Carbon Disclosure Project: the power of information

Peter Drucker, a great businessman, said “what cannot be measured, cannot be improved”. With this objective in mind, the Carbon Disclosure Project, also known as CDP, was born in 2000. Its objective was to solve one of the biggest environmental problems at the time: the lack of public disclosure of carbon emissions generated by large industries. 

The Carbon Disclosure Project report allows all companies around the world to publicly report their contribution to climate change. This report is based on a questionnaire, which is currently completed by 80% of the corporations included in the Fortune Global 500 index. 

But what is the Carbon Disclosure Project? 

What methodology is used to prepare the reports of this project  

Has it achieved the objectives proposed in the year 2000?  

In this article we will answer all these questions, and also give examples of well-known companies that report their emissions to the CDP. 

What is the Carbon Disclosure Project? 

The Carbon Disclosure Project is an international NGO founded in the United Kingdom in 2000. CDP is responsible for developing the methodology for different companies and industries to report the status of their carbon emissions. The main objective of the Carbon Disclosure Project is to contribute to the fight against climate change by encouraging the implementation of emission reduction plans based on the previously mentioned measurements.  

The Carbon Disclosure Project questionnaire is completed by companies on an annual basis, and covers the following areas:  

• Measurement and disclosure of carbon emissions  
• Identification of risks and opportunities associated with these measurements  
• Implementation of corporate strategies to manage the reported emissions 

As of 2022, more than 14,000 companies and 1,100 cities report to the CDP. These companies account for 64% of the global market capitalization. 

How does the CDP score system work? 

CDP scoring reflects a series of clear steps that companies must take to align their management to current environmental policies.   

These steps are contained in a comprehensive questionnaire that includes the following chapters:  

C1: Governance  

C2: Risks and Opportunities  

C3: Business strategy  

C4: Targets and performance  

C5: Emissions measurement methodology  

C6: Emissions Data  

C7: Emissions Detail  

C8: Energy  

C9: Additional Metrics  

C10: Verification  

C11: Carbon price  

C12: Commitment  

C15: Additional Information  

SC: Supply Chain 

Scoring is not only an indicator for stakeholders. It also allows companies to structure and prioritize their climate change strategies and targets.  

Companies that meet the highest environmental and CDP disclosure standards are included in the so-called “A-lists”. 

 What are Carbon Disclosure Project A Lists? 

Based on the questionnaire responses received from companies, CDP awards a score that goes from A to F. This score is based on companies’ understanding, leadership and commitment to current environmental standards.   

The references for this rating are:  

A: Leadership Level  

B: Management Level  

C: Awareness Level  

D: Disclosure Level  

F: The company failed to submit the information required by CDP.  

 The following image shows a summary of the CDP rating system:

 

 

According to publicly available information, Carbon Disclosure Project has three types of “A Lists”:  

• Climate Change
• Forests  
• Water protection  

The companies contained in these lists have reached the Leadership level in the areas mentioned above.  

Finally, some of the requirements that must be met to be on these “A Lists” are:  

• It is mandatory that all Scope 1 and Scope 2 emissions are reported to the CDP.  

• 70% of Scope 1 and Scope 2 emissions must be verified.  
• A minimum number of Leadership Points must be achieved. 

As of today, there are more than 200 companies that have achieved the “A Lists” established by the Carbon Disclosure Project.  

Some of these companies are:  

• Danone  

• HP  
• L’Oreal  
• Unilever  
• KAO corporation  
• Lenzing AG  

• Bayer 
• Carrefour  
• Coca Cola  
• Among others… 

If you want to access the full list of the companies that make up the CDP A-Lists, you can do so with this link. 

Results of the CDP 2017 report 

In 2017 CDP managed to demonstrate, through measurements received in previous years, a fundamental finding. 70% of reported carbon emissions since 1988 are generated by 100 industries alone. These companies belong mostly to the oil industry. 

Other findings of this report are:  

• 32% of emissions come from public companies that belong to investors, 59% from state-owned companies and 9% from private companies.  
• Almost half of the emissions (50%) are associated with just 25 companies.  

• Fossil fuel companies have generated more emissions in the last 25 years than in the 237 years prior to 1988.  
• If these investors and companies take immediate action, it is possible to meet global carbon reduction targets. 

Why should companies report to CDP? 

The impact on climate change and the need to change the way the industry does business is one of CDP’s biggest concerns of the last 20 years.   

The quality of data management and CDP’s global visibility leads to many companies seeking to align themselves to higher environmental standards.  

In turn, there are many investors who use CDP to evaluate a company’s performance before investing in them.   

What are the advantages of reporting to the Carbon Disclosure Project? 

According to CDP, there are numerous advantages for companies that choose to report their emissions:  

• Companies are able to prepare for potential future climate change regulations.  
• It is possible to identify internal risks associated to the company’s environmental impacts.  

• Companies have the opportunity to show stakeholders their environmental performance.  
• CDP helps companies support their environmental engagement communications with public data.  
• Companies that report to CDP increase the level of transparency of their actions and processes, which represents a competitive advantage over other companies that do not report.  

The Carbon Disclosure Project currently works with more than 590 investors with assets of over US$110 trillion to obtain information on the environmental performance of companies.  

Carbon Disclosure Project and renewable energies 

For companies wishing to transform their energy matrix to a 100% renewable one through the purchase of certificates or products, CDP approves the following methodologies:  

• Renewable energy certificates (RECs, GOs, I-RECs).  
• PPAs  
• Green power products   

 It should be noted that CARBON NEUTRAL+ BIORECs offers a combined mechanism where the company receives I-RECs to communicate its renewable energy operation, while also financing renewable energy projects in vulnerable communities in its country of operation.           

A company can report to CDP by completing the questionnaires on climate change, forests and water management. To report to CDP click here.  

If you would like your company to improve its climate change impact, and to score points within CDP, do not hesitate to contact us. 

References 

Janzwood, A. Carbon Disclosure and Global Decarbonization: The Case of CDP. Environmental Governance Lab (2017) 

EDP, The new norm: ESG disclosures and science-based targets, 2022. 

EDP, New report shows just 100 companies are source of over 70% of emissions, 2017.