Shifting CDP Goalposts

16 January, 2018
Top 6 things CEOs must know about achieving Climate Leadership

With the recent Paris agreement on combating climate change, and rising concerns over environmental degradation, there is an increased awareness for the need to track greenhouse gas emissions and implement emission reduction strategies. Transparency and disclosure by companies is key to ensure credibility of the business commitments made by them. Many companies are also diligently submitting CDP disclosures. The purpose of the CDP scoring methodology is to incentivize companies to progress towards environmental stewardship.

The burning question: How does one become a carbon leader? The answer is simple: Dedicated involvement of top management, a well laid out strategy and action plan are crucial to becoming a carbon leader however the simple answer does not outline how. What are the 6 keys things that a company’s CEO or board must know about becoming a Climate Leader?

  • What is your Climate Action Policy? Leadership needs a clear vision for the climate change action – a clearly outlined policy drives the action. The vision needs to be clearly communicated to all stakeholders including customers, employees and trade organizations.
  • Who governs Climate Action in your organization? Crucial aspect of climate leadership is the board oversight around climate change risks and opportunities. Apart from the CEO/MD and the CSO, the Chief Risk Officer and Chief Operations Officer, the Chief Financial Officer, Chief Procurement Officer roles are all critical in integration of climate change action into the core business strategy.
  • Consistent Disclosure & Benchmarking - The first step for any improvement in handling environmental impacts is to conduct a baseline study. Participating in disclosures will be the first step to ensure there are defined processes for monitoring and analyzing environmental impact.
  • Targets, Accounting & Verification - The proactive involvement of top management can help in setting suitable year on year targets for energy efficiency and emission reduction. Also, investments in climate change related projects, especially in incentive systems by leaders will be an act of commitment by the company to pursue actions for climate action agenda.
  • Know your Risks – It’s important to make your business climate resilient – hence assess your risks – understand how vulnerable your business is in context of climate. Put a plan for mitigation. This will not only make your investors breathe easy but help you identify hot spots across your value chain. It’s very important to know what institutional investors expect from corporates in terms of climate risk management.
  • Opportunities Galore - Investing in renewable energy operations, decommissioning of highly polluting assets, acquiring complementing businesses for cleaner technologies, development of energy efficient products, etc. can show commitment by top management to ensure the company is transitioning to more sustainable business operations.

Climate leadership is all about aligning strategy to the above 6 points and drafting your disclosures accurately for stakeholders to clearly understand focus, planning, execution and performance.

CDP has revamped its questionnaire (2018) and scoring guidance and it is now available online, it would be interesting to wait and see how it further impacts the overall leadership ranking trends. 2018 CDP has integrated Task Force of Climate Change (TCFD) recommendations into its disclosure. It is highly recommended that organizations start looking it afresh to prepare and adapt to moving goalposts!

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