CDP
What is it?
The Carbon Disclosure Project (CDP) was established in 2000, and changed its name to CDP in 2013. It aims to enhance companies to disclose their climate impact to stakeholders such as investors, employees and customers. Since then, they have broadened the scope of environmental disclosure, incorporating deforestation and water security, simultaneously building their reach to support cities, states and regions. In 2021, they expanded the scope again to cover all planetary boundaries.
The CDP Framework is voluntary and completed annually, and Small and Medium Enterprises (SMEs) are defined as non-subsidiary organisations with fewer than 500 employees.
In more detail:
Micro-enterprises (fewer than 10 employees)
Small enterprises (10-50 employees)
Medium enterprises (50-500 employees)
Structure of the framework:
Consists of 3 core modules:
Measure
Commit
Action & Impact
With 4 additional ones:
Energy reporting
Value Chain Emissions
Management & Resilience
Climate Solutions
The core modules are advised to be the first for SMEs to report on, and the rest are recommended to be taken on, over a course of three years. Through the framework, SME’s can access which climate-related indicators are more critical, and inform their disclosures. Companies can then report this information in their generic reports or through another method for data collection and reporting platforms.
SMEs are encouraged by the CDP to use the SME Climate Hub, a non-profit climate initiative that encourages SMEs to take action in climate change, which has resources to use for when companies want to report on the indicators in this framework.
In order for the disclosures to be reliable, they should be:
Relevant to the SMEs and their data users
Clear and understandable
Objective and accurate
Complete and verifiable
Benchmarkable against best practices from corporate disclosures
Drive impactful SME climate action and be provided annually and consistently formatted.
Overall, Micro enterprises account for 70% to 90% of all firms, playing a crucial role in reducing global emissions. Larger companies have started to transition to climate neutrality, and a competitive disadvantage might be in the cards for SMEs if they do not start to do the same. More and more investors and customers are looking to invest in and do business with companies that are taking climate action. By reporting on their climate disclosure, SMEs can demonstrate their commitment to sustainability and attract these valuable stakeholders.
Reporting can help SMEs to protect and improve their reputation, by showing relevant stakeholders and clients that they take the issue seriously and are working to reduce their environmental impact. This can help to protect and improve their reputation with customers, employees, and the community. This disclosure also helps to identify risks and opportunities, since climate change is a complex issue with far-reaching implications for businesses, and by better these implications, SMEs can make informed and reliable decisions about their operations and strategies.