CDP Rating Explained: The CDP Scoring Method in Detail

The CSRD introduces new requirements to standardize the sustainability reporting of companies in the EU. However, many companies already use existing frameworks to share their sustainability information with stakeholders. One widely used framework is CDP, through which 23,000 companies worldwide disclosed environmental information in 2023. The CDP platform offers companies, cities, and authorities the opportunity to report on environmental impacts and receive a verified sustainability rating in return.

In this blog article you will learn all about the Carbon Disclosure Project (CDP), the topics that need to be disclosed for a CDP rating and detailed information about the CDP scoring methodology.

Everything You Need to Know About CDP

What is CDP?

The non-profit organization CDP (originally Carbon Disclosure Project) was founded in the UK in 2000 as a platform for companies to disclose their carbon footprint. Since then, the NGO has expanded its scope to include not only information on climate impact, but also on forests, water security, plastics, and biodiversity. CDP is a voluntary reporting system in which any company can participate, regardless of its size and sector.

Every year, more than 15,000 companies publish their sustainability data using the standardized CDP questionnaire, which enables uniform and comparable data disclosure. The CDP rating is used worldwide to measure the environmental impact of companies, set ambitious corporate targets and provide evidence of sustainability progress.

The CDP Process

The CDP process can be divided into three steps:

1. Reporting (Disclosure): Companies, cities, authorities, states, and regions are required to disclose their environmental impact.
2. Insight: This information allows companies' performance to be compared with that of their competitors and evaluated by investors, cities, policymakers and other companies.
3. Action: Based on these insights, CDP deploys campaigns to facilitate and drive meaningful action to tackle climate change.

With these three steps, CDP is pursuing its goal to motivate companies and cities to disclose environmental data, strengthen transparency and accountability for sustainable practices and promote a more sustainable future.

The CDP online portal opens every year in April. Even before the opening date, CDP recommends that companies start preparing their responses. For support, CDP provides helpful documents on its guidance page. The deadline for submitting questionnaires is July if an assessment is sought, or September if no assessment is desired.

The reported ESG data will then be made publicly available via the CDP database so that investors, customers and the general public can access and analyze the information. Companies that submit their data by the July deadline will receive a CDP score, which can range from D- (lowest score) to A (highest score). More details on the scoring method can be found in the section: The CDP scoring method at a glance

Rating Topics for CDP

To receive a CDP rating, companies must disclose data on the specific environmental topics (climate change, forests, and water security). In 2021, CDP began to extend the topics to all planetary boundaries. Biodiversity was therefore added in 2022 and plastics in 2023. Both topics were not yet included for the CDP rating in 2024. We provide all updates on the CDP rating in this blog article: Mastering the CDP questionnaire

CDP Data Points on Climate Change

Climate change requires decisive action. To manage the risks effectively, companies must transparently disclose where they currently stand. They need to underpin their climate targets with clear actions, transition metrics and evidence of progress to achieve global goals such as halving emissions by 2030 and climate neutrality by 2050.

The disclosure of climate data through the CDP rating has continuously evolved to reflect the latest scientific evidence and global policy developments. In the first two decades, the focus was on raising awareness of climate issues, promoting more ambitious targets and informing decision-making through high-quality governance data.

CDP Data Points on Forests

Around 15% of global greenhouse gas emissions are caused by forest and forest degradation, which requires decisive action. CDP has identified the global demand for agricultural commodities — such as wood, cattle products, soy and palm oil — as the main cause of forests. These raw materials form the basis for numerous products and therefore play a central role in the value chains of many companies.

The CDP rating therefore assesses the production and procurement of these raw materials in particular. Companies can also disclose whether they produce or source other agricultural products such as rubber, cocoa, or coffee.

Companies can use standardized metrics from the Accountability Framework Initiative to document progress towards the goal of "eliminating forests". In addition, data on sourcing areas and traceability, but also on cooperation with smallholders, restoration, and nature conservation projects and the application of landscape concepts are disclosed.

CDP Data Points on Water Security

Water is a finite resource and its protection is essential. The CDP questionnaire helps companies to create transparency about their water-related dependencies, risks, and strategies and to pave the way for a water-safe economy.

The CDP rating publishes information about a company's management, governance, and use of water resources. It highlights data points on current and future water-related dependencies, impacts, risks, and opportunities.

It is important to CDP that companies have robust monitoring and accounting for all aspects of their water footprint and that they demonstrate an understanding of their water dependencies and impacts (water accounting).

CDP Data Points on Biodiversity

Biodiversity loss not only threatens ecosystems, but also economic and social foundations. As highlighted by the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES) and the Intergovernmental Panel on Climate Change (IPCC), there is a strong link between biodiversity and greenhouse gas emissions, resilience and adaptability to the threat of climate change.

However, the loss of biodiversity also poses a real risk: Biodiversity is the basis for all ecosystem services on which society ultimately depends and, unlike climate change, biodiversity loss is irreversible.

The IUCN guidelines ("Guidelines for planning and monitoring corporate biodiversity performance") serve as guidance for the biodiversity data points in the CDP rating. Companies must disclose how they:

• Understand their biodiversity dependencies, impacts, risks and/or opportunities and identify where they should focus their efforts;
• Reflect on their ambitions to mitigate negative impacts on biodiversity, as well as their objectives and key strategies;
• decide which indicators and metrics to use to measure the success of the strategies; and
• disclose and monitor the success of the strategy.

As with the topic of plastics, the CDP questionnaire contains data points on biodiversity for all companies, but these are not yet included in the CDP score.

Plastic as a New Rating Topic

Global plastic pollution poses a massive threat to ecosystems, economies and societies. Despite the globally recognized scale of the problem and the scope of its impact, many companies are still unaware of how they are contributing to the plastic crisis and the economic, legal and reputational risks they face in their value chains.

Companies are asked to disclose through the CDP rating whether they are currently taking action to

• reduce the consumption of plastics
• reduce or eliminate the proportion of virgin material in plastics;
• Eliminate problematic and unnecessary plastics;
• promote the transition to reuse systems;
• reduce emissions of microplastics and
• lead to an increase in recyclability.

Even if the data points relating to plastics are not yet included in a company's CDP score, companies are still asked to disclose them.

Sector-Specific Questions in the CDP Rating

CDP requires companies from particularly environmentally intensive sectors to provide extended data disclosure. In addition to general questions, these companies must provide additional, sector-specific information defined by the CDP Activity Classification System (CDP-ACS).

The CDP-ACS categorizes companies based on their sources of revenue and their potential impact on climate change, forests, and water security.

Companies can be assigned to up to four questionnaire areas, but are only rated in their primary sector.

As sector-specific questions are customized, some questions may not be relevant for certain companies.

The CDP Scoring Method at a Glance

The CDP rating serves as a benchmark for environmental transparency and commitment. It helps companies to understand their position on the path to sustainable business and to make targeted improvements. The aim is to support companies in adapting to global environmental goals. At the same time, it provides stakeholders such as investors, customers, and partners with a clear insight into a company's environmental strategies.

How does CDP Scoring work?

The CDP rating assesses companies on the basis of questionnaires in the areas of climate change, forests, and water security. This evaluation is carried out in four successive stages, which reflect the progress of a company on the path to greater sustainability:

1. Disclosure — scores D- and D

Companies are assessed for the completeness of their reporting. Almost every question in the CDP questionnaire is included in this assessment, with the exception of biodiversity and plastics questions. The score depends on the amount and relevance of the data provided.

Example: A company reports on its emissions without analyzing them or taking action.

2 Awareness — Scores C- and C

This level checks whether a company understands the links between environmental issues and its business activities. However, it does not assess whether measures have been taken.

Example: A company recognizes water scarcity as a risk, but has not taken any measures to mitigate it.

3. Management — scores B- and B

This level shows how well a company manages and implements its environmental impact. Points are awarded for specific measures to minimize the environmental impact.

Example: A goal to reduce emissions is pursued, supported by the use of renewable energies.

4 Leadership — Scores A- and A

To achieve this highest level, companies must demonstrate best practices and strategic actions (such as science-based climate targets) that distinguish them as leaders in environmental management.

Example: A company is committed to a forest-free supply chain and actively monitors its suppliers.

Why is CDP Scoring Important?

CDP scoring has two main objectives:

1. To incentivise: It motivates companies to progressively improve their environmental strategy - from transparency (disclosure) to leadership (leadership).
2. Enable comparability: It creates a standardised framework that allows companies, investors and other stakeholders to measure progress towards sustainability.

How the CDP Score is Calculated

A company's score is based on the points collected from the various questions in the areas of climate change, deforestation and water security.

• Disclosure and awareness: The score is based on the ratio of points earned to the maximum possible points.
• Management and leadership: A weighted score is calculated for these levels, taking into account the importance of each question for the respective industry. This enables a differentiated assessment that reflects the specific challenges of the various sectors.

CDP Scoring Innovations 2024

Several changes to the scoring method and requirements have been introduced for the CDP rating in 2024

1. Introduction of the forest score: From 2024, the separate score for each commodity (e.g. palm oil, soy) will be replaced by a single forest score. This combines general questions on forests and specific commodity questions in an overall score.
2. Essential criteria for progress: CDP has introduced minimum requirements (essential criteria) at all scoring levels from 2024. These must first be met by companies before they can progress to the next level. This means that companies must not only achieve a minimum score, but must also fulfill certain requirements to ensure the integrity of their reporting. This prevents companies with selective measures from receiving a good rating without improving their environmental strategy holistically.
3. Clearer requirements for the CDP A-list: Companies wishing to qualify for the A-list must:

• Have at least 70% of their Scope 1, Scope 2 and Scope 3 emissions verified by CDP-recognized standards.
• Demonstrate robust governance and risk analysis.
• Demonstrate progress on science-based targets and emissions reduction along the entire value chain.

4. Extension of criteria for forest and water security: Essential criteria for forests and water security will also only apply at the Leadership Role level from 2024. This new direction underscores the urgency and need for transformative action, particularly in light of growing global environmental concerns.

Strategies for Improving Your CDP Score

1. Increase transparency: Answer the CDP questions fully and in detail.
2. Analyze risks: Identify environmental risks, e.g. water scarcity or forest, and document them.
3. Implement measures: Set ambitious, science-based targets to minimize environmental impact.
4. Strengthen governance: Integrate sustainability into your business strategy and demonstrate progress along the value chain.

CDP scoring not only provides companies with clear guidance, but also the opportunity to position themselves as sustainable market leaders.

The path to a successful CDP score begins with thorough preparation. With a powerful software solution, you can manage your data centrally, complete your CDP questionnaire efficiently and gain in-depth insights.

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