Currently, more than 3,000 companies, including 366 of the Fortune 500, disclose their greenhouse gas (GHG) emissions to CDP (formerly Carbon Disclosure Project). Although reporting is voluntary, there are business rewards for companies that integrate climate change risks and opportunities into their strategy.
The CDP evaluates corporations on their climate change risks, opportunities, impacts, associated business strategies and performance. Not only does reporting assist companies in responding to growing stakeholder expectations (shareholders, current and future customers, supply chain partners, etc.), it also gives companies an opportunity to view risks and opportunities for future business strategies through a carbon lens.
While no federal legislative framework has been created for regulating GHG emissions, in 2011 the Environmental Protection Agency (EPA) began regulating GHGs using the authority of the Clean Air Act. As of now, this nationwide program targets only the largest single-source emitters. Similarly, at the regional level, programs like California’s cap and trade system are also regulating only the largest emitters. So the bulk of U.S. companies today that are reporting to CDP have no regulatory mandate to report. Instead, most reporters choose to do so voluntarily.
WHY REPORT TO CDP?
Prior to 2010, companies earned a ‘disclosure score’ from CDP based mainly on the quality and completeness of their disclosure. Now, CDP also has a ‘performance score’ that ranks the actions of companies to integrate climate change risks and opportunities into their business strategy, including the development of specific emission reduction targets. This information is used by a mix of stakeholders as an indicator of corporate management strength and vitality, including investors, industry peers, reporting agencies such as Bloomberg and Google Financial, and Newsweek’s annual Green Rankings report.
Responding to the CDP questionnaire is very much a collaborative effort within an organization that typically involves cross-departmental team members from the energy, sustainability, marketing and legal teams. The teams are responsible for providing qualitative responses to a variety of questions alongside their emissions inventory and performance. There are many reasons to participate in CDP reporting, including:
- Fulfilling increasing disclosure requests from investors and financial analysts. In 2013 more than 722 institutional investors representing over US$87 trillion in assets supported CDP in engaging with companies to disclose and manage climate change issues. These stakeholders view these data points as a valuable metric by which to evaluate the risk of investing in a given business. More often, CDP scores are reported to investors by Google Finance and Bloomberg, and businesses with the highest (best) scores are included in the new Carbon Performance Leadership Index. The Ecova Blueprint™ whitepaper takes a deeper dive into investor expectations, click here to request the Blueprint toolkit.
- In a B2B (business to business) capacity, large and influential corporations are beginning to request, and in some cases require, their business partners and suppliers report carbon emissions associated with the goods and services they provide, which are in turn reported as part of the requesting corporation’s supply chain emissions.
- There is inherent brand value to showing your employees and customers your company is a leader by disclosing carbon as an integral part of your larger business strategy. In an age of Big Data and even bigger and growing transparency expectations, employees and consumers want to know they are engaging with a good corporate citizen.
- Understanding your company’s emissions performance can assist companies in making better informed business decisions. If carbon is a growing corporate risk, understanding the carbon impacts of specific business strategies is critical to making the best-possible long-term investments.
If your company chooses to report your carbon emissions, you will be joining a forward-thinking group of businesses who are doing the same. Ecova’s Carbon Management team can help you get started with developing your inventory, forming CDP responses that best tell your organization’s story, and developing roadmaps toward a more efficient business strategy.