Why reporting to CDP makes perfect business sense
Founded in 2000, CDP is a non-profit initiative that has built the most comprehensive collection of self-reported environmental data in the world. One fifth of global carbon emissions are managed through CDP, with over 5,500 companies responding to their programs each year. 428 companies have committed to delivering meaningful actions on climate change through CDP, and CDP’s supply chain program members, and their suppliers, cut carbon emissions by over 3.5 million metric tons each year. CDP participation has a wide variety of corollary benefits, which should be of interest to every company.
CDP has produced considerable amounts of data indicating that decreased revenue and lower emissions do not necessarily go hand in hand. The 2016 report ‘Out of the starting blocks’ identified 62 companies that had achieved ‘decoupling’ of emissions from revenue - that is, they had reduced emissions by 10% or more over five years, while simultaneously growing revenue by 10% or more. On average, these companies enjoyed a 29% increase in revenue, compared with a 6% decrease for the 730 studied that did not achieve this decoupling. Across the board, in the same year, companies disclosing to CDP reported cost savings of US$12.4 billion, while reducing emissions by an amount equal to France’s annual carbon footprint.
One of the primary reasons for this enhanced profitability is the smart approach to resource use that emissions control encourages. In order to create a sustainable economy, businesses, nations and individuals need to reduce both consumption of the planet’s limited resources and the amounts of those resources that go to waste. Collecting data on your company’s resource use and wastage is an important part of reporting to CDP - and helps you identify areas for potential savings. If you do not need to procure as much material and waste less of what you do acquire, reduced operational costs will naturally follow.
The expectations investors, regulators and consumers have about companies’ sustainability standards are increasing every year. Over 800 investors, controlling assets worth US$100 trillion, signed CDP’s latest annual disclosure request. Many governmental departments worldwide have specifically referred to CDP in their guidance for private sector partners. Kevin Kampschroer, Chief Sustainability Officer of the U.S. General Services Administration, said, “By disclosing through CDP, our private sector partners can prepare themselves to do business with us in the future." Using CDP methods to disclose data on emissions, resource use and procurement practices is a comprehensive approach to meeting these expectations. Investors, policymakers and companies alike can access CDP’s all-inclusive database, so providing data from your company to the CDP system is a crucial part of maintaining the transparency expected by stakeholders.
The data uncovered by CDP’s reporting processes also allows companies to set expectations of their own for internal staff and for suppliers. Although they can be highly challenging to track, suppliers’ emissions reductions substantially impact a business’s overall sustainability performance. CDP has a dedicated Supply Chain Program, a specialized platform for the implementation of supplier engagement strategies. Ensuring that your suppliers are focused on sustainability issues has direct benefits outside of improving your CDP performance. Resource-smart and environment-conscious suppliers are less susceptible to climate-related threats, safeguarding the continuity of their clients’ operations. In addition, being able to understand, catalyze and demonstrate sustainable practices within your supply chain develops the trust with investors and customers needed for long-term success.
Smarter Decision Making
The CDP disclosure process facilitates companies’ collecting, quantifying and understanding of data on every aspect of sustainability practice, from emissions performance and energy use, to overarching strategy concerns. After you have collected your data and disclosed to CDP, this valuable information is available for your company to use internally going forward. Many companies have discovered opportunities to enhance strategy and improve the efficiency of their processes after completing their first CDP disclosure.
How respondents address risks associated with climate change is emphasized throughout the CDP reporting process. The analysis provided by CDP can be used to engage key personnel within your organization, from senior management to frontline operations personnel, bringing to light risks they may otherwise have been unaware of and suggesting appropriate action to mitigate them. This practice can also be applied to the supply chain by use of risk management evaluation. L’Oréal, for example, has introduced a supplier selection policy in which “performance on climate change is fully included in supplier relationships and challenged during business reviews”.
Alongside the focus on risk management, CDP is principally concerned with how respondents turn the threats posed by climate change into new opportunities. This creates a virtuous cycle: the data patterns uncovered through the CDP disclosure process provide inspiration for companies to develop new solutions or iterate on existing ones, and CDP in turn rewards companies who innovate in this way with improved scores. Hewlett-Packard’s ‘Moonshine Servers’ project provides a powerful example of a company seizing one such opportunity. Designed to meet HP’s ambition to revolutionize the energy economics of data centers, Moonshine Servers use 89% less energy compared to traditional server environments.
The CDP process is designed to give innovative organizations the space to break new ground and a platform on which they can share and demonstrate these technologies or systems. Whenever new metrics are introduced to the scoring system, they are test run for a year in advance of full implementation, giving respondents the chance to iterate new solutions that meet those metrics. Interacting annually with this innovation-focused system can drive groundbreaking thinking to the heart of your company culture, opening opportunities to develop new forms of operating specific to you.
Given all these interconnecting benefits, it is clear that to see CDP participation merely as a rote exercise is to overlook the immense potential for changing the culture of your organization. The comprehensive collection of data for CDP provides significant material for developing improved personnel training programs. Spreading awareness of the risks and opportunities associated with sustainability issues to all members of your company is an effective way to bring the collective expertise of the organization to contribute to developing appropriate solutions. Many CDP respondents have had particular success implementing CDP-informed training for buyers, who can ensure the delivery of supply chain sustainability outcomes by adjusting their practices in line with new data.
As CDP put it, “Considerations around climate impact, water management and deforestation belong squarely in the boardroom of every major corporation in the world”. CDP unlocks the potential to reduce costs, build better stakeholder relationships, develop smarter decision making, initiate exciting innovation and, perhaps most importantly, redefine a company culture that embodies sustainability from the ground up. Organizations, from the largest government agencies to the smallest startups, should explore this potential.
ADEC Innovations, CDP’s Global Scoring and Outsourcing Partner will discuss how to navigate the CDP 2018 Climate Change Questionnaire in a webinar to be held April 24, 2018 at 7:00am PDT. Click here to register.