CDP’s annual climate change information request for the year 2017 is out last December and the last date for submission of responses is 29th June 2017. Through CDP (erstwhile Carbon Disclosure Project), more than 827 institutional investors with assets of over US$100 trillion are asking companies to disclose how they are managing the risks posed by climate change. Globally, 5,800 plus companies, representing close to 60% of global market capitalization, disclose their environmental information such as greenhouse gas (GHG) emissions, risks and opportunities and approach towards overall sustainable management through CDP’s disclosure platform.
In 2016, 58 Indian companies responded to the CDP Questionnaire, of which 47 were among BSE Top 200 companies to whom CDP had requested. CDP send disclosure request to top 200 companies based on their market cap listed on Bombay Stock Exchange. There were another 11 companies who have reported voluntarily (known as self-selected companies).
The UN Sustainable Development Goals, the Paris Agreement and India’s green commitments as communicated via Nationally Determined Contributions (NDC) are the new compass for setting business dimensions. Environmental disclosure via CDP helps you to be aligned with the new developments in sustainability and climate landscape. You may have never reported to CDP before or have discontinued in past, here are some of the reasons you should gear up this year to disclose your market leadership in a sustainable growth and secure your positions in the A-list (see A-list for 2016).
1. What gets measured gets managed
The first thumb rule smart companies follow is to measure their environmental risks to manage it strategically. CDP operates four major disclosure programs i.e. Climate change, Water, Forest, and Supply chain. CDP ask a set of information via its questionnaire as per the program. The questionnaire is very strategic and direct companies to collect information which is material to them as well as to other stakeholders. By reporting environmental information via CDP, companies understand their process, environmental impacts, energy consumption, emissions, etc. in greater extent. Disclosure help companies to identify climate change related risks to their operations and identifies business opportunities as well. The entire process is helpful to make you rethink your business and improve management approach towards emissions reductions and overall environmental conservation.
2. Environmental disclosure is becoming a mainstream activity
Although the environmental footprint of the companies is closely linked with the financial performance of the company, it has barely made a space on the balance sheet. However, the transparent disclosure of non-financial information such as GHG emissions provides stakeholders of the company with access to the insights required to drive sustainable actions. Many companies have started integrating climate disclosure in their financial reports via adopting a framework for reporting environmental information developed by Climate Disclosure Standards Board (CDSB), a partner organisation of CDP.
3. Benchmark your performance
Getting started is always the hardest part and could be arduous and time-consuming in many ways. Yet it’s a great way to show your disclosure efforts to a renowned and industry-agnostic platform such as CDP while getting an excellent benchmark against your peers in the A-list and other research reports.
4. Apple of Investor’s eye
Non-financial disclosures are becoming a pre-requisite for attracting investments. It is evidenced from many case studies that sustainability reporting companies have outperformed the non-reporting companies in their investments and profits.
5. It’s $5.5tn estimated global market for low-carbon good and services
It’s an opportunity for companies providing low-carbon goods and services to tap their business plans towards low carbon future.
6. Global initiatives like Carbon Pricing, Science-Based Targets, RE100, etc.
Environmental information disclosure help companies to measure and manage their emissions effectively. Quantifying organisational/project GHG emissions is the first step towards setting an internal price on carbon or setting science-based emission reduction targets. For example, CDP report (2016) highlight that 517 companies (19% increase from the year 2015) are already using carbon pricing as an accounting and climate risk management tool as their business imperative. 732 companies (26% increase from 2015) have been working to implement one by 2018. Embedding the cost of carbon into operations and economic forecasts is crucial to avoid any sudden shocks posed by any emerging carbon pricing regulations; and, can help to better mitigate the risks, prioritise energy efficiency and other GHG emissions reduction activities in the organisation. CDP’s disclosure program support these global initiatives and provide an edge in its scoring methodology.
7. Cost efficiency
Environmental disclosure direct companies to measure various parameters such as energy, emissions, resources, etc. The activity data help finds out areas where improvements can be made. For example, many companies reporting to CDP have analysed that their scope-3 emissions account for maximum expenses in managing their business. Holding supply chains accountable for carbon emissions and using relevant measures such as video conferencing over the actual travel (wherever possible) benefited companies in both money and carbon footprint reduction.
8. Data matters
The data collected by CDP through climate change questionnaire enables companies, investors, and governments to mitigate risks from the use of energy and natural resources and identify opportunities from taking a responsible approach to the environment. The data collected by CDP is also being used by various indices like S&P BSE Carbonex Index, Dow Jones Sustainability Indices (DJSI), etc. These indices rank companies based on their sustainability performance and accelerate responsible investment. Companies reporting to CDP can get these benefits.