Though the next CDP cycle doesn’t start until the spring, it’s best to begin preparing early, taking into consideration any gaps identified and lessons learnt from the previous cycle. Having just finished EcoAct’s busiest year ever for CDP submissions, our CDP expert, Caoimhe Costigan looks at how you can start preparing now to improve your CDP score for 2024.
In an ever-evolving sustainability landscape, organisations must be prepared to adapt to change, proactively identify and address gaps in their sustainability efforts, respond to risks and opportunities and navigate emerging regulations. One essential tool for achieving these goals is a robust CDP response. In this blog, we delve into why getting a head start is crucial to success, what the most common gaps are and how to improve your score for next year. This is in response to the anticipated and significant changes to CDP’s disclosure framework and timelines in 2024 and as new regulations and frameworks like ISSB (International Sustainability Standards Board) and CSRD (Corporate Sustainability Reporting Directive) gain prominence.
What are the most common gaps in CDP responses?
CDP is more than just a compliance requirement. It’s a strategic initiative that helps companies understand their sustainability impact in terms of climate, forest and water security and helps companies make informed decisions. Preparing early allows you to thoroughly assess your current CDP response. By identifying gaps in your data collection and reporting processes, you can work on improving data accuracy and completeness. Addressing these gaps early on ensures that your sustainability reports are credible and can withstand scrutiny from investors, customers, and regulators.
In terms of CDP’s sustainability themes and criteria, one of the most common gaps identified from this years’ response is the lack of credible and publicly available climate transition plans. 2023 saw an introduction of more stringent A-list criteria from the CDP, including the requirement for credible transition plans, which is an important evolution in strategic sustainability planning. A climate transition plan demonstrates that companies are committed to achieving a 1.5-degree pathway and that they are planning to transform their business model to align to a net-zero carbon economy. Click here to read EcoAct’s recent whitepaper on transition planning and transformation.
Climate-related transition and physical risks are increasing. Aligning to the Task Force on Climate-related Financial Disclosures (TCFD) will enable companies to be aware, prepare for and reduce the climate related risk to the business. Another key gap identified in current strategies, is the lack of climate-scenario analysis (CSA). CSAs are a key recommendation of the TCFD and transition plans. They act as a strategic tool to enable an organisation to integrate planning for possible climate futures into their business strategy, risk management processes and financial planning.
Transition plans need to be 1.5-degree aligned, which demonstrates the importance of setting near-term and long-term (net-zero) science-based targets (SBTs). Companies should be setting ambitious targets and reducing emissions in line with a 1.5-degree scenario and in the longer-term reach net-zero, as laid out by the Paris Agreement in 2015. This sets clear and measurable goals and helps frame a companies’ ambitions. CDP has also expanded the target questions to include forest, land, agriculture targets (or better known as FLAG targets) for companies in land-intensive and agriculture sectors, in line with the new SBTi criteria.
From 2024 onwards CDP will be implementing a Climate Change A list criteria that assesses the presence of a viable net-zero target. This pushes companies to be even more ambitious and implement long-term thinking.
In recent years, supply chain decarbonisation has been identified as a key lever for companies to decarbonise their own value chain. Supplier engagement is a set of mechanisms or interventions implemented both internally and with suppliers to empower them to create decarbonised, more resilient supply chains. As per CDP guidance, the new SBTi guidance and ISO 20400, engagement with suppliers and embedding processes within procurement, are vital to reach net-zero. It is also a factor in achieving A-list status with CDP.
Despite the introduction of the biodiversity module in 2022, few companies have broadened their sustainability strategies to assess and address these issues. As the IPBES and the IPCC emphasise in their 2021 report on climate change & biodiversity, companies need to address the climate and biodiversity crisis simultaneously. To do that, they should consider and integrate governance, commitments, monitoring and reporting on biodiversity issues. Moreover, biodiversity is one of the indicators under CSRD and CDP has confirmed its intention to align with the framework of the Taskforce on Nature-related Financial Disclosures (or TNFD) from 2024 onwards and make the biodiversity questions mandatory. Therefore, it’s best to start preparing now in order to keep up to date with emerging standards and regulations.
How can you prepare for emerging regulations?
The sustainability landscape is evolving rapidly, with new regulations and frameworks coming into play. Two notable developments are the ISSB and CSRD:
ISSB: At COP27, CDP announced that the questionnaire would incorporate ISSB’s climate standard (ISSB S2 Climate Standard) in the 2024 questionnaire. The ISSB aims to standardise sustainability reporting globally, focused mainly on simple materiality. Starting early gives your organisation a head start in understanding and implementing these standards. By aligning your CDP efforts with ISSB guidelines, you can ensure that your sustainability disclosures meet international expectations and reduce reporting burdens.
CSRD: The CSRD, a European initiative, goes beyond ISSB. It is significantly more ambitious and robust, covering 10 ESG topics (climate, biodiversity, water, pollution, circular economy…) and deals with double materiality (both impacts and risks). The directive will significantly impact businesses operating within the European Union and outside of it (non-EU large companies which have significant activities in the EU will be impacted from 2028). Early preparation ensures that you are well-versed in the requirements and can seamlessly integrate them into your CDP processes, minimising compliance-related challenges. CDP is very well aligned with the climate standards of CSRD.
What can be done now to improve your CDP score for next year?
Once you’ve identified the gaps in your CDP response, the next step is taking action. Sustainability is not just about mitigating risks, it’s also about capitalising on opportunities. Starting early with your CDP efforts enables you to identify areas where you can enhance your sustainability performance and create value. Whether it’s optimising energy efficiency and reducing costs, exploring low-carbon products or accessing new markets, a proactive approach allows you to align sustainability goals with business strategies and gain a competitive edge.
How EcoAct can help you prepare for the next cycle and improve your CDP score
At EcoAct, we understand the importance of early preparation. EcoAct has a range of services to help prepare companies for the next CDP cycle and improve scores through improving sustainability strategies.
Transition planning: Our transition planning services provide companies with expert support in the development of strategic ambition and/or operationalisation of that climate strategy. We can help you to understand specific actions needed to deliver on your climate commitments, the financial implications of this plan and how to embed it within your business by ensuring the necessary governance, ownership and control measures are in place.
Alongside this, our operational change management can help you understand your readiness for change and build a change management programme that ensures all affected stakeholders understand and are aligned to the company ambition, to ensure the smooth implementation of your transition plan.
TCFD alignment and CSA: EcoAct offers TCFD readiness assessments as well as qualitative and quantitative CSA modelling under various warming scenarios to understand and assess current and future climate risks and opportunities.
Setting near-term and net-zero science-based targets (SBTs): EcoAct offers support from everything from providing industry context on SBTs, calculating a company’s Scope 1, 2 and 3 emissions, engaging the team to modelling your targets and assisting with SBTi submission and validation. EcoAct have helped over 85 companies set SBTs with an 100% approval rate.
Supply chain engagement: Supplier engagement is an ongoing cyclical process, which embeds into procurement processes and focuses on ongoing improvement of Scope 3 data collection, analysis and KPI setting for suppliers to decarbonise at a rate that aligns to your business. EcoAct offers a bespoke approach to supplier engagement, including evaluating internal procurements processes, assessing supplier maturity, modelling supplier targets, and providing recommendations on next steps for decarbonising your supply chains.
Biodiversity: EcoAct offers biodiversity screenings, footprint calculations, assesses companies risks relating to biodiversity (e.g. through TNFD) and assists companies in taking actions and reducing impact on biodiversity (e.g. through SBTN).
Regulatory Expertise: Companies can stay ahead of emerging regulations like the ISSB and CSRD with our regulatory expertise. We provide insights into compliance requirements, which helps reduce the reporting burdens and integrate responses into your CDP.
Starting early with your CDP response allows you to identify and address gaps, seize opportunities for improvement, and prepare for upcoming and emerging regulations and frameworks. Furthermore, it will help prepare for the upcoming changes to CDP disclosure in 2024. By doing so, your organisation not only becomes more resilient but also contributes to a more sustainable future while maintaining a competitive edge in the market.
This proactive stance will improve your score for the next reporting cycle, while fostering a culture of sustainability within your organisation. EcoAct is here to help you navigate this journey, maximise your impact, and drive positive change.