CDP: Room Remains for Voluntary Reporting
New platform consolidates existing questionnaires to streamline companies’ reporting efforts.
Although governments around the world are increasingly mandating sustainability reporting requirements, there is still a place for voluntary disclosure frameworks, according to Sue Armstrong Brown, Director of Thought Leadership and Impact at global non-profit disclosure platform CDP.
“CDP prepared the market for the advent of mandatory disclosure,” she told ESG Investor. “There’s a relationship between mandatory disclosure rules coming in and where CDP has supported the market to reach a level of maturity. We see our role as supporting compliance readiness – if a company is disclosing to CDP, and we have aligned with a global or regional standard, then they will be prepared for mandatory reporting.”
The environmental disclosure platform has just launched a new platform to streamline and remove barriers to high-quality reporting on climate and nature. It aligns with the International Sustainability Standards Board’s (ISSB) climate disclosure standard.
Countries covering nearly 55% of global GDP are set to make the ISSB standards mandatory.
According to data collated by CDP, 60% of listed companies disclosing to the platform are already responding to the majority of the ISSB’s climate standard data points. In addition, 43% of companies based in the Association of Southeast Asian Nations (ASEAN) member states are prepared for the ISSB’s standards, 61% of EU companies, 82% of US companies, 59% of Chinese companies, and 51% of Japanese companies.
The platform is also aligned with other disclosure rules, such as the EU’s sustainability reporting standards and the US Securities and Exchange Commission’s climate risk disclosure requirements.
Going forward, Armstrong Brown said CDP will continue to align with major mandatory frameworks and consider the data implications for incoming rules – such as those aligning with the Global Biodiversity Framework.
“These are important partnerships that we will continue to foster and build,” she said. “Climate reporting standards are the most widespread in terms of their application through jurisdictional requirements, but there’s quite a lot of maturing to do in the nature disclosure space, which we will support in the same way as we have for climate. We know very well that policy requirements tend to be best when they provide a solid floor that nobody should drop below, but [corporate] leaders are always going to be well above that, opening up the need for new market developments and new expectations – that’s where CDP will be.”
To date, more than 700 financial institutions with a combined US$142 trillion in assets have asked for climate and nature data through CDP. This year, 75,000 companies have been asked to disclose environmental information to the platform.
Evolving with the times
Armstrong Brown described CDP’s new platform as a “natural evolution” in its efforts to support companies as environmental disclosure becomes a business norm.
It now offers a new streamlined questionnaire which combines CDP’s existing climate, forests, water, biodiversity and plastics disclosure requirements.
“There is more and more demand for a greater variety of environmental data – we didn’t want to keep adding additional questionnaires,” she said. “It was a logical step to combine it all into one place to lower the disclosure pressure on companies and enabling CDP to collect much more applicable and decision-useful environmental data, because we’re not segmenting it artificially.”
In addition, CDP now offers a standalone questionnaire for small and medium-sized enterprises (SMEs) that is tailored to their resources and needs to better build reporting capacity across the global value chain.
“Even in the absence of regulatory requirements and compulsory disclosure, companies still use environmental data for their own business resilience, development and to support their access to capital,” said Armstrong Brown. “The original drivers for disclosure were not from government requirements; they were from investors and purchasing companies needing to ensure they were managing risks and opportunities. This will remain a strong driver.”
The quality of company disclosures on climate and nature is slowly improving, according to rankings published by CDP earlier this year. Out of 21,000 companies reporting to CDP, just under 400 were named for disclosing actionable and high-quality environmental data – an annual increase of 14%.
CDP will continue to interact with companies and investors to determine what data they would value having access to and then develop new disclosure requirements with its stakeholders.
“A good example of this in action is our expansion into disclosures on plastics and biodiversity,” said Armstrong Brown. “The innovation space is where we need to stay. Our work will hopefully support the ability of regulators to make environmental disclosures more systematic and harmonised over time.”
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