How CDP’s new holistic approach delivers true value in reporting on environmental performance

Post Date
17 June 2024
Author
Amy Brimmicombe
Author
Joseph Payne
Read Time
4 minutes
  • ESG advisory

Since CDP started 24 years ago, the expectations for corporate climate disclosure have grown significantly. CDP is the most widely-used environmental and carbon disclosure rating system at a global level, with more than 23,000 companies disclosing environmental data in 2023. But as the expectations for voluntary and mandatory climate disclosures increase for companies, what’s the value and purpose of this process, and how do companies avoid the trap (and resource drain) of reporting for reporting’s sake?

1. Build credible data and prepare for emerging regulation

There are many global climate disclosure standards and frameworks to navigate, with nuances in local regions. CDP is positioning itself as a useful starting point for many of these emerging standards and future mandatory requirements. In 2024, this includes alignment with the International Sustainability Standards Board’s IFRS S2 [1], and definition and approach references linked to the Taskforce on Nature-related Financial Disclosures [2] and the European Sustainability Reporting Standards, that will apply under the EU Corporate Sustainability Reporting Directive [3].

Many jurisdictions have already announced the phase-in of mandatory climate-related reporting in line with IFRS S2, while the UK, Canada, Japan, and others have indicated the intention of endorsing this standard. CDP’s proactive approach to alignment allows companies to get ahead of these requirements and see the synergies with existing frameworks, such as the Taskforce for Climate-related Financial Disclosure’s recommendations.

Using a questionnaire approach also helps with streamlining data requests, assigning accountability internally, and generating specific, tangible data points to work towards in order to move beyond the broader statements found in the crowd of disclosure standards. Integrating CDP disclosure with internal teams ensures accountability across the business and reduces the opportunity for a siloed or greenwashed response.

2. A holistic approach to environmental management using an integrated questionnaire

This year, the CDP questionnaire is moving to an integrated approach, considering both climate and nature challenges in the same combined questions rather than through separate questionnaires for Forests, Water, and Climate. This transition reflects the growing expectations for companies to build a holistic approach to environmental performance with resilience against the critical dependencies of nature and climate. It also allows companies to disclose on new areas with greater depth and transparency or share details that are hard to fit in increasingly packed annual and sustainability reports, a useful evidence base for investors and other users of company data.

In line with the principles of double materiality, CDP maintains that companies should only respond to activities relevant to their business and its impacts. The use of sector-specific questions and more flexibility within questions allows companies to focus on what matters and where the greatest impacts are.

Finally, a new SME-dedicated questionnaire was also released in 2024, building on the previous minimum version. This provides a pared-down pathway suitable for smaller companies with limited resources and a useful starting point for those responding for the first time to demonstrate transparency in climate and nature-related activities.

3. Getting value from CDP responses

The consistency of data reported in CDP is also helpful for users, from investors looking to benchmark companies to inform investment decisions - 94% of FTSE 100 companies disclose to CDP [4] - to supply chain customers requesting data to understand supplier performance and improve scope 3 performance.

And for the company itself, beyond just reporting alignment, credible environmental disclosures with consistent, verifiable data provide senior stakeholders with a solid evidence base for decision-making. The disclosure process is a valuable tool for benchmarking against global best practice, highlighting opportunities for change and improvement by identifying gaps in a company’s climate, water, and nature strategies that will need to be addressed to navigate emerging risks around these topics.

To discuss your own reporting, please get in touch.

SLR is hosting a CDP Disclosure 2024 webinar on the 19th of June to discuss some of these changes in more detail.

CDP disclosure in 2024: What's changed and tips to prepare

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References

(1): https://www.ifrs.org/issued-standards/ifrs-sustainability-standards-navigator/ifrs-s2-climate-related-disclosures/

(2): https://tnfd.global/

(3): https://finance.ec.europa.eu/news/commission-adopts-european-sustainability-reporting-standards-2023-07-31_en

(4): https://cdn.cdp.net/cdp-production/cms/reports/documents/000/007/665/original/Accelarating_UK_Decarbonisation_Report.pdf?1714123797

(5): https://www.slrconsulting.com/events/cdp-disclosure-in-2024-what-s-changed-and-tips-to-prepare/

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