Responding to CDP this year? Here’s what you need to know

This article was written by Meredith Ledbetter and Whitney Johnson, for Corporate Citizenship - part of SLR. Corporate Citizenship provides ESG strategy, reporting, social and environmental impact and other sustainability consulting services to multi-national companies.

Sustainability reporting season is here and while some things are the same, the landscape of reporting standards and frameworks is changing rapidly. Entities are merging and expectations of investors, regulators and other stakeholders for transparency and reporting are at an all-time high.

Among these changes is CDP’s updated 2022 disclosure requirements for their Climate Change, Forests, and Water Security questionnaires. CDP’s reporting requirements are updated annually to “accelerate the pace of change” in alignment with CDP’s 5-year Strategy to leverage corporate disclosures to “drive action from businesses, investors, cities and governments around the world” to avoid catastrophic climate change and irreversible ecosystem loss. This year’s changes further align CDP with both the Science-Based Targets Initiative (SBTi) and the Taskforce on Climate-Related Financial Disclosures (TCFD), broadening its scope to include more dimensions of environmental impact and elevating the ambition of its existing disclosure requirements.

Why submit a CDP Response?

Originally established as the Carbon Disclosure Project, CDP has evolved into a more holistic disclosure framework, inviting organizations to disclose their climate, forests, and water security impacts. By submitting a CDP response, companies report environmental impact information and subsequently demonstrate progress year over year. While CDP is a non-profit, it’s important to understand that the invitation to respond to their surveys is sent on behalf of nearly 700 investor signatories worth over $130 trillion in assets, as well as other companies who use CDP’s platform to request information from their suppliers. Reporting is also a mechanism to align on and articulate enterprise-wide climate-related risks and opportunities, get in front of regulatory pressure, and to increase competitive advantage. Externally, CDP provides a framework for comparability, increase transparency of corporate activities related to environmental impact, and provides a means to track corporate progress against their commitments.

Planning a 2022 CDP Submission

Each year companies can either voluntarily submit a CDP report or do so in response to a submission request from investors and/or customers. They can also choose whether to make their response public or keep it private – but note that scores and responses are available to investors and customers either way, and the score is also made public after companies’ first year of submission.

This year’s questionnaire launched earlier this month with the opening of CDP’s Online Response System (ORS). Companies must submit their responses via the ORS by July 27, 2022 to be eligible for scoring. Scores are expected to be released in Q4 of this year.

Here we provide an overview of the key changes to note in preparing this year’s response, focusing specifically on the impacts on companies.

Key Changes in 2022

Climate Change

The main changes to this year’s Climate Change questionnaire relate to “tracking organizational alignment with a 1.5-degree climate scenario”. This includes a new question tracking board competence on climate-related issues, modified questions on low-carbon products, and new questions on financial accounting, including whether the company specifically tracks low-carbon revenues and investments. In addition, a first-of-its-kind biodiversity module has been added to this year’s questionnaire, although it will initially be unscored. Paul Watkinson analyzed this specific change in his recent article, Navigating Corporate Biodiversity Reporting.

Changes have also been made to the scoring of existing questions. Additional points are available for setting Net-Zero targets, including specific credit for aligning with the SBTi Net Zero Standard. Scoring on climate-related risks and opportunities has also been simplified, removing some tricky and subjective case study requirements, and also removing the requirement for companies to report at least three discrete examples of identified risks and opportunities. In total, 70% of the core questions from 2021 are unchanged or have minor revisions; 12 were removed, 25 have been added, with a total of 130 core and supply chain questions for 2022.

Forests

Changes to the Forests questionnaire this year focus on forward-looking disclosures on landscape approaches, value chain mapping, land conversion footprint, and risk procedures (CDP). Similar to Climate Change, there’s also a new question on board competence. 90% of the questions from 2021 remain unchanged or are only minorly changed; 2 core questions were removed and 8 were added, with a total of 78 for 2022.

Water Security

Similar to the Climate Change and Forests questionnaires, this year’s Water Security questionnaire changes build momentum around forward-looking disclosures, water accounting, board competence, and innovation in products and services. 85% of the questions were not changed or only minorly changed; 3 core questions were removed and 4 new ones added, with a total of 71 for 2022.

Future-Proofing through Increased Disclosure

As the ESG reporting landscape continues to evolve and expectations rise, it is critical for organizations to build internal processes that support the continuous monitoring and improvement of their corporate disclosures. We expect to see further alignment among reporting frameworks (e.g. TCFD, CDP and the new International Sustainability Standards Board (ISSB)) that will increasingly harmonize ESG reporting and provide greater comparability for stakeholders in the years ahead. Corporate Citizenship’s work aims to competitively position companies for leadership within a future where disclosures are not only mandatory but serve as opportunities to drive change within their respective industries – increasing investor confidence, strengthening customer transparency and trust, and future-proofing their models to anticipate the realities of a changing climate.