The world is no longer debating the need for sustainability reporting. Disclosure is increasingly seen as the critical first step to drive corporate climate action demanded by customers and investors worldwide. One of the key tools that can help companies disclose environmental performance is the CDP reporting framework.
Reporting and disclosure of non-financial information is a vital ingredient of a company's sustainability journey. It allows businesses to get ahead of policy changes, identify and tackle emerging risks, and discover new opportunities for action. It also allows society and investors to keep track of a company's contribution towards meeting internationally agreed sustainability targets.
But just any kind of corporate disclosure won't do: reporting environmental performance should be in line with authoritative international standards and impact calculation methodologies. One such reporting framework is the CDP (formerly the "Carbon Disclosure Project") – a global disclosure system that enables companies, cities, states and regions to measure and manage environmental impacts. It has already become a critical part of most companies' sustainability journeys.
So how does CDP disclosure generate value? What's in it for you?
In short, using CDP's framework to better understand material risks and evaluate climate action will help protect reputation, benchmark your progress against peers, and boost your competitive advantage. These together will help build resilience and bring value to your investors, customers, supply chain partners, and society more broadly.
- It strengthens your company's licence to operate. CDP reporting and disclosure allows for third party scrutiny of your environmental impact and actions, be that in the climate change, forestry or water impact sphere. That kind of proactive transparency engenders social legitimacy.
- It improves your company's internal awareness of progress. Looking at a company's operational and governance system through the prism of sustainability generates new insights. It allows you to compare year-on-year progress across the board - but also to benchmark yourself against other peers reporting to CDP.
- It forces your team to explore climate risks and opportunities more holistically. The CDP questionnaires are comprehensive in nature, providing scores in three different areas: climate change, water security and forestry. This challenges your team to evaluate your business strategy and future climate action against a range of possible, or perhaps growing, impacts.
How to use your CDP score to your advantage
After completing CDP's questionnaires on climate change, forests and water security, you will receive a score from A to D-. Depending on the score you receive, your company effectively gets a stamp of approval, a boost to its licence to operate, or alternatively, a call to action.
Naturally, these scores are mere snapshots. But undertaking a CDP disclosure on an annual basis creates a journey. With such an approach, the reporting and disclosure process opens up the potential of virtuous cycles of change. The scoring card itself becomes part of your company's repository of knowledge around its environmental performance and how to effectively engage with it. In other words, you can use the CDP score as an annual barometer of your sustainability performance.
Once your company successfully improves its score over time, you can leverage this information for external engagement with investors, customers, and peers. We know that investors increasingly use CDP as part of their portfolio analysis to guide their investment strategy. Companies not engaged in CDP reporting may attract less interest from investors. This is another reason why companies across sectors have started engaging more actively with CDP and the data it generates. Sustainability managers use it to unlock action within their supply chain and to create buy-in from senior management and colleagues for more ambitious sustainability action.
To measure is to know - get started today
Ambitious climate action has to be quantifiable, verifiable, and in line with science for it to make a real contribution to people, planet, and healthy economies. To measure is to know – and what is not measured can lead to baseless claims or unrecognised positive contributions. The business case for reporting to CDP is clear. How will you respond to your stakeholder's requests for sustainability disclosure?
You can find a helpful overview and toolkit to kickstart your climate journey here.