Carbon Emissions Reporting in CDP: What you Need to Know
CDP has been evolving over the last 22 years, defining and honing its disclosure system to bring transparency to sustainability and be part of the effort to effect meaningful action on key environmental issues.
In the ever-changing landscape of environmental sustainability, CDP continuously learns from it’s 13,000+ disclosing companies - understanding what climate change, land and water management means in practice.
This is reflected in Planetly’s approach to carbon measurement and management - learning from you what companies need, want and expect. This learning has in turn come from your suppliers, customers, employees and the local and global communities in which you operate, informing your own sustainability strategies based on your stakeholders needs, wants and expectations.
If you have been requested to disclose to CDP by one of your investors or a major purchaser, or indeed you have decided to participate voluntarily, you will no doubt have contemplated the mountainous task at hand.
Here are some of our thoughts about how to get the most out of CDP:
To Disclose or not to Disclose?
Even if you receive a request to disclose by an investor or purchasing company, it is still a voluntary scheme and you can decide whether to disclose or not. There are lots of reasons to disclose, and CDP does a good job of outlining them on their website. We think that there are two even better reasons to disclose:
1. The entity who has made the request to your company to disclose through CDP will know that you did not disclose. This is not a good look for anyone!
2. If a company has been requested to disclose and does not submit a response, it will receive an ‘F’, the grade that we all feared at school.
So to look good for your investors or key customers, even a basic disclosure is better than none and it will give you a chance to improve in future years. In your first year, you can opt to submit to the minimum version of the questionnaires too, which have fewer requirements. However, CDP is an undertaking which will take time and internal resources, so be prepared for the climb if you decide to start the journey.
Know Your Carbon Footprint
CDP has 3 questionnaires - Climate Change, Water and Forests. The Climate Change questionnaire is the most requested as it is relevant to almost all companies. In this questionnaire, the main sections ask you a myriad of questions about your company's operational carbon footprint. Depending on whether you are competing the full or minimum versions of the questionnaire, you need to know not only your total carbon footprint, but lots of additional information including:
- Your most recent year's carbon footprint and up to 3 years previous to that (if you have calculated your carbon footprint before). Additional to this, you are asked if your carbon footprint has changed due to any significant changes in your business or reporting methodology, rather than just through excellent sustainability initiatives.
- Your carbon emissions, broken down by GHG scope - Scopes 1, 2 and 3 as defined by the GHG Protocol. Within each scope, you need to also break down your emissions by the carbon activity, such as per energy type and specific upstream and downstream activities.
- What you are NOT reporting on. You are asked to explain operational facilities, locations, business entities and carbon related activities which fall within the reporting boundary but are excluded from your carbon footprint.
- Intensity measures: These are your annual carbon emissions broken down by relevant indicators such as per FTE employee, per unit of currency revenue, per square meter floorspace occupied, per unit of production and any other indicator which links your carbon footprint to your business growth.
- Energy consumption and generation, including fuels, electricity and renewable energy which fall under your companies Scope 1 and 2 emissions.
Undertaking a carbon footprint assessment and using good data and information to compile it will ensure that you are able to answer these questions effectively. Planetly is happy to support you here!
If you are responding to the full version of CDPs questionnaire (or the minimum version but are supply chain-requested) and submit it by their July deadline, they will read all your answers and give you a score. Imagine doing that for thousands of companies!
As we already said, you don’t want an F. By disclosing, you can get a score ranging from ‘A’ through to ‘D-’. CDPs Scoring Methodology has a number of complexities, in which it weights particular questions to reflect the status of a company's environmental performance.
Very few companies reach the Leadership stage, and CDPs annual A List consists of 200-300 companies a year who have scored ‘A’ in any of the questionnaires. To get a good CDP score, you need to consider the following:
- Submit by the deadline and your response will be scored.
- Answer every question. Leaving a question blank means that you will automatically earn zero, so write down something.
- Make your answers relevant to your business and avoid generic statements
- Remember that your scores are reported back to you and allow you to define areas of improvement. So better inputs lead to more useful outputs.
Planetly supports companies in CDP by generating good quality answers to the key technical questions in the Climate Change questionnaire. We factor in the scoring methodology to ensure that each answer is able to be awarded the best possible score in the given context.
However, getting a D does not necessarily mean that you have done badly. Your investors, customers and other stakeholders will appreciate that you have disclosed at all and are working towards improving your score.
Timelines to Keep in Mind
Whether your CDP submission is a race against the clock or not partly depends on your chosen carbon reporting year. Many companies report on the calendar year, i.e. 1st January to 31st December. CDP’s submission deadline for scoring is the end of July each year (they release the exact date at the start of the year). So you will have around 7 months from the end of the reporting year to calculate your carbon emissions, work through the questionnaire and internally review and sign off your responses.
Carbon footprint data collection usually takes around 3 months but can vary vastly depending on the nature of your business and accessibility of carbon activity data. You should begin the process as soon as possible, concurrently completing your carbon footprint and working on all the sections of the CDP questionnaire. The online portal used by CDP, the Online Response System (ORS) opens in April each year, so you will need to work off-line until that time.
You may receive a request to disclose late in the day, and if you decide to disclose that same year, you may find it’s all hands on deck to complete and submit for the deadline. If you disclose to the minimum version, which you can opt to do in your first year of disclosure, you will not be scored in any case so the deadline won’t factor in here.
The take-away is that you should start preparing for CDP as early as you can. Be generous in your timeframes and resource allowance and the process will be a positive one, as well as a useful tool in your sustainability programme.
Tackling Climate Change Your Way
In addition to the technical questions, sections of CDPs questionnaire ask about your specific approach to climate change risks and opportunities and what strategies you have in place to measure, monitor and implement good practice. By the time you are completing the questionnaire, you may not be able to answer all these questions fully because your company may not have thought about some of these aspects yet.
Some interesting questions include:
- Is there board-level oversight of climate-related issues within your organisation?
There are additional questions which ask you to provide more details, but the idea behind this question is to know where ownership and responsibility for performance lie and how high up on the agenda climate change is in your company.
- Does your organisation have a process for identifying, assessing, and responding to climate-related risks and opportunities?
You may not have got round to doing a SWOT analysis for climate change, but CDP is asking you to do it! Investors and supply chain managers want to understand what risks may exist related to climate change and what is being done to manage them in the short, medium and long term.
- Provide details of your absolute and intensity emissions targets and progress made against those targets.
Setting targets is a key component of CDP, as it provides a tangible measure of performance and improvement. As a founding member of the Science Based Targets Initiative (SBTi), CDP provides room to disclose whether your targets have been calculated based on this methodology.
- Do you engage with your value chain on climate-related issues?
Understanding that stakeholder engagement is a vital part of the mix, CDP delve into how your company actively engages with suppliers, customers, policy makers and trade associations, as well as how else your business provides transparency about its climate performance.
- Is there board-level oversight and/or executive management-level responsibility for biodiversity-related matters within your organisation?
Biodiversity is a new section in CDPs 2022 disclosure. It aims to gather information about approaches to biodiversity issues including how stakeholders are engaged, what commitments have been made and how they have been publicised, and whether biodiversity has been assessed in the value chain. The focus of these questions are likely to evolve over time as CDP gains insights into this topic.
You can utilise these types of questions as a framework to design your company's own sustainability programme. Remember that CDP has used input from thousands of companies over the course of 2 decades to design their questionnaires, so it can act as a valuable resource. CDP also has a guide for taking a step-by-step approach.
If you want to know more about how Planetly can help you with the technical sections of your CDP climate change disclosure, contact us.