Simplify your CDP Reponse Processes and Prepare for Future Scoring

As a European company, the pressure is on, if you haven’t already started reporting on sustainability. As new laws, regulations, and standards are coming into force in the EU, such as the Corporate Sustainability Reporting Directive (CSRD), your company will be required to report extensively on your sustainability efforts, including both past performance and future goals.

While the CSRD creates a new set of requirements in an attempt to standardize sustainability reporting across companies in the EU, many companies are likely already using existing sustainability frameworks to disclose sustainability-related information to their stakeholders. One common framework is CDP, to which 18,700 companies around the world disclosed environmental information in 2022. CDP’s platform offers a place for companies, cities, and public authorities to disclose their environmental impact, and in return, receive a verified sustainability score.

This blog article will take you through the basics of CDP reporting, and how you can optimize your reporting practices through the use of automated systems, thus doubling your efficiency when it comes to the new implementation of EU laws and regulations like CSRD.

👉 In 2024, the focus of the CDP assessment is expanding to consider Environmental Impacts and Dependencies alongside Risks and Opportunities. As a result, understanding both the entities under control and the supply chains in which companies operate becomes more important. Following the guidance of TNFD (Taskforce on Nature-related Financial Disclosures), companies responding to the integrated CDP questionnaire should highlight key areas for the topics of forests, water, and biodiversity.

Jump to the section on CDP disclosure topics for more details on the 2024 changes.

The Scope and Mission of CDP

CDP, originally called the Carbon Disclosure Project, was established in the UK in 2000 as a platform where companies could disclose their carbon footprint. It has since expanded its scope to include disclosures not only on climate impact, but also on forests and water security.

The CDP process can be broken down into three steps: disclosure, insight and action. Companies, cities, public authorities, and states and regions are encouraged to disclose their environmental impacts. With this information, performance can be compared against that of their peers and further evaluated by investors, cities, policymakers, and other companies. Based on these insights, CDP uses campaigns to facilitate and advance meaningful action, tackling issues related to climate change.

Through these three steps, CDP promotes its mission to encourage companies and cities to disclose their environmental data, thus furthering transparency and accountability with regards to sustainable practices, aiding in the creation of a more sustainable future.

CDP: The Process

CDP is a voluntary reporting framework, to which any organization, regardless of size or industry, is invited to disclose. Companies report to CDP by responding to a corporate questionnaire through CDP’s Online Reporting System (ORS). The portal opens each year in April, and CDP offers supporting documents on their guidance page in advance to the opening date and recommends businesses start preparing their responses prior to the portal’s opening. The deadline to submit your questionnaire is in July to receive a score, or September without a score.

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Reported data is then made publicly available through the CDP's database, allowing investors, customers, and the general public to access and analyze the information. Companies who submit by the July deadline will receive their CDP score which can range from D (lowest) to A (highest).

The CDP-Questionnaire

When a company is requested or chooses to complete the CDP questionnaire(s), they are able to access and download the questionnaire as a PDF even in advance to the official portal opening date from the CDP website. These PDFs are often over 100 pages, and thus begins the preparation process, which takes the bulk of a company’s time. 

From April 2024 onwards, CDP offers a new integrated questionnaire format encompassing the previously existing three questionnaires on the following topics:

• Climate change
• Forests
• Water security

The full corporate questionnaire will help stakeholders to better understand all environmental impacts across climate, forests, and water security, with regard to their operations, value chain, and financial decision-making.

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Not every company must disclose datapoints and answer the questions on all of the topics across the different environmental issues when completing the integrated questionnaire: ‍All respondents will be evaluated on climate change indicators, while questions regarding forests and water security will be tailored to each company's operations and significance. 

The CDP Activity Classification System (ACS) methodology is used to gauge the relevance of these questions, employing the same approach that CDP has relied on for the past decade to determine requests posed to large public companies.

In general, the length of the questionnaire can also vary depending on your response to particular questions. For example, there could be a sequence of follow-up questions, after you answered “yes”. Many of the questions are quantitative data questions. Ultimately, the more advanced you are in your sustainability journey, the longer and more extensive your questionnaire is likely to become.  

To prepare for the questionnaire, you typically need to gather data from various departments such as quality control, human resources, finance, etc., requiring extensive collaboration and coordination within your company. CDP also requires you to review and reflect on your existing initiatives, targets and policies, and create future goals for improvement, ensuring you are aligned with global standards.

‍Thus, advanced preparation and having an efficient response system in place is helpful to completing your yearly CDP questionnaire(s).

CDP’s Disclosure Topics: Changes in 2024

Five Year Strategy (until 2026)

In 2021, CDP launched a five year strategy to expand their disclosure topics to cover all planetary boundaries, involving biodiversity, plastics, land, oceans, waste, food and resilience, recognizing the interconnectedness of nature and earth’s systems, and more.

The endeavor to address a wider range of environmental themes commenced in 2022 with biodiversity and extended into 2023 with plastics. Looking ahead, stakeholders can anticipate an even broader scope of environmental issues being addressed.

While CDP questionnaires primarily concentrate on environmental matters, they are progressively incorporating connections to social and governance issues.

CDP wishes to enhance the involvement and role of stakeholders in the reporting and analysis process, as well as place a stronger emphasis on the formation of future targets and actionable tasks. 

In 2024, the introduction of the new integrated questionnaire streamlines efforts to tackle environmental topics such as biodiversity, plastics, and land more efficiently. This integration eliminates redundant governance and strategy questions across multiple questionnaires. Although the full questionnaire retains specific questions and scoring related to each environmental topic, respondents will now face a more holistic approach.

They will encounter questions covering all the environmental topics they're required to address, presented in a single interface for responding. 

Topic-Related Changes and Scoring in 2024

Climate Change, Forests and Water:

The introduction of the new integrated questionnaire doesn't mean that every company will need to address all themes or multi-environmental issues. In 2024, all respondents to the full corporate questionnaire will still be asked to disclose climate change datapoints .

Companies previously asked about forests and water security will likely encounter these topics again in the integrated questionnaire. CDP has outlined the methodology for determining if a sector will receive questions about water and forests as follows:

• The Water Watch tool will be used to assign water-related questions.  
• For forests, the sector methodology outlined in Appendix 1 of the CDP Forests Sample – Investor Request 2023 document will be used.

A significant change for 2024 is that the approach to determine which themes or environmental issues are relevant will be applied universally to all companies, both at the request of investors and customers.

Previously, Supply Chain members would specify the theme(s) or environmental issue(s) their suppliers needed to address. Moving forward, CDP will take charge of this determination, assessing it using the CDP ACS. This change also extends to companies requested to disclose by a bank or private market investor.

Despite this shift, CDP Supply Chain members, banks, and private market investors retain the ability to request disclosures on specific theme(s) or environmental issue(s) they deem pertinent, independent of CDP's assessment.

Regarding forests and water, companies can indicate any dependencies, impacts, risks, or opportunities they have identified to ensure they receive relevant questions.

Plastics:

In 2024, all corporate disclosers—excluding SMEs and public authorities—will be asked to present basic datapoints on plastics. Sectors heavily impacted by the topic of plastics may face a broader array of questions.

The identification of plastics activities will expand beyond production/commercialization to encompass waste and/or water management activities, as well as financial products/services related to plastics activities. This expansion aims to facilitate future incorporation of comprehensive metrics covering the entire spectrum of plastic-related activities along the value chain.

Biodiversity:

In 2024, all corporate disclosers—excluding SMEs and public authorities—will be asked basic questions about biodiversity. While in previous years, biodiversity questions were directed to those companies disclosing on the climate change questionnaire, CDP now recognizes the interconnectedness of biodiversity, climate change, and all nature-related concerns.

👉 In 2024, scoring will continue to separately assess climate change, water security, and forests. Neither plastics nor biodiversity questions will be factored into the CDP scoring in 2024. 

CDP’s Alignment with International Standards and Frameworks

CDP aims to adopt, align, or integrate with impactful, high quality international sustainability disclosure standards. This includes existing standards and recommendations, like GRI (Global Reporting Initiative), TCFD (Task Force on Climate-Related Financial Disclosures), ISSB (International Sustainability Standards Board), and EU Taxonomy, in addition to newer, upcoming standards and frameworks like the CSRD’s ESRS. 

Basing their responses with these frameworks allows companies to apply the requirements and comply with the regulations through data collection, analysis, and reporting. 

CDP and ESRS

👉 CDP aims to align with CSRD’s ESRS and announced on 31 July 2023 that many companies who disclose to CDP are well prepared to comply with the ESRS, as they already disclose on elements regarding relevant reporting topics. According to CDP, 55% of disclosing companies have a process in place to assess climate risks and opportunities. Data from the CDP disclosures is applied by policymakers, financial institutions, and companies around the globe to assess environmental progress.

CDP currently covers three main focus areas: climate change, forests, and water. These topics align with the topics of the CSRD EU Sustainability Reporting Standards (ESRS), which will become active from January 2024, and build upon other existing standards like GRI. 

Similar to CDP’s three main disclosure areas, the ESRS have created reporting standards on five environmental topics: climate change, pollution, water and marine resources, biodiversity and ecosystems, and resource use and circular economy.

On 8 November 2023 CDP announced its collaboration with EFRAG to ensure that companies can prepare for their sustainability reporting on environmental topics based on Environmental ESRS through their CDP disclosures.

CDP and GRI

👉 CDP writes their questionnaires in alignment with GRI Sustainability Reporting Standards to avoid duplication and ease the burden on companies who report to both CDP and GRI. 

CDP and EU Taxonomy

👉 CDP integrated best practice sustainable EU taxonomy criteria into its 2023 Climate Change Questionnaire and scoring, thus encouraging the practical application of sustainable finance through yearly disclosures. 

CDP and TCFD

👉 In 2018, CDP redesigned their climate change questionnaire to align with the TCFD recommendations.

CDP and ISSB

👉 CDP plans to incorporate the ISSB climate-related disclosure standard into its global environmental disclosure platform from 2024 to ensure a rapid early adoption of the global baseline standard for sustainability-related financial information.

Building a Universal System for Responding to Various Sustainability Requests 

With new EU sustainability legislation and standards in addition to existing disclosure platforms like CDP, responding to all sustainability requests each year becomes a huge project which is difficult to tackle. With many new legal requirements to adhere to in the coming years, it will be difficult to keep up with your sustainability disclosures. Implementing a system where your overlap in data collection, tracking and reporting can be completed in an automated fashion may help you overcome this challenge. 

Sustainability initiatives request central ESG information, and promote transparency for the benefit of interested parties. All of the standards and frameworks presented above require companies to consistently collect data, track metrics, and, in turn, report on their progress. Good news: With a request management already in place for CDP, you are on track to start collecting data and reporting according to new and upcoming regulations.

How to Prepare Your Response and Reporting System

While this all might seem overwhelming, there is no need to worry. Keep reading to learn our tips and tricks to staying on top of all of your sustainability reporting requirements. 

Because the realm of sustainability is interdisciplinary, people from every department of your company will ultimately need to be involved in data collection and reporting. This is where using an automated system to store data, policies, and metrics, as well as answers to different requests comes in handy. 

Sunhat’s system includes several mechanisms to help optimize your reporting process:

Similarity Score and Suggested Answers

With different frameworks that overlap in certain topics, Sunhat includes a similarity score and answer suggestions that allow you to easily map similar answers between different frameworks without the extra internal work.

For example, you could use the information stored in Sunhat from your answers to CDP’s integrated corporate questionnaire for your climate change disclosure according to the ESRS. This way, instead of repeating the same process twice, you can build on your previous answers. 

Tagging and Library Search

Tag your answers and questions to efficiently filter and search for contents like your energy use or greenhouse gas emissions when you need them. This way you will find old answers on similar topics easily and won’t get lost in the extremely detailed and specific reporting frameworks!  

Assigning Tasks and Data Collections

Not only can automated systems help you in answering questions more quickly, but they can also help distribute the work among your team and keep each member accountable for their designated tasks. This ease in communication limits the amount of mistakes you might make and saves you time and energy by reducing the number of miscommunications and back and forth email chains.

💡Using a platform like Sunhat will allow you to more quickly respond to sustainability requests, whether you have saved answers from previous years, or an overlap in questions from different assessments and reports.