate-Related Financial Disclosures), ISSB (International Sustainability Standards Board), and EU Taxonomy, in addition to newer, upcoming standards and frameworks like the CSRD’s ESRS.
Basing their responses with these frameworks allows companies to apply the requirements and comply with the regulations through data collection, analysis, and reporting.
CDP and ESRS
👉 CDP aims to align with CSRD’s ESRS and announced on 31 July 2023 that many companies who disclose to CDP are well prepared to comply with the ESRS, as they already disclose on elements regarding relevant reporting topics. According to CDP, 55% of disclosing companies have a process in place to assess climate risks and opportunities. Data from the CDP disclosures is applied by policymakers, financial institutions, and companies around the globe to assess environmental progress.
CDP currently covers three main focus areas: climate change, forests, and water. These topics align with the topics of the CSRD EU Sustainability Reporting Standards (ESRS), which will become active from January 2024, and build upon other existing standards like GRI.
Similar to CDP’s three main disclosure areas, the ESRS have created reporting standards on five environmental topics: climate change, pollution, water and marine resources, biodiversity and ecosystems, and resource use and circular economy.
On 8 November 2023 CDP announced its collaboration with EFRAG to ensure that companies can prepare for their sustainability reporting on environmental topics based on Environmental ESRS through their CDP disclosures.
CDP and GRI
👉 CDP writes their questionnaires in alignment with GRI Sustainability Reporting Standards to avoid duplication and ease the burden on companies who report to both CDP and GRI.
CDP and EU Taxonomy
👉 CDP integrated best practice sustainable EU taxonomy criteria into its 2023 Climate Change Questionnaire and scoring, thus encouraging the practical application of sustainable finance through yearly disclosures.
CDP and TCFD
👉 In 2018, CDP redesigned their climate change questionnaire to align with the TCFD recommendations.
CDP and ISSB
👉 CDP plans to incorporate the ISSB climate-related disclosure standard into its global environmental disclosure platform from 2024 to ensure a rapid early adoption of the global baseline standard for sustainability-related financial information.
Building a Universal System for Responding to Various Sustainability Requests
With new EU sustainability legislation and standards in addition to existing disclosure platforms like CDP, responding to all sustainability requests each year becomes a huge project which is difficult to tackle. With many new legal requirements to adhere to in the coming years, it will be difficult to keep up with your sustainability disclosures. Implementing a system where your overlap in data collection, tracking and reporting can be completed in an automated fashion may help you overcome this challenge.
Sustainability initiatives request central ESG information, and promote transparency for the benefit of interested parties. All of the standards and frameworks presented above require companies to consistently collect data, track metrics, and, in turn, report on their progress. Good news: With a data collection system already in place for CDP, you are on track to start reporting according to new and upcoming regulations.
How to Prepare Your Response and Reporting System
While this all might seem overwhelming, there is no need to worry. Keep reading to learn our tips and tricks to staying on top of all of your sustainability reporting requirements.
Because the realm of sustainability is interdisciplinary, people from every department of your company will ultimately need to be involved in data collection and reporting. This is where using an automated system to store data, policies, and metrics, as well as answers to different requests comes in handy.
Sunhat’s system includes several mechanisms to help optimize your reporting process:
Similarity Score and Suggested Answers
With different frameworks that overlap in certain topics, Sunhat includes a similarity score and answer suggestions that allow you to easily map similar answers between different frameworks without the extra internal work.
For example, you could use the information stored in Sunhat from your answers to CDP’s climate change questionnaire for your climate change disclosure according to the ESRS. This way, instead of repeating the same process twice, you can build on your previous answers.
Tagging and Library Search
Tag your answers and questions to efficiently filter and search for contents like your energy use or greenhouse gas emissions when you need them. This way you will find old answers on similar topics easily and won’t get lost in the extremely detailed and specific reporting frameworks!
Assigning Tasks and Data Collections
Not only can automated systems help you in answering questions more quickly, but they can also help distribute the work among your team and keep each member accountable for their designated tasks. This ease in communication limits the amount of mistakes you might make and saves you time and energy by reducing the number of miscommunications and back and forth email chains.
💡Using a platform like Sunhat will allow you to more quickly respond to sustainability requests, whether you have saved answers from previous years, or an overlap in questions from different assessments and reports.
