Today’s climate disclosure landscape is quickly evolving. Amid the emergence of regulatory climate disclosure requirements, and in order to remain relevant, well known voluntary disclosure standards are changing.
CDP, the sustainability disclosure non-profit, is one example. The organization updates its disclosure framework annually, adjusting its coverage of key climate issues, as well as the contents of specific questions on companies’ climate-related information.
CDP’s “Signposting & Feedback Opportunity: 2023 CDP Questionnaires” identifies upcoming changes to the questions, as well as new topics that the overall questionnaire will cover. The changes will be confirmed by early 2023. In the interim, companies should understand and prepare for the expanded questionnaire coverage.
In a joint blog, Manifest Climate and our strategic partner GHD highlight three changes that companies should focus on. We also describe how these updates align with other disclosure frameworks. When you’re done reading this blog, explore how these changes differ from the 2022 CDP questionnaire in our partner GHD’s blog.
Changes were made to the “Business Strategy” section of the CDP questionnaire. The topic is covered by Question 3.5, which requests information regarding the alignment of a company’s spending or revenue with a transition to a 1.5°C world — also known as a low-carbon transition.
The question covers:
- The identification of spending or revenue aligned with a company’s low-carbon transition, including any alignment with sustainable finance taxonomies. This question was modified from last year’s
- The share of spending or revenue aligned with a company’s low carbon transition. This question was modified from last year’s
- The share of spending or revenue associated with activities or assets under a sustainable finance taxonomy (e.g. the European Union taxonomy). This is a new question
- The assurance of information covered in this question. This is a new question
The question under “Business Strategy” aligns with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), the world-leading climate disclosure framework. The TCFD recommendations ask companies to report how climate-related issues affect their financial planning processes.
This is similar to what’s required under the draft sustainability disclosure standards released by the International Sustainability Standards Board (ISSB) in March 2022. The ISSB was formed by sustainability standard-setter the IFRS Foundation. It requests information regarding anticipated changes to companies’ business models as a result of climate-related impacts, including changes to resource allocation, how companies believe their financial positions will evolve over time, and how companies think about their climate transition plans.
Meanwhile, the US Securities and Exchange Commission’s (SEC) proposed climate disclosure rule requests information regarding transition plans, but does not explicitly call for a specific breakdown of revenue shares and spending, as laid out in CDP’s proposed 2023 questionnaire. The Canadian Securities Administrators’ (CSA) proposed climate disclosure rules ask for higher level strategy-related information, such as the impact of climate effects on companies’ financial planning.
In other words, CDP’s 2023 questionnaire requests information that falls under other standards and frameworks. However, CDP requests more details.
Subsidiary emissions disclosures
Subsidiary emissions breakdowns are covered under Question 7.7 of CDP’s questionnaire. This is a new question for the 2023 disclosure cycle, which requests Scope 1 and Scope 2 subsidiary emissions data.
Breaking down Scope 1 and 2 emissions by subsidiary is more specific than the requirements set out by voluntary and regulatory frameworks and standards. The ISSB, TCFD, SEC, and CSA ask for Scope 1 and 2 emissions, sometimes even Scope 3 emissions, but do not specifically ask for a breakdown by subsidiaries.
Internal carbon pricing
Internal carbon pricing is covered under Question 11.3a, which has been modified to request more information for 2023.
The question asks:
- How and when the internal carbon price will change, if it changes over time
- If applicable, the different carbon prices applied across the organization
- How the internal carbon price is used
- Whether use of the internal carbon price is mandatory
- How using an internal carbon price contributes to the achievement of a company’s climate strategy or transition plan
Similar to the question on transition spending, this new CDP question is more specific than those of other standards and frameworks. Where relevant, the TCFD requests the internal carbon prices used by companies. The ISSB requests details of the internal carbon prices used, including how the prices inform decision-making.
The SEC’s proposed rule requests information regarding how companies use internal carbon prices, how many internal carbon prices are used, the prices of carbon used, how the carbon footprint is measured, and the rationale for the internal prices selected. Where relevant, the proposed rule also requests details about how the internal prices are used to assess and manage climate-related risks and why a company uses multiple internal carbon prices. The CSA does not mention internal carbon pricing.
CDP’s inclusion of the topics listed above reflects an increased specificity in the information requested from disclosing companies. The good news is that reporting in line with CDP’s new rules sets a baseline for other disclosures under the TCFD, ISSB, SEC, and CSA. This is because the level of detail requested by CDP exceeds the level of detail requested by these other frameworks.
By completing a 2023 CDP disclosure, companies will be well on their way to gathering the information requested by other frameworks and standards. CDP routinely updates its coverage and modifies its disclosure questions. To read about how the 2023 disclosure may differ from previous years, read our partner GHD’s blog.
How Manifest Climate can help
Manifest Climate embeds intelligence to guide organizations through Climate Risk Planning by helping them manage, understand, and communicate their climate-related financial risks and opportunities. Our powerful software allows users to understand companies’ climate maturity and evaluate their alignment to different climate-related disclosure frameworks and standards. Request a demo to learn more.