Earlier this month, CDP (formerly known as the Carbon Disclosure Project) announced the launch of a new environmental disclosure platform. CDP is a non-profit that scores and assesses participating companies and cities, states, and regions on climate, deforestation, and water security topics. According to CDP, over 23,000 companies (representing two-thirds of global market capitalization) disclosed through CDP in 2023.
Platform Updates. The new platform brings two important changes to CDP's voluntary environmental questionnaire system that are intended to ease participants' reporting burdens and better harmonize global reporting standards. First, it replaces CDP's separate questionnaires regarding climate change, forests, water, biodiversity, and plastics with one integrated questionnaire covering these issues. Second, the new integrated questionnaire aligns with the International Sustainability Standards Board's climate standard (“IFRS S2") and incorporates other global standards like the Taskforce on Nature-related Financial Disclosures (“TNFD") and the European Sustainability Reporting Standards (“ESRS").
According to CDP, while the questionnaire format may look different, the information requested and CDP scoring system have not fundamentally changed. There will still be questions and scores specific to particular environmental issues, and companies will continue to be scored separately on climate change, forests, and water security.
Reporting Considerations. The CDP reporting window opened on June 4, 2024. All responding entities must submit their responses by CDP's scoring deadline on September 18, 2024 in order to be scored. Responses submitted after the scoring deadline but on or before October 2, 2024 will not be scored, but will be made available to certain stakeholders and in CDP data analytics.
Companies intending to complete a CDP questionnaire this year should consider the following:
- CDP Changes May Impact Scores and Responses. Before jumping in, companies may benefit from reviewing the key changes to the CDP questionnaire and considering how these changes might impact their scoring and disclosures. Summaries of changes are available in two parts (here and here), and question-level changes are available here.
- Responses and Scores Can Be Publicly Accessed. The CDP questionnaire solicits details on governance, reporting, and compensation practices and forward-looking strategy or expectations—and unlike many sustainability rankings or questionnaires, responses and scores can be accessed by the public (including investors). Participating companies should confirm these details are consistent with other public disclosures (e.g., SEC filings and ESG reports) and consider including a forward-looking statement disclaimer, if appropriate. Companies should also avoid repeating year-over-year responses until they have confirmed the responses continue to reflect current intentions or expectations. While CDP responses are typically prepared in-house or with the assistance of an environmental consultant, consider whether outside counsel can be helpful with this review.
- Responses May Support Transition to ISSB for California and Other Reporting Regimes. The CDP's alignment with ISSB's IFRS S2 standard may be an opportunity for companies to transition to disclosures aligned with the ISSB. The ISSB's reporting standards are meant to build on and replace the standalone reporting standards previously published by the Task Force for Climate-related Financial Disclosure (“TCFD") and the Sustainability Accounting Standards Board (“SASB"). Voluntary reporting under the IFRS is expected to begin with reporting for financial years beginning on or after January 1, 2024, but many countries are in the process of seeking mandatory full alignment with ISSB standards under local law. California's Senate Bill 261 also provides that reporting to ISSB standards may be a satisfactory alternative to TCFD reporting. CDP hopes that aligning its integrated questionnaire with IFRS S2 now will ultimately make it easier for reporting companies to comply with ISSB standards in the future.
- CDP May Incorporate Additional Environmental Topics in the Future—and Impact SEC Reporting. CDP has indicated that the integration of the questionnaires is intended to provide a “more holistic approach" and “encourage companies to address the interconnectivity of these issues." CDP also plans to further expand the coverage of environmental issues in the future (following the additions of biodiversity in 2022 and plastics in 2023). Companies may want to consider how these changes could impact the scope of their disclosures and the content of their discussions regarding risk, for example. As a reminder, while the climate rule disclosure rule adopted by the U.S. Securities and Exchange Commission has been stayed pending current litigation (as summarized in our blog), U.S. public companies are still obligated under current securities rules to report on material risks, commitments, and known or unknown trends and uncertainties in their periodic reports, among other matters.
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Thank you to associates Lauren Assaf-Holmes and Meghan Sherley from our Orange County office and Nathan Marak from our D.C. office for their assistance with this update.