Understanding CDP: A Comprehensive Guide to the Carbon Disclosure Project in 2024

What is CDP?

Many organizations contribute to the project each year by filling out CDP's online surveys and providing self-reported data and other environmental information. The questions on the CDP are meant to collect information on topics Climate Change, Water, Forest and Plastics.The Carbon Disclosure Project (CDP) formerly known as the Carbon Disclosure Project, stands out as a pivotal player in advancing transparency and accountability among organizations worldwide. Founded in 2000, CDP is a global non-profit organization that empowers companies, cities, and governments to measure and manage their environmental impacts. By providing a robust framework for disclosing greenhouse gas emissions and other critical environmental data, CDP helps organizations understand their environmental footprints and implement effective strategies for improvement.

Disclosure cycle of CDP, 2024

How does CDP work?

The Carbon Disclosure Project (CDP) operates through a structured framework that facilitates environmental reporting, assessment, and improvement for organizations worldwide. It begins by filling a detailed questionnaire covering various aspects of environmental management, including governance, greenhouse gas emissions (Scope 1, Scope 2, and sometimes Scope 3), water usage, deforestation, and climate-related targets. Once the questionnaires are submitted through CDP’s online platform to evaluate theresponses based on their completeness and quality, then CDP scores are published.

Focus Area of CDP

The organization lists four sustainability and environmental issues as its key areas of focus for data collection.

1. Climate change

The CDP data gathered through the questionnaire encompasses Scope 1, Scope 2, and Scope 3 emissions as outlined by the Greenhouse Gas (GHG) Protocol. Additionally, it includes critical information on governance structures, business strategies, the utilization of carbon credits, and internal carbon pricing—essentially the monetary value that companies assign to their greenhouse gas emissions. This comprehensive data collection not only allows organizations to quantify their carbon footprint but also enables them to evaluate their overall environmental impact and align their strategies with climate-related goals. By focusing on these key areas, CDP empowers companies to identify risks and opportunities associated with climate change, facilitating informed decision-making that contributes to effective sustainability practices and long-term environmental stewardship. Through this structured approach, CDP helps organizations transition towards a low-carbon economy and supports global efforts to mitigate climate change.

2. Water:

CDP encourages companies to assess their water impacts and initiatives aimed at enhancing water security. By disclosing this information through CDP, organizations increase the transparency of their water security measures and pollution reduction efforts to shareholders and customers alike. The CDP questionnaire enables companies to gain a deeper understanding of water-related risks and opportunities, promoting informed decision-making that bolsters long-term resilience. By focusing on these critical aspects, CDP supports organizations in developing comprehensive water management strategies that not only mitigate risks but also contribute to sustainable water use and conservation efforts.

3. Forests:

CDP recognizes deforestation as one of the most pressing environmental challenges globally, impacting climate regulation, water resources, and biodiversity. Through its framework, CDP monitors efforts to prevent deforestation in agricultural production, emphasizing the importance of sustainable land-use practices. The CDP Forests questionnaire is designed to align with the Accountability Framework, ensuring that companies can transparently report their commitments and progress in combating deforestation. This alignment facilitates a structured approach for organizations to assess their supply chains and make informed decisions that contribute to responsible forestry and land management.

4. Plastics:

CDP recognizes plastic pollution as a critical environmental issue with far-reaching impacts on ecosystems, human health, and the global economy. Through its framework, CDP encourages companies to assess their plastic usage and implement strategies to reduce plastic waste throughout their operations and supply chains. The CDP Plastics questionnaire enables organizations to disclose information regarding their plastic footprint, including production, usage, and disposal practices. By promoting transparency, CDP helps stakeholders, including investors and consumers, understand how companies are addressing plastic pollution and managing related risks. Additionally, the questionnaire guides organizations in identifying opportunities for innovation, such as adopting sustainable materials and improving recycling initiatives.

Types of disclosures

1. Full Corporate questionnaire:

The full corporate questionnaire is suitable for large companies and organizations, and includes sector-specific data points. It’s for: Organizations with headcount greater than 1,000 or an annual revenue of more than US$250 million.

2. SME Corporate questionnaire:

The SME questionnaire is tailored to smaller organizations and contains fewer and simplified data points.  It’s for organizations with a headcount of less than 500 and an annual revenue of less than US$50 million.

Additional Considerations

Organizations with a headcount of less than 500 and an annual revenue of US$50 million - US$250 million, or organizations with a headcount between 500 and 1,000 and annual revenue of less than US$250 million, then they should fill full corporate questionnaire. Small and Medium Enterprises (SMEs) account for around 90% of global business. Therefore, it is crucial that SMEs are equipped with the knowledge, tools and resources required to commit to and accelerate climate action, while ensuring long-term business viability.

CDP Alignment with Standards and Framework

International Financial Reporting Standards (IFRS) S2 (ISSB) climate standard

Aligned with the IFRS S2 standard issued by the International Sustainability Standards Board (ISSB).Alignment:The IFRS S2 outlines the reporting requirements for companies regarding governance, strategy, and risk and opportunity management. It specifies the processes for identifying, assessing, and prioritizing risks and opportunities, as well as the metrics and targets to be included, such as Scope 1, 2, and 3 emissions.

European Sustainability Reporting Standards (ESRS)

Currently substantially aligned.

Alignment:The European Sustainability Reporting Standards (ESRS) encompass a comprehensive and ambitious framework that mandates companies to report extensive data on covering areas such as climate change, pollution, water and marine resources, biodiversity and ecosystems and resource use and the circular economy (E5), the ESRS aims to enhance transparency and accountability in corporate sustainability reporting.

Task Force on Nature-related Financial Disclosures (TNFD) recommendations

Currently partially alignedAlignment:CDP initially concentrated on climate change, deforestation, and water security but has recently broadened its focus to include biodiversity and plastic pollution by aligning with TNFD framework presents an exciting opportunity for a coordinated response to the crisis of nature loss.

Task Force on Climate-related Financial Disclosures (TCFD) recommendations

Aligned with TCFD recommendationsAlignment:TCFD's recommendations encompass governance and strategy related to climate-related risks. CDP questionnaires frequently inquire about governance structures and strategic responses to climate change, aligning closely with TCFD’s focus.

Global Reporting Initiative (GRI) standards

This alignment stems from both frameworks heavily relying on the Greenhouse Gas Protocol Corporate Standard and Scope 3 (Value Chain) Standard developed by the World Resources Institute (WRI) and the World Business Council for Sustainable Development (WBCSD).This synergy with internationally recognized best practices reduces disclosure duplication, enhances the consistency and comparability of environmental data, and streamlines reporting for the thousands of companies using CDP’s climate change and supply chain programs and the GRI Standards.

EU Taxonomy

CDP introduced questions on sustainable finance taxonomies in the Corporate Questionnaire in 2023 to gather data on company's activities under the EU Taxonomy. The questions gather information on the eligibility of activities and whether their financial accounting is aligned with the taxonomy. CDP's disclosure system is adaptable to new standards and will integrate other best practice taxonomies as they are finalized. The focus is on disclosure according to the EU Taxonomy for companies subject to the EU Corporate Sustainability Reporting Directive (CSRD).

CDP SCORING

The Carbon Disclosure Project (CDP) employs a comprehensive scoring system to evaluate and benchmark the environmental performance and transparency of organizations that disclose their data. Organizations submit detailed responses to questionnaires covering various aspects of environmental management, including governance, risk management, greenhouse gas emissions (Scope 1, Scope 2, and, in some cases, Scope 3), and climate-related strategies. Scores are categorized into four main levels:

A- Leadership

To achieve leadership status, organizations must exemplify best practices in their strategies and actions. These practices are developed in collaboration with CDP to promote environmental stewardship and are often already adopted by leaders in environmental policy and practice.

B- Management

The Management score assesses whether organizations are effectively managing their environmental impact, but it does not reflect whether they are taking actions that position them as leaders in their field.

C- Awareness

The Awareness score evaluates how thoroughly an organization has assessed the intersection of environmental issues with its business. However, this score does not indicate that the organization has taken any actions to address these environmental issues beyond initial screenings or assessments.

D- Disclosure

The Disclosure score evaluates the completeness of an organization’s reporting. The points assigned to each question are based on the volume of data requested and the relative importance of that data to its users.

E- Non-disclosure

An ‘F’ is assigned to any company that is requested to disclose information by but fails to respond. This score applies to each environmental issue for which the company did not provide disclosure.

Scoring Methodology

CDP’s scoring methodology evaluates the detail and comprehensiveness of an entity’s response, along with their awareness of environmental issues, management approaches, and progress in environmental stewardship. Accredited scoring partners trained by CDP conduct the questionnaire scoring, after which our internal scoring team compiles the scores and performs data quality checks to ensure accuracy and consistency in scoring standards.