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Carbon Disclosure Project (CDP) disclosure has crystallized into a key component of environmental strategy for forward-thinking corporations. The year 2023 saw a huge surge with over 23,000 entities, including upward of 80% of the Fortune 500, using CDP's platform to disclose their environmental information.
The motivations driving the adoption of CDP disclosures are multifaceted. The increases are representative of an era where transparency in climate actions is paramount, ambitious environmental objectives are being pursued, and large companies are asking their entire supply chains to align with their ambitious goals. The expanding terrain of sustainability reporting regulations and the increasing prevalence of climate-related risks have also increased the significance of CDP disclosure.
In this article, we delve into the essence of CDP, its growing importance, and five persuasive arguments for integrating CDP disclosure into the core of your company’s sustainability endeavors.
The significance of CDP, established as the Carbon Disclosure Project in 2000, has grown markedly in its 24 years to now being the gold standard for environmental reporting. It now stands as a beacon of trust for investors and stakeholders to assess companies’ environmental performance.
One of the key qualities of CDP is that it bridges various regulatory and reporting frameworks, including the International Sustainability (ISSB), Global Reporting Initiative (GRI), European Sustainability
Reporting Standards (ESRS), and the emerging Taskforce on Nature-related Financial Disclosures (TNFD); CDP disclosure ensures a seamless integration. It has established itself as a fundamental step for businesses embarking on mandated or voluntary disclosure pathways in 2024 and beyond.
Between 2020 and 2023, CDP disclosure witnessed a doubling in the number of companies reporting, from about 9,000 to roughly 23,000, representing an international group of businesses from over 100 countries.
Driving this expansion are 330+ member companies within the CDP Supply Chain encouraging a staggering 47,000+ suppliers to partake in environmental data sharing.
Incentives for CDP Disclosure Within Supply Chains
As the global economy pivots towards sustainable practices, here is why CDP disclosure is becoming a prerequisite for suppliers:
In 2024, the simplification of the CDP disclosure process, including a newly integrated holistic questionnaire and a specialized iteration for smaller businesses, suggests there will be a continued upward trend in CDP participation in 2024. If your company is new to CDP disclosure or hesitant about its value, here are five strategic benefits to get you on board:
Engaging in CDP disclosure when you receive a request for data will not only help you comply with your clients' sustainability data requests but could also position you as a preferred supplier for other companies, opening doors to enhanced current and future business relations and opportunities.
Leading companies, like PepsiCo, Amazon, and others, are beginning to embed CDP disclosure requirements into their procurement policies or use their purchasing power to force companies to respond to CDP. In the future, this may become common practice.
CDP disclosure scores enable businesses to measure their environmental credentials against the competition and attract investors and customers looking for sustainable companies. This benchmarking score can help direct your ESG strategy and set realistic yet aspirational environmental goals.
With CDP's tiered scoring system from A to F, you can:
Transparency is a cornerstone of stakeholder trust, and the consistency and comparability of the disclosure platform provided by CDP ensures that a company's environmental actions are visible, verifiable, and comparable to other reporters.
Stakeholders can evaluate a firm's sustainability initiatives and hold them against industry benchmarks through CDP’s public disclosures. For bonus points, companies can further improve their CDP score and transparency by getting third-party assurances.
Ongoing CDP disclosure can significantly raise a company's profile as a company that is transparently moving toward sustainability. Frequent disclosures and progress on your CDP score show that your company is a leader in sustainability and can help differentiate products and services.
This leadership can be leveraged to win customer loyalty, enhance corporate image, and attract top talent, thus providing a competitive advantage in sustainability-centric markets like the EU.
One key benefit of CDP disclosure is its integration with other reporting frameworks and regulations in CDP questionnaires. Over the years, CDP has integrated or made its reporting interoperable with new ESG reporting standards. In 2024, CDP questionnaires will be aligned with ISSB climate standards (IFRS S2) and are already aligned with the TCFD, ESRS, and other key frameworks.
With so many new global reporting regulations coming online in the next few years and CDP integrating most of the reporting frameworks on which these new regulations are based, CDP is a suitable place to start formatting your ESG data to ensure you are prepared for future regulatory compliance.
Kellogg’s is a global food company with ambitious climate and other environmental goals. The majority of Kellogg’s emissions come from its Scope 3 (value chain), meaning it needs to work with suppliers to measure and reduce emissions to meet its own 50% Scope 3 reduction goal by 2050.
Kellogg’s uses CDP to capture emissions data from its suppliers as a CDP Supply Chain member. It also incentivizes suppliers that participate with preferential financing for low-carbon tech and teaches them how to adopt more sustainable practices through its Kellogg's Origins program. If you are a supplier to Kellogg’s or any other of the 330+ CDP Supply Chain member companies, reporting to CDP can pay dividends.
The trend is clear: CDP disclosure is becoming an imperative for businesses across the globe. With major firms in the US and Europe leading the charge, the disclosure of environmental impact through the CDP is fast becoming a global standard.
For organizations not disclosing today, the time to engage with CDP is now. It's a step that could soon be a prerequisite for supplier selection. A professional CPA can be invaluable in navigating this process, providing expert assistance from your first report to getting assurance and attaining a leadership status, A score.
As a CPA firm, we are perfectly positioned to ensure you reap these benefits from CDP disclosures and can help you improve your score. We will help you diligently collect all necessary data and ensure its accuracy through an auditing process, which will increase your score. We will also help you iterate each year based on your current score and strategize to improve. In other words, we are a one-stop shop for all aspects of CDP disclosure.
Reach out below to find out how our team can help you advance on CDP and other environmental reporting requirements you may be facing.
The information provided in this communication is of a general nature and should not be considered professional advice. You should not act upon the information provided without obtaining specific professional advice. The information above is subject to change.
