2022 was a landmark year for corporate environmental reporting. With mandatory disclosure just over the horizon, leading companies are already using reporting to drive progress and show impact, unlocking a variety of business benefits along the way. Last year, a record-breaking 18,700+ companies disclosed through CDP, the world’s leading environmental reporting platform, representing half of global market capitalization.
CDP is quickly becoming the unofficial “scoring arm” of today’s most rigorous frameworks, such as the Task Force on Climate-Related Financial Disclosures (TCFD) and more recently the International Sustainability Standards Board (ISSB). Late last year, CDP announced it would integrate the ISSB’s Climate-Related Disclosures Standard into its platform by 2024. What’s more, as part of its Federal Supplier Climate Disclosure Rule, the US Government will now require major federal suppliers to disclose climate impacts and risks through CDP.
All this to say, CDP will only gain relevance in coming years. Looking to boost your CDP score in 2023 or reporting for the first time? In its ongoing effort to increase rigor year-over-year, CDP just released its new climate, water security, and forests questionnaires. Read on to learn about the changes you should be aware of.
Climate Change Questionnaire
This year’s climate questionnaire asks for more accountability details. For example, on the topic of employee incentives, CDP is now asking about specific performance indicators you use to manage climate-related issues and how your company’s incentives are linked to your climate transition plan.
This shift is reflective of where we are in the climate action journey. Our window to prevent the worst consequences of climate change and nature loss is closing. CDP’s changes encourage you to back up commitments with specific plans, transition metrics, and evidence of progress against 1.5°C goals. Some headline changes include more robust questions on public policy engagement, such as disclosing membership and funding of trade associations, and new questions to scale globally recognized standards emerging from the ISSB and European Union.
Here are a few other noteworthy changes:
Companies must explicitly say whether GHG data includes emissions from subsidiaries. If so, Scopes 1-2 emissions must be broken down by subsidiary. If you’re a larger company, this change might prompt you to start considering subsidiary emissions, as they can represent a significant gap in reporting and an area of unassessed climate risks and opportunities. If you’re a sub-brand, you may start getting requests from your parent company to provide Scopes 1-3 data.
Companies must share whether their spending is aligned with the 1.5°C transition under a sustainable finance taxonomy, such as the EU Taxonomy. If so, you’ll be asked to share a percentage and an absolute financial figure. This change is particularly significant because it reflects CDP’s increasing alignment with frameworks and regulations coming out of the EU.
Companies must provide details on any activities in biodiversity sensitive areas. This new question will help investors comply with the EU Sustainable Finance Disclosure Regulation (SFDR) and further highlights CDP’s support of EU regulations.
Financial services disclosers must provide more information on water and deforestation risk. For instance, do you assess your portfolio’s exposure to forest and water-related risks? What’s your portfolio's impact on deforestation and water security? Do you have targets for deforestation-free or water-secure investing?
Water Security Questionnaire
Like the climate questionnaire, the 2023 CDP water security questionnaire tightens alignment with EU regulations and asks for more information about accountability. Three notable highlights include:
Revisions to integrate the EU Sustainability Reporting Standards (ESRS) water pollutant categories. Using emerging EU frameworks as a best practice, your company will have to provide detail on how you identify, manage, and minimize adverse impacts of water pollutants. As a reminder, the ESRS are simply the reporting requirements of the EU’s Corporate Sustainability Reporting Directive.
More detailed questions on supplier engagement. For instance, your business must provide information on water-related requirements suppliers have to meet as part of your procurement processes.
A brand-new section of questions asking about targets and goals for water, sanitation, and hygiene (WASH). The water questionnaire also features a brand-new section on plastics, informed by the Ellen MacArthur Foundation and UNEP’s New Plastics Economy Global Commitment. The questionnaire asks for details like:
- Have you mapped where in your value chain plastics are used and produced?
- What’s your exposure to plastic-related risks?
- What’s your company’s total weight of plastic polymers, durable goods, and packaging sold?
- What kind of plastic-related targets do you have?
Plastics are dominant pollutants in freshwater ecosystems. The introduction of plastics-related questions sends a signal that it’s time to understand and disclose your exposure to commercial, legal, and reputational risks linked to your use of plastics and packaging.
Changes to the 2023 forests questionnaire sharpen the focus on supplier engagement and risk assessment. Here are a few modifications to be aware of:
- Companies must provide a breakdown of deforestation free (DCF) and non-DCF commodities.
- Companies must disclose how they track supplier compliance and performance against forest-related commitments.
- Companies must share whether they use a classification system to determine deforestation risk in sourcing areas.
While the degree of changes here aren’t as significant as the climate and water questionnaires, they reflect a similar theme – awareness and commitment aren’t enough. Today’s frameworks are looking for specific information on how you’re driving progress on your goals and staying accountable.
Where CDP is Headed
All three of CDP’s environmental questionnaires are already tightly linked to TCFD’s key disclosure building blocks – governance, strategy, risk management, and metrics and targets. Whether you’re reporting on climate risk, water security, or deforestation risk, this shouldn’t come as a surprise. What is new is CDP’s recognition and integration of more rigorous, internationally recognized frameworks, especially from the EU.
The EU has always been a leader on issues like climate, biodiversity, and corporate accountability. While non-EU companies historically haven’t been impacted, that’s starting to change. Both through the international reach of the EU’s emerging corporate reporting regulations and the adoption of its frameworks by platforms like CDP, the rest of the world is getting up to speed. As a business, this means you’ll need to provide more detail and granularity on how you’re staying accountable than ever before.