CDP Reporting Explained

As environmental responsibility climbs up the corporate agenda, the call for transparency is gathering pace.

Action to reduce our environmental impact is no longer on the fringes – it’s becoming a core corporate priority. The need for sustainable practices across all industry sectors is being recognized – and so are its benefits.

It’s no surprise, then, that the voluntary adoption of environmental, social, and governance (ESG) reporting is growing. Over 90 percent of S&P 500 companies (a stock market index) are now publishing in some form, and around 70 percent of Russell 1,000 companies (the top 1,000 companies by market capitalization in the United States)¹.

In Europe, around 50,000 companies² will need to report under European Sustainability Reporting Standards (ESRS), as well as non-EU-based companies with a large base in the region.

From 2025, companies of all sizes will need to report on their ESG performance. This is likely to mean more standardized reporting across industries.

Whilst there are several options to choose from, CDP³ is the most widely adopted reporting framework in the world. Many businesses choose to adopt it voluntarily – and others are required to do so by their supply chain or clients. An annual ‘score’ from CDP reflects the action a company is taking to reduce its environmental impact and plot year-on-year progress against its targets.

CDP also aligns with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). This makes it easier for investors to assess and compare climate-related risks and opportunities across different companies, including governance, strategy, risk management, metrics, and targets.

To encourage more ambitious climate action, Science-Based Targets (SBTs) are now embedded within the questionnaire. SBTs monitor progress toward goals to reduce emissions that are scientifically grounded, aiming to limit global warming to 1.5°C above pre-industrial levels.

Here are ten benefits

1. Draw value from a world-recognised framework
   CDP is a well-recognised framework to report sustainable targets including carbon, forestry, and water. It covers governance, strategy, and results, with an overall annual grading of ‘A’ to ‘F’.
   Companies can opt not to share their results publicly, but an A grade is reserved for those prepared for a public disclosure among other criteria.
2. Increase trust with verified results
   A robust scoring methodology, especially where it’s validated by an independent third party, is increasingly the preferred route to reporting. Self-assessment is open to question, so having verified and benchmarked results is more likely to be data-based, comparable, and trusted.
   Regulatory bodies, investors, and consumers are demanding more robust approaches to reporting.
3. Get access to green investment
   Investors are increasingly looking at ESG factors when making investment decisions. CDP disclosure offers a clear, standardized way for companies to communicate their environmental performance to investors.
   This can attract investment from ESG-focused funds, improving access to available capital.
4. Protect your brand reputation
   Transparency can boost your company's reputation and brand value. Many consumers are informed and concerned about sustainability, and actively seek brands they can trust.
   By demonstrating your commitment to environmental responsibility, you can strengthen your appeal to conscious consumers.
5. Manage your business risk
   Environmental disclosure can help you identify and manage risks related to climate change. By being proactive, your company can mitigate potential legal and financial risks associated with environmental factors. Disclosure can also help manage risks across the supply chain as you work to ensure you’re doing business with reputable players along the network.
6. Identify cost savings
   Addressing environmental impact can help identify inefficiencies in the use of resources or uncover opportunities for cost savings. Sustainable practices can reduce energy and water consumption, lower waste management costs, and improve operational efficiency.
7. Gain a competitive advantage
   Sustainability can differentiate your company in the marketplace and position your company as a leader in environmental responsibility.
   This can be particularly important in industries where sustainability is a key consideration for customers, clients, and the supply chain.
8. Attract and retain talent
   Employees, communities, and other stakeholders value transparency and commitment to sustainability. CDP disclosure can improve employee morale and retention. Your brand will be more attractive to those who prioritize working for environmentally responsible companies.
9. Be bold – Use CDP disclosure to drive your innovation
   CDP disclosure encourages long-term strategic planning on environmental impact. Measuring and reporting sustainable practices can drive innovation in products, services, and processes, reducing impact and improving performance.
10. Benchmark your progress
    CDP provides a framework for measuring and tracking performance over time. Companies can benchmark their performance against industry peers, identify areas for improvement, and set achievable sustainability goals.

The global CDP framework continues to evolve and update to stay relevant and effective. Below are five important changes that were implemented in 2024 and are going to be maintained in future years:

1. A simplified questionnaire: CDP unified climate change, forests, and water security data into a single questionnaire to streamline the process. It’s simpler, avoids duplication, and provides a more holistic view.
2. Improvements for Small and Medium-sized Enterprises (SMEs): A new questionnaire was designed to address the needs and capacities of smaller businesses, making CDP disclosure more accessible. It aims to encourage greater participation from SMEs and support their sustainability journeys.
3. Biodiversity and ecosystems: Data on biodiversity and ecosystem services was strengthened in 2024. This recognizes the synergy between climate change and biodiversity. Natural ecosystem impact will now be considered, as well as efforts to protect and restore biodiversity.
4. Increased focus on supply chain engagement: More detailed information is required on how businesses are working with their suppliers to address climate-related risks and reduce emissions. It aims to encourage collaboration and improve accountability.
5. Improved data transparency and accessibility: CDP made improvements to its reporting platform. More advanced data analytics tools and dashboards give businesses a better understanding of their environmental performance and benchmark against peers. It has also simplified access and analysis of disclosed data, making informed decision-making easier for stakeholders, investors, customers, and regulators.

While there are many frameworks available for environmental disclosure, CDP’s comprehensive, investor-focused, and globally recognized approach makes it a solid choice.

Whichever reporting framework you choose, adopting a formal approach to sustainability reporting means your company can enhance its reputation, improve access to capital, gain valuable insights, and manage environmental risks and opportunities effectively. We can work with you to identify which is the right scheme or reporting framework for your business, to meet your unique goals.

Sources

¹McKinsey Quarterly Does ESG Really Matter -and Why

²CDP Website

³Sustain Life Blog