CDP works closely with governments and regulators to support them in mandating and enforcing the highest possible standards of disclosure - putting our data, insights and expertise at their disposal.
Global support for mandatory disclosure regulation has accelerated since 2020 with many large economies now implementing mandatory environmental disclosure, directly shaping how companies measure and manage their environmental impacts.
The majority of existing regulation is based on the recommendations of the Task Force on Climate-related Financial Disclosures. This is an important first step to wider and more advanced environmental disclosure that builds on financial and risk-based data and looks at impacts on people and planet – what CDP defines as ‘high-quality mandatory disclosure’.
CDP has identified five main principles that should be applied to mandatory disclosure regulation:
The policy should be designed to advance the environmental agenda and to lead to real change that positively impacts people and planet. It is not possible to tackle climate without a holistic approach to the environment. The TCFD recommendations provide a good starting point for evaluating climate-related financial risks but the low-carbon transition requires a broader focus. Further data is needed, on a much wider range of environmental topics and with a view towards incorporating impacts on people and planet.
If not based on, the policy needs to be aligned with existing internationally agreed standards. If national standards are developed, they need to be compatible with international standards. Policymakers should rely on existing standards and reporting practices, enter into dialogue with other jurisdictions to agree on a common baseline and raise ambition at the national level with their own requirements to align with their Paris Agreement commitments and 2030 SDG targets
The policy implementation should be monitored by the relevant government authority, and effective measures for non-compliance should be in place. First and foremost, it is essential for policymakers to ensure that climate change is treated as intrinsically material at the company level and highlight that non-disclosure is not permitted under any circumstance. In addition, enforcement agencies’ mandates should include environmental issues. These agencies should strive to build internal expertise in the specific topics covered by regulatory requirements, also by collaborating with external actors with a focus on environmental issues
To meet this criterion, reporting should not only focus on risks but also strategy, impact, sector focus, comparability of disclosures, reliability, and accuracy. It should require forward-looking information to support the low-carbon transition. Companies should be required to fully integrate environmental factors at board level, both in terms of board composition and executive compensation. This would provide companies with the expertise at the top level to push for the development and disclosure of climate transition plans. These plans should include short-, medium- and long-term targets to ensure a response to climate change with the required urgency and scale. They should also include robust, quantitative and accredited science-based targets outlining how companies will transition to the 1.5°C-aligned business model, and shareholders should be given the opportunity to vote on them at companies’ AGMs.
The regulation should not form a ceiling and create a tick box exercise but serve as a floor/minimum requirement that stimulates even more ambitious, broader, and deeper disclosure and action. As other regulatory and policy regimes continue to develop, other frameworks, such as the Taskforce on Nature-related Financial Disclosures (TNFD) can guide the expansion into other areas and further create a pathway into corporate reporting. CDP has been at the forefront of this movement, leveraging its fully TCFD-aligned questionnaire to build upon the TCFD recommendations, both in terms of scope (beyond climate, into forests and water and soon even further), and of kind of data gathered (focusing on impacts in addition to risks and opportunities)
As the global environmental disclosure system, CDP will accelerate the implementation and rollout of both global and jurisdictional standards, including those in development by the International Sustainability Standards Board (ISSB), the European Sustainability Reporting Standards (ESRS) and the US Securities and Exchange Commission (SEC).
CDP is a knowledge partner to the Task Force on Nature-related Financial Disclosures (TNFD) putting our data, insights and expertise at their disposal to support the development of the TNFD framework.
CDP has the largest TCFD-aligned environmental database in the world, used by policymakers for decision making.