To CDP Or Not To CDP? An Overview Of CDP’s 2022 Climate Change Updates
Each year, CDP releases annual revisions and developments to its questionnaires to reflect and drive best practice, improving both data quality and the disclosure experience for companies. Their 2022 Updates were recently released for the Climate Change, Forests, and Water Security questionnaires.
In 2021, more than 13,000 companies worth over 64% of global market capitalization disclosed data through CDP. Further, 590 investors with over US$110 trillion in assets and 200+ large purchasers with over US$5.5 trillion continue to request companies disclose their environmental data through CDP.
With this high and fast-growing demand for environmental and climate change disclosure, Riveron recommends reviewing the 2022 updates to the CDP Climate Change Questionnaire and consider reporting to CDP in 2022.
Below are 6 main updates to the 2022 CDP Climate Change Questionnaire that companies should take note of this year:
- Climate Oversight on the Board
- 1.5 Degree Scenario Analysis
- Climate and Supply Chain Management
- Target Setting
- Scope 3 Emissions
- Biodiversity
Climate Oversight on the Board
Climate oversight is a hot button issue with investors, and CDP is similarly requesting information on board-level competence on climate-related issues. This capability at the board level signals a company’s commitment to understanding and responding to risks, opportunities, and impacts. CDP added a new question to section C1 – Governance. This new question asks if the organization has at least one board member with competence on climate-related issues. Though CDP leaves the definition of competence open for interpretation and explanation by the reporting company, what they are requesting is a sign of the company’s commitment to understanding and responding to climate-related risks, opportunities, and impacts. Many boards boast diversity of skill, but CDP has given another area of expertise for them to consider when selecting new director nominees.
| Question No. | 2022 New or Modified Question |
| C1.1d | Does your organization have at least one board member with competence on climate-related issues? |
1.5 Degree Aligned Scenario Analysis
CPD supports the use of the 1.5 degree scenario, as outlined in the Paris Agreement, and seeks to understand why and how companies use scenario analysis. As such, CDP has added or modified questions related to scenario analysis to understand why an organization uses scenario analysis, how the results have impacted strategy, and how customized or bespoke scenarios (outside of a 1.5 degree scenario) are used. Another new question, C3.5, asks companies how they identify spending and revenue aligned with their transition plan in their financial accounting and to quantify the percentage of their spending and revenue. The changes in this section aim to measure how fully companies have integrated their transition plans into their overall strategy and operations. The sooner companies can integrate climate considerations across their portfolio of products and services, the better prepared they will be to respond to these changes.
| Question No. | 2022 New or Modified Question |
| C3.2b | Provide details of the focal questions your organization seeks to address by using climate-related scenario analysis and summarize the results with respect to these questions. |
| C3.5 | In your organization’s financial accounting, do you identify spending/revenue that is aligned with your organization’s transition to a 1.5oC world? |
| C3.5a | Quantify the percentage share of your spending/revenue that is aligned with your organization’s transition to a 1.5oC world? |
Climate and Suppliers
Significant changes in terms of climate strategy came in section C12 – Engagement, asking companies to disclose what sort of climate-related requirements suppliers must meet as part of the purchasing process. This allows CDP to evaluate how a company is to driving climate action through its supply chain. Since the bulk of many companies’ emission are categorized under Scope 3, supply chain engagement presents a significant opportunity for organizations to lower their emissions and achieve reduction targets.
| Question No. | 2022 New or Modified Question |
| C12.2 | Do your suppliers have to meet climate-related requirements as part of your organization’s purchasing process? |
| C12.2a | Provide details of the climate-related requirements that suppliers have to meet as part of your organization’s purchasing process and the compliance mechanisms in place. |
Targets and Performance
As companies continue to make public GHG reduction commitments, CDP is asking companies to report how exactly they plan to achieve these targets – and any progress made thus far. This section was expanded to request companies report multi-scope targets aligned with net zero commitments. New or modified factors request a description of low-carbon products, low-carbon avoided emissions estimations, low-carbon energy purchases, planned carbon removals, percent of target achieved in the reporting year, and a description of concrete plans for achieving targets.
| Question No. | 2022 New or Modified Question |
| C4.5 | Requests if any of your existing goods and/or services are low-carbon products. |
| C4.5a | Requests more granular details on low-carbon products and any avoided emissions estimations. |
| C8.2e | Sourcing options revised to capture more granular details of low-carbon energy purchases. |
Scope 3 Emissions
Hand-in-hand with the previous sections are changes to scope 3 emissions calculations to allow for more granular reporting on scope 3. In section C5 there are a few new questions, and a modified question which allows for Scope 3 emissions to be reported for the base year. Section C6 contains one new question which allows companies to restate Scope 3 emissions for previous years. This enables a consistent, trackable Scope 3 data set. Together with information on target setting, these sections allow for better understanding of a company’s year-to-year changes in emissions and the driving force behind any significant changes.
| Question No. | 2022 New or Modified Question |
| C4.1a | Provide details of your absolute emissions target(s) and progress made against those targets. (New columns: added to collect per-Scope data for multi-Scope targets, including scope 3, and information on target progress and achievement.) |
| C4.1b | Provide details of your emissions intensity target(s) and progress made against those target(s). (New columns: added to collect per-Scope data for multi-Scope targets, including scope 3, and information on target progress and achievement.) |
| C5.2 | Provide your base year and base year emissions (17 new rows have been added to cover the Scope 3 categories – the GHG protocol specifies that companies should have a base year for all scopes.) |
| C6.5a | Disclose or restate your Scope 3 emissions data for previous years. (This question allows restatements of Scope 3 emissions for previous years, enabling a consistent Scope 3 data set over time.) |
Biodiversity
One of the most notable changes to the 2022 CDP Climate Change Questionnaire is the new 6-question module on biodiversity. These new questions are designed to assess the level of commitment and resources a company gives to managing biodiversity issues. More specifically, this module evaluates a company’s biodiversity oversight, how it monitors biodiversity performance and progress, and information on the species and ecosystems affected by a company’s operations.
In its first year, this module mostly serves to help organizations consider biodiversity-related risks and impacts on their business practices. This module is only the first step. Companies should expect CDP to expand this section in the future, and potentially even branch out to other environmental issues that pose material risks in organizations’ value chains.
| Question No. | 2022 New or Modified Question |
| C15.1 | Is there board-level oversight and/or executive management-level responsibility for biodiversity-related issues within your organization? |
| C15.2 | Has your organization made a public commitment and/or endorsed any initiatives related to biodiversity? |
| C15.3 | Does your organization assess the impact of its value chain on biodiversity? |
| C15.4 | What actions has your organization taken in the reporting year to progress your biodiversity-related commitments? |
| C15.5 | Does your organization use biodiversity indicators to monitor performance across its activities? |
| C15.6 | Have you published information about your organization’s response to biodiversity-related issues for this reporting year in places other than in your CDP response? If so, please attach the publication(s). |
How to Prepare for the 2022 Climate Change Questionnaire?
Like most companies, you’re probably in the process of enhancing your organization’s climate-risk monitoring and reporting strategy and considering submitting the 2022 CDP Climate Change Questionnaire.
Riveron is an Accredited Solutions Provider with CDP and can help guide your company through its first disclosure process or respond to the updated questions. We believe that starting with the CDP questionnaire is an important first step.
The CDP Online Response System opens in April, and companies have until the end of July 2022 to submit their responses to the questionnaire(s) to be eligible for scoring and inclusion in CDP reports. Reach out to us to better understand how we can help your CDP reporting go smoothly.