Responding to the CDP: Why & How
by Chelsea Glisson
A Case for Carbon Reporting
The days are behind us when carbon reporting was just optional. Yes, we know it’s technically “optional,” but denying it much longer is like pretending you don’t need an accountant to help with your taxes while the SEC is breathing down your neck. If you’re privately held or insulated by your supply chain, you may have a few more years before you feel the full weight of carbon reporting mandates, but their effect is imminent, and our recommendation stands: respond to the CDP. Now.
The CDP is the world’s leading framework for reporting carbon emissions, providing datasets for investors, companies, and regions to manage their environmental impact. Its rigorous requirements ensure that participants adhere to the most up-to-date mandates and stay ahead of the ever-changing landscape of climate-positive initiatives. Each participating company is given a letter grade, ranking them from failure to report (F) to climate leadership (A). Responding to the CDP shows investors, consumers, and competitors that you’re taking corporate action with climate change.
The Complexity of CDP Scoring Methodology
The CDP takes a level approach to scoring with a minimum number of indicators for each level in order to advance to the next. If the minimum score threshold is not achieved for a particular level, the company will be graded at that level and cannot advance, despite higher potential scores in other categories. In this way, gaps in data or responses in one area will anchor your company to that score, regardless of your high achievement in other areas.
Additionally, the CDP adds requirements each year. For new elements, companies have one year to respond without being scored on them, but the grace period is lifted the following year. This ensures companies are complying with the latest policy changes but means replicating responses year over year won’t necessarily yield the same score. Maintaining your grade is complex and improving is challenging; but neither is impossible with time, due diligence with data, and a strategic approach to answering the questionnaire.
How to Approach Your CDP Response
While the due date isn’t until July 27, 2023, responding to the CDP requires months of data collection, strategy, and thoughtful articulation. For first-time responders, we recommend beginning in early March, while repeat responders should begin in April. We suggest going question by question to identify gaps in data or information. With ample time, your team can chase down critical metrics from other departments or facilities (if you use an Energy Management System already, this is where you’re really happy that you do).
Understanding the scoring methodology can be an incredible asset to your process, as you can identify lagging areas that influence your overall score. Remember, excelling in a few areas may be exciting but it won’t positively impact your score if you’re behind in other areas. We recommend getting a few years of responding under your belt before it’s mandated so you aren’t scrambling to understand the process with legal implications in the mix.
Remember — It's a Journey, Not Just a Score
Most importantly, remember that you are on a journey to tell your company’s climate story. Ultimately, what matters is that you are intentionally collecting, calculating, disclosing, and reducing your carbon emissions – and, thus, your company’s risk profile. By responding, you’re showing stakeholders that you take climate change seriously and are trying to manage your carbon footprint. Each year, the requirements are becoming more stringent, so don’t belabor over your grade. Focus on celebrating ways you are improving.
If you’re looking for help responding to the CDP, let’s chat. We support companies step by step, formulating responses, collecting data, and strategizing ways to improve.
