As an authority on leadership psychology, the business strategist Tony Robbins knows a thing or two about asking the right questions: “Successful people ask better questions, and as a result, they get better answers.”
The art of asking the right questions enables companies to gain deeper insight, develop innovative solutions and make more informed decisions.
CDP asks the right questions
As the gold standard in environmental reporting, CDP has been asking questions of companies and cities for over a decade. The world economy coalesces around CDP’s data platform to inform investment and procurement decisions. The data we deliver must remain meaningful.
Environmental impacts remain a substantial risk to the way the world does business. For example, an Aviva sponsored report from the Economist Intelligence Unit shows expected losses from climate change to the world’s current stock of manageable assets is valued at US$4.2 trillion.
As the markets and companies evolve in their awareness, CDP must keep pace and ensure it is providing the framework to address this vast risk.
A sector-based approach to environmental reporting
That is why we are moving to sector-focused disclosure this year.
Investors have been calling for this move to enable easier and more meaningful comparison of company progress.
As Bruce Duguid, Director at Hermes Investment Management says: “The move to sector-based disclosure and reporting will enable investors to more easily compare environmental performance.”
This evolution in disclosure benefits companies. Whether it be CO2e per tonne of crude steel, water withdrawal intensity for power generation, or progress of habitat restoration and protection by paper and forestry companies, we will focus on the sector specific performance metrics that have the most environmental impact.
Shining a light on these business activities provides a greater understanding of a company’s environmental risks and opportunities for improved decision-making. It also increases understanding of progress against peers.
Our questionnaires provide companies with a guide to transition to a sustainable business, helping companies find clear, measurable KPIs to work towards and report on.
This leads to better overall performance.
Disclosing companies on CDP’s A-List outperformed the market by 6% over four years, according to STOXX, showing that management of your environmental risk hotspots is not only good for the planet, it’s good for business.
Four beneficial changes in your 2018 questionnaire
1. A move to sector based information
Companies will continue to complete a climate change, forests and/or water security questionnaire. Those companies in high impact sectors will be asked to disclose relevant sector specific information. In 2018, we are introducing 19 sectors within Agriculture, Energy, Materials and Transport. More high-impact sectors will be included over the next two years. But a high level of consistency remains, with some three-quarters of questions in the climate, water and forests questionnaires remaining either unchanged or with a modification to the previous year’s question.
In order to allocate sector-specific questions to companies CDP has developed a new Activity Classification System. This is a framework used to categorize companies by the most relevant sectors. It focuses on the diverse activities from which companies derive revenue and associates these with the impacts to their business from climate change, water security and deforestation.
As a result, this new approach ensures a better understanding of company actions according to their environmental risk, opportunity and impact and is essential for better comparability of data.
2. More focus on forward-looking metrics.
Our sector questions will help companies and investors assess future exposure to risk by including forward-looking metrics. For example, by asking for information on oil, gas and coal reserves, we aim to help companies be more aware of locked-in emissions and stranded assets. We are continuing to build on metrics such as science-based target setting and carbon pricing to include reporting on scenario analysis, which helps companies plan for the transition to a sustainable economy.
3. By disclosing to CDP you will be responding to the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) in a globally comparable and structured format.
We are advancing the availability of financially relevant information by aligning with the TCFD. This brings optimal disclosure benefits. Companies can respond to the recommendations through CDP’s established global disclosure platform that can structure, analyze, compare and trace information in a transparent way.
4. A more intuitive disclosure process.
In response to company feedback we are introducing a new online reporting system to create greater efficiencies.
Our sector requests are aligned with existing disclosure metrics in reporting recommendations and frameworks such as TCFD, the Dow Jones Sustainability Indexes, SASB and GRI.
Disclosure to CDP’s global platform enables companies to reach global investment decision-makers across multiple platforms from Bloomberg to MSCI ESG Research and Thomson Reuters, as well as 99 of the world’s top procurers.
Environmental action is a growing boardroom priority as companies face increasing financial and reputational risk from climate change, deforestation and water security.
Asking the right questions in order to gather the most meaningful and comparable data means better managing that risk and revealing significant business opportunities.
Put simply, better disclosure leads to greater insight and more impactful action.