April 13, 2021
Understanding CDP sustainability expectations
While the benefits from disclosing sustainability metrics to the Carbon Disclosure Project (CDP) are numerous, companies gain the most when their reports are thorough. Many environmental, social and governance (ESG) reporting software platforms exist to simplify the process and help ensure accurate reporting. However, knowing the best reporting tactics can help you choose the right software and use it effectively.
Reporting to CDP can be used to assess business impact on the world around it, along with internal impacts on the business itself. CDP questionnaires help organizations report metrics like water quality, emissions, chemicals and waste. Because of the ways these reports can impact a business’s reputation and financial performance, reporting to CDP can enhance investor interest and support. In fact, between 2011–2019, the number of S&P 500 companies publishing sustainability reports increased from 20% to 90%, according to a 2020 BSR report.
A detail-oriented and data-driven approach will optimize the benefits of reporting to CDP. According to Forbes’ “12 Ways to Drive Better ESG Reporting,” here are a few ways to improve your organization’s tracking efforts and enhance benefits:
- Create a materiality map.
- Use both historical data and forward-looking targets.
- Align sustainability reporting to the organization’s financial calendar.
- Provide data tables for easy communication.
- Tell the organization’s story through ESG reporting.
We’ve taken these recommendations and woven them into advice on how to report to CDP effectively, giving you tips on what to look for in your tracking software.
To start, each organization has different tracking needs, depending on the industry it belongs to. A materiality map pairs the company’s industry segment to the key performance indicators (KPIs) that correspond most closely to its impacts on the environment and community.
In 2018, CDP implemented the CDP Activity Classification System (CDP-ACS), which assigns segment-specific questions for annual disclosures on climate change. If at least 20% of your company’s revenue comes from a particular industry’s type of activity, additional questions are provided to match that industry’s operations, waste or emissions.
A software solution that supports your ESG reporting should have the following capabilities to cater to your industry and possible specifications within that industry:
- Ability to choose from a wide variety of KPIs to track and add your own as needed.
- Tracking for scope 1, 2 and 3 emissions.
- Meter reading and automatic uploads from additional sources of data.
After effectively catering ESG tracking efforts toward your industry, operations, and supply chain, your organization will be able to better compare results to peer organizations. This can help you determine where you thrive and how to improve as a means of gaining competitive advantage.
Detail in the data
After determining what to track, a detail-oriented approach to data collection, management and analysis will beef up your ESG tracking process. Your industry segment will help determine KPIs, but the audience for the report will also drive the details of the data. Consider whether you will be sharing your report inside or outside of your organization, and what details your audience prioritizes.
With the audience in mind, you can figure out how to create an approach to data that values accuracy and transparency. Some considerations include:
- Reporting using a consistent methodology. This will require planning and communicating throughout the organization about who collects and manages data, and how frequently it is collected. However, a strong software solution will centralize the process and can flag missing data. Some reporting software can also carry over data forms from one year to the next, allowing you to consolidate and revisit your data when needed.
- Creating options for several types of data formats and visualization. Depending on the organization’s needs and reporting audience, there might be more beneficial ways of organizing your data. An organization with various store or manufacturing locations might prefer to have a map view. At other times, a table, chart or graph might be more applicable. Look for software that gives you a variety of options for data visualization.
- Maintaining searchable documents and clear organization. Large organizations likely have large data sets. Finding specific data and responses to CDP questions will be faster with a search capability. For organizations with various locations or components, a platform with various dashboards for each element will save plenty of time.
- Pairing ESG collection and metrics to your financial calendar. Some software solutions can report automatically on a monthly or quarterly basis. Although CDP disclosure takes place yearly, aligning financial calculations with sustainability reports can help organizations recognize patterns, see which initiatives can benefit the company financially, and help manage initiatives that have been launched.
A then, now, next approach
Thinking holistically about the data you’re tracking means both examining historical data and considering future targets that you would like to meet. After analyzing a previous year’s reports, aligning it with the organization’s goals can help to set quarterly or annual benchmarks that you would like to hit to improve ESG performance. A software solution will simplify the process.
Then. Where have you been? What have you already tracked? Consider where the organization stands with regards to ESG concerns and reporting in the past. Are there clear places to start tracking or working on improvement? Once these questions are addressed, a software solution can be great at managing data, helping you notice where information is missing and carrying data from previous years into future reports.
Now. Where do your metrics stand now that you have tracked them? How close are you to meeting your goals? Aligning the values of your organization to a CDP questionnaire will help compare where the organization stands to where it wants to be. A robust data management program will easily show you where you perform the best and worst to help assess the current moment.
Next. How would you like to improve? How do you plan to reach your goals? Setting single or multi-year targets becomes easy when you have a platform that highlights each target. Additionally, using a software provider that offers advisory services can take your goal-setting to the next level.
This approach helps organizations visualize their long-term trajectory while guiding them through each avenue of improvement with a software platform. In turn, accountability and change management become natural processes.
Telling your story
After gathering the organizational history and outlook, along with clear KPIs and stellar data management, you can begin to craft the ESG narrative for your organization. A clear narrative will help you communicate its purpose and ESG goals to stakeholders while keeping employees onboard to uphold tracking efforts.
While communicating the results, aligning the values and mission of the organization to the drive for ESG reporting will create holistic and genuine buy-in. To make this connection, consider questions such as:
- Why does your organization value reporting to CDP?
- How do your ESG reports uphold your mission and values?
- If past years don’t meet your desired marks, how are you going to get there?
- What is the organization’s long-term vision? What steps are required for reaching this?
Although the organization must answer the why? to craft a narrative around CDP reporting, a strong reporting system will provide the how? A holistic approach to CDP reporting weaves together the meaning of an organization with top-of-the-line data collection and management. By pairing the two together, an organization opts to uphold the well-being of its business model, stakeholders, employees, and the people that inhabit this planet.
UL, a leader in global sustainability solutions, can provide you with the “How?” to your CDP reporting process. Our 360 Sustainability Essentials data management and reporting platform has been CDP Gold Accredited for the past 10 years. The platform integrates with CDP to provide organizations with up-to-date questionnaires and report directly to CDP. Learn more about how our software can help you collect, draft and publish your CDP report.
360 Sustainability Essentials Software
Read more about 360 Sustainability Essentials packaged software and how it can help you get up and running in as little as six weeks reporting to all the major frameworks such as CDP, GRI, SASB, DJSI e.g.