CDP: Carbon Disclosure Project Beginner’s Guide
The Carbon Disclosure Project (CDP) manages a international sustainability disclosure system that helps states and regions, cities, investors and companies manage their effect on the environment. It’s a not-for-profit organization founded in 2000 by Paul Dickinson (a founding member of Persefoni's Sustainability Advisory Board) and Tessa Tennant, who wanted to create a system that empowers investors to use their influence to encourage disclosure from corporations.
CDP’s disclosure mechanism creates urgency for organizations to take the first step in joining the fight to manage climate change. CDP gives customers, investors and other stakeholders a path to request environmental information from companies, cities, states, countries and public authorities.
Since 2000, CDP has become a vital part of many reporting organizations, with more than 13,000 disclosing in 2021. It also uses this self-reported data to provide comprehensive data for uses ranging from data packages to mapping trends to creating CDP’s annual “A Lists” to highlight the leaders in environmental action and transparency. High-profile organizations like AstraZeneca, L’Oréal and Mitsubishi Electric are among the entities who’ve earned “A List” status for multiple years.
We’re going to cover how CDP’s framework works, how it aligns with other initiatives and why organizations should disclose through CDP. You can visit CDP’s official website for more information.
How Does CDP Reporting Framework Work?
The basic disclosure process involves a disclosure request and disclosure submission through CDP, resulting in data available for future reports.
Here are the five general steps in CDP’s disclosure process for companies:
Step 1: Investors or customers submit a disclosure request through CDP
Step 2: Companies receive the disclosure request, then gather their information and submit their disclosure to CDP
Step 3: Companies review the complete disclosure and CDP score for opportunities to improve their environmental impact
Step 4: CDP sends disclosure to requesters
Step 5: CDP uses disclosure data for future reports and datasets
CDP also has disclosure models that cities, states and regions, and public authorities can also submit. Any organization is welcome to submit information without a disclosure request as a self-selected company, city, state or region.
CDP assigns scores to companies and cities to illustrate their progress and motivate them to take the lead in environmental action. Scoring methodologies differ between CDP’s three questionnaires: climate change, forests and water security. There’s also guidance tailored for companies, cities, and states and regions.
CDP’s scoring methodology evaluates reporting organizations by the following categories. Each category represents the levels organizations move through as they work toward environmental stewardship.
The disclosure category focuses on the amount of data and its relevance to users.
The awareness category focuses on the thoroughness of an organization’s assessment of how their business converges with environmental challenges.
The management category focuses on evidence given for the way an organization manages their environmental impact.
The leadership category focuses on an organization’s performance in the previous three categories. It looks at the comprehensiveness of their actions, risk assessment and the implementation of their strategies to improve their environmental impact.
Reporting organizations must attain a minimum score and/or meet a minimum number of criteria at one level before CDP will score the next section. For example, if an organization fails to meet the minimum for the disclosure level, then it will not get a score for any of the other levels.
Points awarded for each category have their own calculations:
Disclosure and awareness points are divided by the maximum number of points possible, then multiplied by 100 and rounded to the nearest whole number to convert to a percentage.
Management and leadership points are calculated based on weighting for that category determined that year.
CDP sets preliminary benchmark scores that are subject to change if deemed necessary. It may adjust the thresholds to ensure scores accurately reflect the progress of reporting organizations.
CDP creates “A Lists” for cities and companies to highlight entities that are leading the way with “A” scores. If reporting organizations can meet the bare minimum for the first category, they can earn a “D-” at the minimum. “F” scores are reserved for organizations that fail to provide enough information for CDP to evaluate, including organizations that fail to respond at all.
Organizations benefit from these scores because it gives them a clear way to see how they stack up against peers. It’s also a signal to see how much more work they need to do to reduce their organization’s negative impact on the environment.
The scoring system is also a straightforward way to improve investor relations by showcasing where they stand with their environmental impact along with plans to improve. These scores and disclosure processes also give reporting organizations tangible resources they can provide for investors who include corporate social responsibility or climate risk in their investing decisions.
How Can Organizations Improve Their CDP Rating?
Organizations can improve their rating by familiarizing themselves with CDP’s scoring methodology, using relevant data to inform their answers and actions, and leaning on external help when needed and accessible. Following these basic steps can start reporting entities off on the right foot.
Below are a few tips that organizations can follow when starting on their CDP disclosures:
Understand CDP’s scoring methodology to see what information is needed and what categories you should focus on first for the biggest impact.
If applicable, leverage scores and insights from previous CDP reports to inform changes and actions needed for future disclosures.
Get buy-in from relevant staff, board members and other stakeholders to ensure everyone understands the disclosure’s importance and their role in earning an improved rating.
Set science-based targets (SBTs) based on current data so that your organization has measurable and realistic goals.
Compare progress and goals to peers to see how similar organizations have worked through their CDP disclosure and how they’ve worked to reduce their negative environmental impact.
Aim to collect accurate scope 1, scope 2 and scope 3 information to provide a full set of data for the disclosure.
Take advantage of additional resources and engagement with CDP’s staff if the budget permits.
Vet accredited solutions providers to find support with putting together your disclosure and navigating CDP’s scoring system.
What Does CDP Reporting Require?
CDP reporting requires reporting organizations to submit qualitative and quantitative data to explain the current state of their organization and their plans to improve.
Companies are asked to disclose relevant information about climate change, forests and water security. These questionnaires can differ between industries. There are also questionnaires for cities, public authorities, and states and regions. CDP makes all questionnaires available through their website. They also note any changes between reporting years.
Reporting entities can turn to tailored guidance for relevant resources:
What Are Examples of Other Resources CDP Provides?
CDP provides access to research and engagement campaigns in addition to their scores and reporting platform. These additional resources help support efforts to improve the quality and number of disclosures.
CDP’s research hub is home to many datasets and reports that illustrate how reporting organizations are taking action. Data is freely available to the public.
Access to this research can let customers and residents see how companies, governments and public authorities are making progress with their climate goals. Investors can get a closer look at how companies are faring against their peers. Reporting organizations can also use this information to guide their disclosures.
CDP’s annual Non-Disclosure Campaign gives investors an opportunity to engage with companies that have yet to respond to their disclosure requests. CDP also publishes both the investors involved and companies targeted in the campaign each year.
In its most recent report on the campaign, CDP says it’s seen a 35% yearly increase on average in investor signatory participation. CDP also says that companies that disclose once are likely to disclose the next year. For example, 85% of companies targeted in the 2020 campaign responded to CDP’s climate change questionnaire the following year.
What Are the Different Types of Memberships?
CDP provides membership for supply chain, reporter services and investors. Becoming a member comes with its own set of benefits and access to CDP’s resources. All memberships require a fee and some include different levels of benefits. We’ll break down the three primary membership types below.
CDP Supply Chain membership is for companies that want support disclosing emissions along their value chain. As a member, CDP will allow customers to directly request their suppliers to disclose to CDP and support both customers and suppliers throughout the whole process. They also provide resources and strategies for engaging suppliers.
Here are the benefits Supply Chain members can expect:
CDP disclosure system benefits help members understand and collect useful and applicable information from suppliers.
Account management benefits help members take advantage of CDP’s resources and expert team.
Data and analytics benefits help members make informed decisions and take action with their suppliers’ data.
Support and training benefits help members engage with and support suppliers with their disclosures.
Communication benefits help members inform their stakeholders about their CDP Supply Chain membership and how they’re taking action.
Depending on the level of membership (standard, lead, premium), businesses can also get help with more complex resources like support with net-zero targets, summaries of each supplier’s performance and multi-region support. Once information is collected, CDP will evaluate and provide suppliers’ data with their insights each year.
Companies can tackle a large number of emissions by requesting information from suppliers. Indirect emissions created along a company’s value chain are known as scope 3 emissions. These emissions are the most difficult to measure since they require engagement with many entities, including suppliers.
There are nearly 300 Supply Chain members that resulted in more than 47,000 requests in 2022. CDP’s recent Global Supply Chain Report found that engagement from Supply Chain members resulted in a reduction of 231 million tons of CO2e. Companies can reach out to firstname.lastname@example.org questions.
CDP offers Reporter Services to disclosing companies to provide custom support, additional tools and access to enhanced and tailored data. CDP provides Reporter Services based on multiple principles, like ensuring disclosed information is “investor-ready.”
Here are the benefits Reporter Services members can expect:
Disclosure support will help companies improve their data and plans for mitigating their negative environmental impact. Resources include one-to-one account management, review of the first disclosure draft and step-by-step guidance for first-timers.
Data and analytics support will help companies learn best practices and benchmark their progress against others. Resources include unlimited downloads of responses from companies, access to an interactive analytics tool and customized data cuts upon request.
Events and insights support will help companies get ahead of environmental news and trends while also highlighting their leadership. Resources include knowledge sharing and networking events, and member-exclusive webinars.
Full demos are also available for companies that want to see an example of CDP’s analytics tool. There are more than 300 Reporter Services members around the world. Companies can reach out to email@example.com for more information about membership.
CDP Investor Signatories gain access to disclosure data from all reporting companies. This helps investors inform their decision-making process and see how different organizations are progressing with their environmental goals.
General benefits for investor signatories include:
Access to CDP emissions data and scores via Bloomberg to help investors get a full picture of a company’s environmental impact.
Option to participate in the Non-Disclosure Campaign and the Science-Based Targets Campaign to allow investors to engage with companies.
Access to current and historical company responses along with all company CDP scores (with Excel export capabilities) lets investors see how companies are improving over time.
Disclosure progress updates throughout the open disclosure period so companies can know how companies of interest are moving through the process.
Newsletters on the latest happenings with CDP’s worldwide programs and other work so investors can stay up to date.
Promote corporate-level environmental engagement and reporting aligned with the Task Force on Climate-Related Financial Disclosures (TCFD) and the UN’s Principles for Responsible Investment (PRI) principles 1-4 so investors can influence companies’ immediate action.
Public acknowledgment for their commitment to engaging companies regarding their environmental-related challenges so investors can highlight their leadership.
Modeled scope 1, 2 and 3 dataset for more than 5,500 companies available for purchase at a discounted rate so investors can get a more complete view of emissions data where gaps exist.
Below are signature products available to signatories:
Investor Research includes reports encompassing 10 global regions and their progress in the transition to a low-carbon economy.
Matchmaker platform is an online dashboard that provides access to information on CDP cities’ disclosure and risk reduction actions along with metropolitan information on the project level.
Temperature ratings is a dataset that provides science-backed temperature ratings based on a company’s global warming potential if their GHG emissions are lowered at the same pace over time.
Climetrics is a fund rating that allows investors to incorporate climate impact into their decision-making.
Is CDP Disclosure Mandatory?
CDP disclosure isn’t mandatory, but the world is quickly moving toward mandatory reporting. Responding to a CDP disclosure request is in a company’s best interest in order to be transparent with the requester.
Getting started with calculating greenhouse gas (GHG) emissions inventories today can give organizations more time to gather information and prepare for potential requests.
Since CDP is aligned with other initiatives, like the TCFD and GHG Protocol, preparing for a CDP disclosure request can also help companies align with other recommendations.
Can Private Companies Report to CDP?
Private companies can use CDP’s private markets disclosure platform to report and disclose to the CDP. CDP worked with prominent investors to create a questionnaire specifically for private companies in 2021. This provides a way to hold private companies accountable. Without this system, they’re less likely to face similar environmental requests or mandates as public companies. Private markets have historically lagged behind public markets in ESG data disclosure, but are quickly catching up thanks to pressures from private equity investors and their LPs.
How Does CDP Make Money and Who Funds Them?
CDP is primarily funded by government and philanthropic grants along with administrative and other fees. For example, organizations must pay an administrative fee to submit disclosure or to become a member of one of CDP’s programs. Fees collected for datasets and other resources also go toward pushing forward CDP’s mission.
CDP is separated into three parts and all fall under the umbrella of CDP Global. Each has its own funding and financial position:
How Much Does It Cost To Submit to CDP?
Reporting to CDP can cost between $1,055 to $6,500. As CDP grew to serve organizations on a global scale, it began asking reporting organizations for these contributions to help fund their operations. Besides a slight adjustment to their fees in 2022, CDP hasn’t raised fee prices since it introduced fees in 2016.
There are three types of contributions that come with varying benefits:
Subsidized contributions are aimed at small- to mid-sized enterprises or those with a tight budget. Organizations can give a partial payment with the rest subsidized by other funding sources.
Standard contributions are for organizations that can pay the full expense. This covers the company’s cost and helps support platform and resource development.
Enhanced contributions allow organizations to pay more than the full cost in exchange for access to more data and support.
How Does CDP Use These Admin Fees?
CDP uses these fees to maintain their online disclosure system, resources and support, and overall increasing traffic to their site and tools. They also use funding to support annual updates to their questionnaire and improve compatibility with other reporting platforms.
How Do Companies Benefit From Funding CDP?
Funding CDP gives companies access to many services for disclosing environmental information. These are a few benefits companies receive by finding CDP:
Benchmark performance against peers
Highlight their sustainability progress through CDP’s globally known platform
Learn about best practices through stakeholders communities
Identify strategies to address climate risks and improve overall understanding through disclosure
Disclose to multiple stakeholders at once
Take advantage of CDP’s expert staff and resources
How Can Companies Get a Fee Exemption?
Companies are exempt from fees if they fall under one of the following categories:
They have not been requested by any of the above organizations and have only received requests from Bank Program members and/or Supply Chain members.
Companies headquartered, listed or incorporated in these countries are not required to pay the administrative cost:
CDP decided to stop commercial relations with Belarusian and Russian businesses at this time. This includes collecting disclosure administration fees and fees for Reporter Services. These companies may still submit disclosures. CDP requests that those fees are instead donated to a local environmental cause of their choosing.
Taking into consideration the invasion of Ukraine, CDP has waived fees for Ukrainian reporting organizations. CDP will also grant a reasonable pause in disclosure for Ukrainian organizations that receive a request.
How Does CDP Align With Other Initiatives and Organizations?
CDP aligns with other initiatives and organizations primarily by ensuring their questionnaires line up with others’ recommendations. Staying aligned with globally accepted recommendations helps streamline reporting for organizations and cuts down on the time and money needed to assemble reports. It also ensures that reporting organizations are submitting high-quality, comparable and standardized information.
How Is CDP Aligned With the TCFD?
CDP used the TCFD’s recommendations and pillars to inform their disclosure questionnaires starting in 2018. By disclosing through CDP, reporting organizations can actively apply the TCFD’s recommendations when reporting on their climate-related financial data.
This alignment led to CDP having the largest TCFD-aligned collection of environmental data worldwide. This helps further alignment since CDP data is used by many entities for decision-making and modeling.
What Is the Difference Between the Global Reporting Initiative (GRI) and CDP?
The GRI develops reporting standards, while CDP manages the global environmental reporting system. CDP is also collaborating with the GRI to standardize disclosures and environmental information. For example, CDP climate change and water questionnaires align with the GRI’s standards.
How Many Companies Are Reporting to CDP?
Over 13,000 companies reported to CDP in 2021. However, nearly 17,000 companies worth a combined $21 trillion failed to respond to disclosure requests.
Here are some other highlights about companies that recently reported through CDP:
270+ companies around the world earned a spot on CDP’s “A List”
509 companies improved from scoring a C or below to a B between 2020 and 2021
58% of companies scored between a C and D-
Why Should Companies Disclose Through CDP?
Companies should disclose through CDP to build trust and transparency, benchmark progress and do their part to create a low-carbon society. CDP found a 46% increase in new disclosure requests between 2021 and 2022 in a recent report. CDP says that there is more demand each year for transparency and disclosure.
CDP’s Non-Disclosure Campaign, the increasing demand for environmental action and transparency from stakeholders, and the global effort to fight climate change all create much-needed urgency for organizations to respond to disclosure requests.
Disclosing through CDP can help organizations prepare information aligned with other reporting frameworks, saving organizations time in the long run. Lowering an organization’s carbon footprint can also inevitably lead to improved operational efficiency and lower costs.
Responding to a climate disclosure request requires a reasonably fast and accurate disclosure. Investors, customers or stakeholders are requesting transparency from companies for a reason — whether it’s to see if a company is a good investment or if an organization is living up to its public climate goals.
Carbon accounting software can significantly cut down on the time needed to gather data and prepare these reports. Streamlining steps like data collection and formatting can lead to fewer mistakes and more time for analysis.
Learn more about how Persefoni’s climate management and accounting platform can help your company prepare for disclosure requests and other sustainability reporting.
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Persefoni is a leading Climate Management & Accounting Platform (CMAP). The company’s Software-as-a-Service solutions enable enterprises and financial institutions to meet stakeholder and regulatory climate disclosure requirements with the highest degrees of trust, transparency, and ease. As the ERP of Carbon, the Persefoni platform provides users a single source of carbon truth across their organization, enabling them to manage their carbon transactions and inventory with the same rigor and confidence as their financial transactions.