CSR Deep Dive: About the Carbon Disclosure Project
Before delving into my CSR deep dive on the Carbon Disclosure Project, I thought it would be helpful to outline what the CDP is and why it is important. The Carbon Disclosure Project describes itself as "an independent not-for-profit organization holding the largest database of primary corporate climate change information in the world." Launched in 2000, CDP was designed to "accelerate solutions to climate change by putting relevant information at the heart of business, policy and investment decisions."
How CDP works
CDP sends its questionnaire to "the largest companies globally as measured by market capitalization, as well as suppliers of major purchasing organizations." In 2009, it sent its questionnaire to 5,500 organizations worldwide with extremely high response rates from major publicly traded company (to illustrate, of the 500 largest companies in the FTSE Global Equity Index Series, 82% sent in responses). CDP collects and publishes responses, submitting data to partner PriceWaterhouseCoopers for analysis and publication.
The CDP questionnaire includes several different categories of questions designed to provide an overall snapshot of each company's climate change profile and strategy. Questions include (please note that I have paraphrased or summarized some of the more involved questions for brevity's sake):
Governance: Where is the highest level of responsibility for climate change within your company? How is overall responsibility for climate change managed within your company? Do you provide incentives for the management of climate change issues, including the attainment of greenhouse gas (GHG) targets?
Risks and opportunities: What is your company's process for identifying significant risks and/or opportunities from climate change and assessing the degree to which they could affect your business, including the financial implications? Do current and/or anticipated regulatory requirements related to climate change and physical impacts of climate change present significant risks to your company? Do current and/or anticipated regulatory requirements related to climate change and physical impacts of climate change present significant opportunities for your company?
Strategy: How does your overall group business strategy link with actions taken on risks and opportunities (identified in questions 3 to 8), including any emissions reduction targets or achievements, public policy engagement and external communications? Do you have a current emissions reduction target? How would you describe your company's actions to reduce its GHG emissions?
Emissions: How would you quantify your company's actions to reduce its GHG emissions? Information about how to respond to this section may be found in "The Greenhouse Gas Protocol: A Corporate Accounting and Reporting Standard (Revised Edition)" developed by the World Resources Institute and the World Business Council for Sustainable Development ("the GHG Protocol").
Communications: Have you published information about your company's response to climate change/GHG emissions in other places than in your CDP response?
CDP scores individual responding companies based on the responses in their questionnaires, and publishes scores in the key stats section of Google Finance. It should be noted that scores reflect "quality of disclosure" and not performance. Embedded below is a visualization of top-scoring companies world-wide, showing that Bayer, BASF, HSBC, and Wal-Mart either are really most exceptional of the bunch or know how to play the game better. I have also embedded a visualization of top scorers by sector.
If nothing else, this summary of the Carbon Disclosure Project should offer a sense of why CDP has become the most well-respected disclosure mechanism in CSR today. But how taxing is it for a company to respond? After all, even a company with a minimal climate footprint faces an extremely involved process to respond. Stay tuned for an actual CSR case study exploring this question.
Photo credit: I don't know, maybe