When your company plans to report with the CDP, you likely understand its importance for meeting investor and stakeholder expectations and assessing supply chain impacts. Following a 30% rise in […]

When your company plans to report with the CDP, you likely understand its importance for meeting investor and stakeholder expectations and assessing supply chain impacts. Following a 30% rise in submissions last year, the CDP has announced significant updates for 2024 [1]. These include streamlining topics, focusing more on forest-related disclosures, and better aligning with International Financial Reporting Standards (IFRS) S2. 

While these updates may pose some challenges, the CDP anticipates they will ultimately simplify the ratings process, especially with the predicted high submission volume for 2024. 

In this blog, we’ll cover the essentials of CDP reporting, detail the 2024 changes, discuss common challenges, and offer strategies to enhance your reporting process and elevate your performance. 

What CDP Reporting Involves  

CDP reporting is a comprehensive process designed to help companies disclose their environmental impacts transparently and systematically. It involves several key steps and components, which are essential for organizations looking to understand, measure, and manage their environmental footprints. Here is an overview of what CDP reporting typically involves: 

• Data Collection and Management: This begins with identifying key data points such as greenhouse gas (GHG) emissions (Scope 1, 2, and 3), water usage, and forest-related impacts. Data is collected from internal operations, supply chains, and other relevant sources, including energy consumption records, water usage logs, and information from suppliers. 
• Questionnaire Completion: Companies must complete various questionnaires. The Climate Change Questionnaire covers emissions management, climate-related risks and opportunities, and climate governance, requiring reports on GHG emissions, climate strategies, and progress toward climate targets. The Water Security Questionnaire focuses on water-related risks and opportunities, water management strategies, and efforts to reduce water consumption and improve water quality. The Forests Questionnaire addresses impacts on forests, including deforestation and forest degradation, requiring disclosure of the use of commodities like palm oil, soy, cattle products, and timber. 
• Compliance with Standards and Frameworks: CDP reporting aligns with international standards such as the Task Force on Climate-related Financial Disclosures (TCFD) recommendations and the Science Based Targets initiative (SBTi), ensuring consistency and comparability of data. Companies also need to comply with relevant local and international regulations, which may influence their reporting practices and disclosures. 
• Scoring and Evaluation: CDP uses a detailed scoring methodology to evaluate the quality and completeness of the information provided. Scores are based on various factors, including the comprehensiveness of the data, the company’s management of climate risks, and the ambition of its climate targets. Companies receive scores and feedback, which can be used to benchmark their performance against peers and identify areas for improvement. 
• Public Disclosure and Transparency: CDP encourages public disclosure of the environmental data reported. Companies can choose to make their reports public, enhancing transparency and accountability. The information disclosed through CDP reporting is used by investors, customers, and other stakeholders to assess a company’s environmental performance and sustainability practices. 

Updates to CDP Reporting for 2024 

In 2024, CDP (formerly the Carbon Disclosure Project) has implemented several substantial changes to streamline the reporting process and enhance the depth and scope of environmental disclosures. Key updates include: 

1. Integrated Reporting Framework: The previously separate questionnaires for climate change, water security, and forests are now consolidated into a single integrated reporting framework. This change simplifies the reporting process and encourages a more holistic approach to environmental impact assessment. Additionally, plastics have been introduced as a new topic, reflecting the growing concern over plastic pollution [2]. 
2. New Online Platform: CDP has launched a new online platform designed to improve user experience and facilitate easier data submission. This platform also supports the integrated questionnaire, making it easier for companies to manage and report their environmental data. 
3. Alignment with IFRS S2: The new questionnaire aligns with the International Financial Reporting Standards (IFRS) S2, which focuses on climate-related disclosures. This alignment aims to standardize sustainability reporting globally and integrate it with financial reporting, ensuring that climate-related information is presented in a manner consistent with financial disclosures [3]. 
4. Revamped Scoring and Reporting Guidance: CDP has updated its scoring methodology and reporting guidance to reflect the new integrated framework and alignment with global standards. This includes a more detailed assessment of net-zero targets and the inclusion of biodiversity questions as mandatory, in line with the Taskforce on Nature-related Financial Disclosures (TNFD) [4]. 
5. New SME Module and Sector Classification System: A new module specifically designed for small and medium-sized enterprises (SMEs) has been introduced, making it easier for these businesses to participate in CDP reporting. The sector classification system has been updated to categorize companies based on the most relevant sectors, improving the relevance and comparability of reported data. 
6. Water Watch Tool: CDP has introduced the Water Watch tool, which ranks over 200 industrial activities across 13 sectors based on their potential impact on water resources. This tool aims to provide companies with insights into their water-related risks and opportunities. 

These changes reflect CDP’s ongoing efforts to enhance the transparency, accuracy, and usability of environmental disclosures, helping companies better understand and manage their environmental impacts while meeting the growing demands of investors and other stakeholders. 

Common Challenges in Reporting 

CDP reporting can be complex and demanding, with several key challenges that companies frequently encounter: 

1. Data Collection and Accuracy: Gathering accurate and comprehensive data from diverse sources, including internal operations and external suppliers, is a major challenge. Ensuring data accuracy and consistency is crucial but difficult, especially for large organizations with complex supply chains. Many companies struggle with the meticulous task of collecting relevant data and verifying its accuracy, which is essential for reliable reporting. 
2. Resource Intensity and Integration: The process of CDP reporting is resource-intensive, requiring significant time and personnel. Smaller companies often lack the necessary resources to complete the reporting effectively. Additionally, integrating CDP requirements with existing business systems can be challenging. Companies must ensure that their current systems can handle the data collection and reporting without significant operational disruption, which often requires additional investment in technology and training. 
3. Changing Guidelines and Scope 3 Emissions: Keeping up with frequently changing CDP guidelines and standards, which are updated regularly to reflect the latest environmental best practices, can be complex and time-consuming. Quantifying Scope 3 emissions, which involve indirect emissions occurring throughout the value chain, presents a particular challenge due to the numerous external data points and partners involved. Despite being critical for comprehensive reporting, these emissions are often the least understood and hardest to measure accurately. 
4. Stakeholder Engagement and Communication: Engaging relevant stakeholders, including suppliers and internal departments, is crucial for comprehensive data collection but can be difficult to achieve. Ensuring that stakeholders understand the importance of CDP reporting and contribute necessary data requires effective communication strategies. Furthermore, presenting data transparently and clearly in the CDP report is essential. Companies must balance detailed technical information with accessible summaries to ensure all stakeholders, including investors and regulatory bodies, can understand the findings. This requires a strategic approach to communication and transparency. 

Enhancing Your Reporting and Elevating Your Score 

Improving your CDP reporting process and boosting your score involves strategic planning, effective use of technology, and continuous improvement. Here are some key strategies: 

1. Leverage Technology and Tools: Utilize advanced data management tools and software to streamline the data collection and reporting process. Implementing systems that integrate with existing business processes can reduce manual effort and increase accuracy. Platforms like CDP’s new online system are designed to enhance user experience and facilitate easier data submission. Additionally, tools such as the Water Watch tool can provide insights into specific environmental impacts, aiding in more precise reporting. 
2. Stay Updated with Guidelines and Standards: Regularly review updates to CDP guidelines and align your reporting practices with international standards such as IFRS S2 and the TCFD recommendations. Keeping abreast of changes ensures that your reporting meets current requirements and avoids potential pitfalls. Engaging with industry forums, subscribing to CDP updates, and attending relevant webinars can help stay informed about the latest changes and best practices. 
3. Enhance Data Accuracy and Coverage: Focus on improving the accuracy and comprehensiveness of your data. This involves thorough internal audits, regular data validation checks, and ensuring that all relevant sources of data are included. Pay particular attention to Scope 3 emissions, which are often the most challenging but also the most critical for a complete environmental impact assessment. Training staff on data collection protocols and fostering a culture of accuracy and accountability can significantly improve data quality. 
4. Engage Stakeholders and Communicate Effectively: Ensure that all relevant stakeholders, including suppliers and internal departments, are engaged in the reporting process. Clear communication about the importance of CDP reporting and its benefits can enhance cooperation and data sharing. Additionally, presenting your CDP report in a clear, transparent, and accessible manner is crucial. Use visuals and infographics to highlight key achievements and areas for improvement, making the report understandable for all stakeholders, including investors and regulatory bodies. 

Conclusion 

In conclusion, CDP reporting is an essential aspect of corporate sustainability and responsible environmental management. As guidelines and standards evolve, companies must stay updated and continuously improve their reporting processes to meet the growing expectations of stakeholders. Leveraging technology, staying informed with guidelines, focusing on data accuracy, and effective stakeholder engagement can help elevate your CDP score and showcase your commitment to sustainable practices. By taking a proactive approach to CDP reporting, companies can not only meet regulatory requirements but also drive positive environmental impact and attract responsible investors. 

 

Sources: 

[1] https://cdn.cdp.net/cdp-production/cms/reports/documents/000/007/561/original/CDP_2023_Non_Disclosure_Report.pdf?1706784161 

[2] https://www.scsglobalservices.com/resources/navigating-2024-cdp-reporting-changes-learn-about-the-major-changes-to-cdp-and-how-to 

[3] https://www.adecesg.com/resources/webinar/cdp-2024-deep-dive-into-the-new-integrated-questionnaire-pre-webinar-survey/ 

[4] https://eco-act.com/blog/improve-your-cdp-score/