What should you know about CDP reporting?

As climate change influences various sectors, jobs, and consumption patterns, community members more and more wish to know how companies to which they hold onto adapt to the novel environment.

What Information Is Required About the CDP?

Let’s understand CDP

The CDP was among the first organizations to take on this challenge head-on. Originally known as the Carbon Disclosure Project, CDP is a global nonprofit organization that offers the voluntary CDP reporting framework. Companies can use this framework to submit yearly reports outlining their environmental impacts and efforts to lower emissions, pollution, and climate-related collateral damage.

Established in 2000 by a small group of investors and stakeholders, the Carbon Disclosure Project (CDP) has expanded over the past 24 years to become a preeminent framework for reporting carbon emissions, with more than 23,000 participating companies.

The Effects and Advantages of the CDP

The objective of the CDP is to standardize the regular disclosure of environmental and climate data in the corporate sector. Investor support for the CDP increased by 56% in 2021 compared to 2020. When approached by investors, companies are more likely to disclose their environmental impact, as evidenced by the 29% increase in engagement from these investors over 2020.

Every year, the CDP writes to the boards of companies asking them to reveal their environmental impact. In 2022, the Letters were sent to 10,400 companies and endorsed by 680 financial institutions holding more than $130 trillion in assets.

More than 700 Capital Market Signatories, with assets valued at over US$142 trillion, supported the CDP Letter in 2024, which requested environmental data from more than 30,000 companies globally.

Among the benefits of CDP reporting are the following:

• Determine supply chain risks;
• assess carbon reduction effectiveness in comparison to competitors;
• and steer clear of any recurring hazards.

Enhanced transparency and accountability can help your business attract environmentally conscious stakeholders and establish a solid foundation for sustainable business practices in the future.

Businesses that use the CDP reporting framework will benefit from its multi-regional applications and alignment with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) in light of the evolving landscape of mandatory disclosure.

The CDP Reporting Framework: How to Use It

Through the CDP’s three series of questionnaires on climate change, water security, and forests, companies can submit data and energy portfolio on their carbon emissions. First, respondents are asked to fill out a forests questionnaire covering topics like their use of natural commodities and the effects of operations on woodlands and other environments, depending on the sector that the reporting entity works in.

The second step in addressing water risks and opportunities is to ask companies about their efforts to recycle and clean water, as well as their use of water for cooling, cleaning, and processing. This is done through the water questionnaire.

On the other hand, the climate change questionnaire covers subjects like initiatives to reveal carbon emissions and implement lower-carbon technologies and practices. This includes safeguarding operations for the future against potential threats to the company’s assets, operations, and reputation.
Answers to a variety of pertinent questions related to each subtopic are required, and grades ranging from A to D are given according to how well each metric is performed. In order to produce a more comprehensive disclosure report for stakeholders, respondents may choose to address extra factors or limit their responses to the essential questions.

Businesses can choose to proactively and voluntarily provide climate data, or investors or clients can make requests for information to be provided via the framework.