CDP is a non-profit organisation that runs a disclosure system for companies and investors to report and manage their environmental impact. Following the guidelines of the Greenhouse Gas Protocol (GHG-P), it evaluates corporate practices and encourages firms to act on sustainability issues.
CDPs disclosure framework is based on questionnaires that measure environmental impact in three areas: climate change, water security, and forests. Reporting entities can choose to complete one or all the questionnaires, which are assessed separately to provide the most comprehensive global score of corporate environmental performance.
How CDP evaluates Scope 2 emissions
The GHG-P, which provides the base for CDP scoring, defines Scope 2 as the indirect emissions from the generation of electricity, steam, heating, or cooling consumed by the reporting company.
There are two ways to evaluate and disclose Scope 2 emissions:
The location-based method
It reflects the average carbon content of the grid in which energy consumption occurs.
The market-based method
It reflects emissions from electricity suppliers that the reporting company has purposefully chosen. To track and document the origin of electricity, it relies on Energy Attribute Certificates (EACs), such as:
- Guarantees of Origin (GOs) in Europe.
- Renewable Energy Certificates (RECs) in North America.
- International Renewable Energy Certificates (I-RECs) in the rest of the world.
CDP's scoring system
CDP provides a score based on reporting entities’ responses to their questionnaires. The score, ranging from D- to A (see figure 1), reflects the degree of detail of the content, as well as the company’s awareness of climate change issues, management methods, and environmental action.
Reporting companies are assessed across four consecutive levels. To access the next superior level, all the minimum requirements of the one that precedes it must be satisfied.
The first stage indicates a company’s willingness to report on its environmental impact and awards points according to the importance of the question and the level of detail of the response provided.
This level evaluates a company’s knowledge of environmental issues and how these intersect with business practices. A company’s evaluation should demonstrate an understanding of how its activities affect the environment and vice versa, contributing to the assessment of business risks.
Points are awarded for responses demonstrating actions that advance environmental stewardship. In other words, companies should show the steps they take to reduce environmental impact, such as mitigating risks, bolstering risk evaluations, and implementing environmental policies.
Companies that reach the leadership level in the climate change programme have established company-wide emission reduction targets and implemented actions to achieve them. They show a robust understanding of climate risks and opportunities and follow best practices defined by CDP and partners.
Why do companies report to CDP?
CDP provides the benchmark for green investments. Its disclosure system aims to engage stakeholders in real, measurable action to mitigate climate change and to provide investors with credible information on businesses’ environmental performance.
By supplying tools to evaluate impacts, risks, and opportunities, CDP empowers companies to build a sustainable economy. Disclosing to CDP improves corporate reputation and gives a competitive advantage in markets where investors and consumers demand environmental responsibility.
How can Ecohz help?
Ecohz’ experts can support your company in the disclosure process of Scope 2 emissions.
We offer end-to-end management of documented renewable electricity, from sourcing Energy Attribute Certificates (EACs) to providing you with reporting-ready documentation. Ecohz can also help you craft a robust decarbonisation strategy that maximises impact and ensures high CDP scores.
Whether you are new to CDP disclosure or are further along your Net Zero Roadmap, our advisors walk you through the questionnaires and inform you on best practices to ensure the highest gains from your sustainability strategy.