The recent CDP press release sheds light on this issue: while more companies are considering their impacts on climate and nature, only a select few have demonstrated best practices around climate by meeting CDP’s ambitious standards. Out of over 21,000 companies scored, fewer than 400 have achieved the prestigious A List status. A List companies are those with the most accurate picture of their environmental impacts and are best equipped to take climate and nature-positive actions to mitigate them. Beyond climate change, CDP also captures disclosures on water security and deforestation. The rest of this article focuses on climate as it is the most material impact across industries, but the recommendations apply equally to water and forests as well.

CDP 2023: Challenges and insights

2023 brought significant methodology changes and further increased expectations, making this year's CDP scoring particularly challenging for companies. Based on insights from internal experts and our customers, the following conclusions can be made:

• Stricter scoring and methodology changes raised bar on disclosures:
  Many companies struggled with the levelled scoring approach in categories like Scope 1, 2, and 3 emissions. Gaining sufficient points in the Awareness category is crucial for advancing beyond to Management and Leadership levels in the CDP scoring framework. Additionally, in 2023 companies needed to provide 100% verification of their Scope 1 and 2 emissions compared to the previous 70%.
• Integration of SBTi standards:
  Reflecting an overall trend amongst ESG benchmarks, for example S&P Global's Corporate Sustainability Assessment, the 2023 CDP scoring emphasized the necessity of setting (net-zero) targets aligned with the Science Based Targets initiative to achieve maximum points.
• Success in climate management and governance:
  On a positive note, within the Finch & Beak customer base, we saw companies excel in areas such as business strategy, financial planning, scenario analysis, and governance. The maturity on these aspects in alignment with TCFD recommendations suggests that the convergence of climate frameworks has been helpful in setting a common standard.

Beyond reporting: Crafting an ambitious climate strategy

CDP's evolving standards are a clear indicator and call to action for companies to adopt a forward-looking and comprehensive approach to environmental sustainability. Furthermore, for those subject to the CSRD, this serves as an initial step to compliance, highlighting the importance of investing in the development of climate strategy to address the requirements under ESRS E1.

Developing a climate strategy entails having a plan to mitigate the company’s impacts on climate change, as well to adapt to the new circumstances arising from climate change. The TCFD recommendations provide an excellent framework that can help shape the climate strategy: read more about that in this article.

Looking ahead: Preparing for CDP 2024

In anticipation of the CDP 2024 cycle, companies are well-advised to enhance their disclosure and action plans. Significant changes are expected in CDP’s approach in 2024, including a new response platform and a new integrated questionnaire allowing companies to respond with one submission tailored to the themes it has been requested to report on.

To confront these changes, it is vital for companies to anticipate the release of the questionnaire in April and prepare necessary adjustments in their approach and disclosure.

To take a head start on CDP in 2024, companies are recommended to:

1. Leverage the CDP 2023 scorecard to mobilize topic owners: Utilize the CDP scorecard as a heatmap to identify and focus on specific weaknesses that require attention. For instance, if a scoring category like "targets" dropped, pinpointing the root cause (such as the lack of SBTi validation) could prompt steps to address the issue and improve performance. In collaboration with topic owners, define gaps and get commitment on improvement actions for the short, mid and long term.
2. Identify best practices from the A List: Learn from the successes of A List companies and apply those lessons to your own sustainability efforts. Since companies need to submit a public response in order to achieve an A-score, there is very detailed, comparable information available on the CDP platform from A-list companies that typically goes beyond the regular annual report.
3. Prepare for methodology changes: CDP is expected to announce methodology changes for the 2024 questionnaires ahead of the launch of the new questionnaire. Stay tuned for an analysis of the most important updates and plan meetings to brief your company’s topic owners so they can review the implications as soon as possible.

For a more comprehensive overview of the 2024 CDP timeline, please download the document at the top of the page.

How Finch & Beak and SLR can help you to accelerate on climate action and disclosure

Together with our colleagues from SLR Consulting, we offer a wide range of services in ESG Benchmarking, Resilience & Net Zero support services:

• CDP Support: from review to turnkey project management including completion of the company response
• GHG Accounting: this includes calculating operational carbon footprints (scope 1, 2 and 3), embodied carbon, avoided emissions, and carbon sequestration.
• Net Zero strategy: setting carbon reduction targets in accordance with the SBTi's framework, and helping companies achieve reduction targets through concrete decarbonization action plans, supplier engagement initiatives and residual emissions strategies.
• Climate risk & opportunity, e.g., TCFD disclosures: supporting clients with quantifying the impacts of climate change and integrating climate strategy across business functions, as well as ensuring clients meet disclosure reporting requirements, e.g., TCFD, IFRS S2.

If your organization requires support on its CDP disclosure or strengthening its climate strategy, please contact us at hello@finchandbeak.com to discuss how we can assist you.