Whether you're just starting out on your climate journey, and want to use CDP's reporting framework to kickstart your climate action plan, or you're a seasoned CDP reporting business looking to make the “A-list", we've rounded-up 5 rules for taking the most strategic approach to CDP reporting.
CDP can be a time-consuming disclosure exercise, kicking off just after the new year and ending with the final submission on July 28th 2021. But much more than 'disclosure', our experience shows that there is much to be gained from taking a more strategic approach to CDP. The annual disclosure and scoring process gives organisations a critical checkpoint to understand where they stand against rapidly rising expectations from investors, regulators and the public. It allows the right questions to be asked of the right people internally. And it generates the impetus for renewed ambition and action on climate change, water security and forest risk commodities.
Read on for our 5 Rules for taking a strategic approach to CDP in 2021.
1. Use CDP as an annual barometer of your climate, water and deforestation performance
As you are working through your response, take note of the areas where you are falling short.
CDP asks organisations to provide detailed information on climate change governance, strategy, and performance. The questionnaires have evolved to reflect fast moving expectations from investors. For example, in 2018 the questionnaires were overhauled to reflect the recommendations from TCFD. This year, further updates have been made. Importantly: financial services, construction, real estate and capital goods are now in the spotlight and will need to provide much more detailed information on their climate performance.
Developing the response to the wide ranging questions in the questionnaire allows you to take stock, on an annual basis, on how external expectations are being met. Ask yourself: where are we struggling to provide enough detail? Where are the gaps in our response? Would our peers have more to say? Use the insights you gain from this to map out next steps - at a strategic level - for stepping up your climate strategy (see Rule # 5).
2. Form a cross-functional working group at the outset
Key in unlocking the internal resources you need for building your CDP response is forming a working group that spans the likes of risk, finance, operations, supply chain, IR, and executive management. As noted in the latest TCFD Status Report, climate change won't be mainstreamed unless there is understanding and buy-in from across the organisation - and CDP is a great way to set this in motion.
Often, the environment or corporate responsibility team are given responsibility for driving forward the climate agenda across the organisation. As you embark on the CDP response, ask yourself: Are there any internal stumbling blocks? Do you feel internal stakeholders are sufficiently briefed on the topic? Are there certain parts of the response you struggle with each year? For example - and a common stumbling block - are you really able to communicate the financial implications of climate risks and opportunities to the business, as TCFD requires?
Use the working group to assign clear responsibilities & accountability at the outset. Importantly: make the working group broader than CDP and disclosure. This is about climate change, supply chain resilience, risk, and core business strategy.
3. Revisit your stakeholder engagement strategy
Engagement across the value chain is the key to unlocking the emissions reduction potential beyond your Scope 1 and 2.
If you find yourself repeating the same content year after year when it comes to engagement across the value chain, it's probably time to reassess your climate programs with suppliers, customers, and other value chain partners. Building collaborative initiatives across the value chain is becoming more and more important as companies set Science-Based Targets and ambitious goals for Scope 3.
Of course, investors are 'the' key stakeholder as the ultimate users of the information gathered through CDP. However - your engagement with investors should not stop when you hit submit on the response. It is important to understand what information your investors are looking for, and how the information will be used. Make sure your Investor Relations team is involved in the process and can leverage the CDP response for further discussions tailored to investors' needs. For example, setting Science-Based Targets and amplifying your organisation's climate strategy.
4. Identify your gaps against TCFD
Because CDP is so closely aligned with TCFD, companies can make significant progress with their TCFD disclosures through their submissions to CDP. This is particularly true of the TCFD 'target sectors' - highlighted in the TCFD's Implementation Report - each with their own set of TCFD-focused sector-specific questions.
TCFD is a voluntary disclosure framework – for now. Whilst over 1,500 organisations (representing a market capitalization of US 12 trillion +) endorsing the TCFD, the disclosure of climate-related financial information is deemed 'insufficient for investors'. In 2020, the UK government released its roadmap towards mandatory disclosures, starting in 2021. The Swiss government followed suit in December, laying the groundwork for making TCFD mandatory in the coming years. It is clearly only a matter of time before this becomes a compliance issue. Make sure you identify where you are falling short in your climate disclosures so you can make plans to address these gaps (Rule #5).
5. Don't stop at the climate change questionnaire – use this opportunity to build a long term sustainability strategy for your supply chain
Whilst CDP is fresh in people's minds, use the working group to map out specific plans, programs and initiatives to support your organisation's water security and forestry disclosure (if applicable). This is an optimum time to use CDP's water security and forestry reporting frameworks to build a long term sustainability strategy and boost supply chain and business resilience - linking your objectives and outcomes to CDP, TCFD and broader corporate governance objectives
As we progress into the 'Decade of Action', CDP (through its close alignment with TCFD) offers a valuable opportunity to reassess your organisation's climate performance against fast-moving expectations from investors, regulators and consumers.
Much more than a standalone disclosure exercise, CDP should be used as a way to reflect on and improve climate change management and performance, and to integrate climate and sustainability into core business strategy.
As you embark on this year's questionnaires, take the time to reflect on how you approach CDP more strategically to make sure you are getting maximum value out of the process.
For more information take a look at our CDP services and 2021 toolkit.
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