CDP, an abbreviation for ‘Carbon Disclosure Project,’ is an international non-profit organization founded in the United Kingdom in 2000 and the world’s only independent environmental information disclosure platform. Established jointly by global financial institutions, CDP currently has approximately 9,600 listed companies participating.
Originating from the perspective that climate change can be both a risk and an opportunity for companies, CDP operates an information disclosure system that enables central and local governments, investors, and companies to manage their environmental impact. Initially, it focused on disclosing carbon emission information related to climate change, but has gradually expanded its scope to cover a range of environmental information including forest protection, plastics issues, biodiversity, and water resources.
[CDP (Carbon Disclosure Project) Ⓟ ESG.ONL/ESG Today]
To this end, CDP requests major companies worldwide to transparently disclose information including carbon emission volumes, reduction efforts, and climate change response strategies. Companies wishing to respond to CDP’s information disclosure request and have their environmental management capabilities and performance evaluated must disclose to CDP the relevant management-related information and materials that can substantiate their performance.
The companies subject to the information disclosure request are selected each year based on market capitalization, and CDP delivers a disclosure request letter to the selected company’s CEO and relevant personnel. Even companies that have not received a request may participate voluntarily. Companies that accept CDP’s disclosure request or wish to voluntarily receive a CDP rating evaluation may submit information through CDP’s proprietary online response system, ORS, by the response deadline. How much information and what kind of information the company discloses is also reflected in the evaluation results.
The CDP rating is the result of evaluating how companies and cities disclose and manage their environmental impacts. Grades range from D- to A, and a certain score must be achieved at each of the four stages before evaluation proceeds to the next stage.
- Disclosure (D- or D): Evaluates the extent of environmental data disclosure and completeness of reporting
- Awareness (C- or C): Evaluates the company’s level of awareness of the impact of climate change on its business
- Management (B- or B): Evaluates the company’s activities and management measures for responding to environmental issues
- Leadership (A- or A): Evaluates exemplary environmental management practices and leadership
If a sufficient score is not achieved at the Disclosure stage, the company is not given the qualification to be evaluated in the remaining three stages. With its rigorous evaluation method, CDP is recognized as one of the most reliable ESG evaluation indicators.
For a CDP rating evaluation to proceed smoothly, companies need to systematically manage and transparently disclose their ESG data. Amid the trend toward mandatory ESG disclosure, CDP can serve as a strategic tool for companies seeking to attract investment.
by Editor O