At the very end of 2022, the world’s leading environmental disclosure platform, CDP, released their annual report. In the yearly report, organisations who disclose to the CDP are rated from A to D- according to their environmental action and transparency. Here we take a look at this year’s trends in the rankings, CDP’s upcoming Supplier Engagement Rating (SER), and offer the Vizibl view on what these new figures mean for the state of supplier sustainability.
Firstly, Vizibl would like to congratulate our partner CDP, the world’s most prominent voluntary corporate environmental disclosure platform, for announcing the release of its company scores for 2022, including its annual “A List” of top performers.
All in all, over 18,700 companies disclosed their climate, water, and forests impact through CDP this year – representing half of global market cap and a huge 42% increase from 2021. It also represents a 233% increase on the number of reporting companies CDP saw in 2015, the year the Paris Agreement was signed.
This growth demonstrates the impact companies can make if they respond to climate change and nature loss with the urgency required. In a year of ever-increasing environmental concerns around the world – from extreme weather to unprecedented losses to nature – the need for transformational, urgent and collaborative change is more critical than ever.
Furthermore, over 330 companies were awarded “A” ratings. 283 made CDP’s Climate Change A List, 25 made the Forests A List, and 103 made the Water Security A List. However, only 12 companies were classified as “triple A” performers – getting the best grade across all three programmes – down from 14 in 2021.
Having said that, becoming triple A rated by CDP isn’t a static target. The bar on what qualifies as climate, forests and water leadership is regularly lifted in line with emerging environmental science, feedback from stakeholders, and market needs. Although companies that achieve an A are among the most mature and transparent when it comes to disclosure and performance on climate change, deforestation or water security, they are not at the end of their environmental journey.
In a sustainability sense, 2022 will be remembered for the IPCC declaration that "if we want to restrict global warming to 1.5°C, it's now or never". The need for prompt climate action has never been more urgent in a year marked by catastrophic weather events around the world competing for headlines with startling statistics like a 69% loss in biodiversity since 1970.
COP27 emphasized the impending "tipping point" and focused on tackling climate damage, reallocating resources to support climate adaptation, and protecting natural ecosystems simultaneously – with businesses playing a crucial role at every stage. Companies must continuously strive to improve their environmental performance, and CDP transparency and scores are crucial to this process.
Dexter Galvin, Global Director of Corporations & Supply Chains at CDP, said:
“Environmental disclosure is the first vital step towards a net-zero and nature-positive future, so A List companies should be commended for the level of transparency in their CDP responses. But we cannot ignore that these companies are in the minority. Most are still not managing all environmental issues holistically, and far too many are remaining complacent or failing to respond at all.”
The biggest increase in top scores was in the Climate Change category, with 283 companies reaching an “A” score, up 34% over 2021, while 25 companies achieved an “A” score in the Forests category, up only by 1 compared to the prior year. Companies achieving the top score in Water Security declined to 103 from 118 in 2021.
It’s also worth noting that 76% of companies on the Climate Change A List have an approved science-based absolute or intensity emissions target (compared to 19% of A- to B- scoring companies, and 2% of C to D- scoring companies). Having a science-based target is one indicator that a business is serious about reducing its emissions, and in a year where greenwashing has been repeatedly called out – most notably at COP27 – this is a promising sign.
“Companies must step up to the challenge as CDP continues to lift the bar for what qualifies as environmental leadership, and since there is no route to 1.5°C without nature, they must speed and scale up their progress in addressing deforestation and water impacts, dependencies and risks, too,” Galvin added.
More than 29,500 businesses with market capitalisations of at least US$24.5 trillion received failing grades for either declining to respond to disclosure requests from their clients and investors, or for responding with insufficient details.
59% of the companies received grades between a D- and a C, indicating that they are just starting to understand the importance of disclosing their environmental impacts. With 66% of D- to A-scoring enterprises failing to improve in 2022, far too many continue to stagnate. These businesses must step up their environmental action and disclosure initiatives.
At Vizibl, we’re also looking forward to the upcoming release of CDP’s 2022 Supplier Engagement Rating (SER). In 2021, with only 11,000 companies reporting to CDP’s Climate Change programme, there were encouraging results: emissions reduction initiatives addressing 231 million tons of CO2e were driven last year by over 200 Supply Chain members. However, last year’s data also showed a lack of engagement with suppliers. For example, on climate change, only 20% of buying organisations reported data for Scope 3 category 1 ‘Purchased Goods and Services’ emissions, and 62% weren’t engaging suppliers on the topic at all.
With far more companies reporting in 2022, we hope that this year’s SERs will see an upturn in all these metrics. Since we know that supply chain (or scope 3) emissions are on average more than 11 times higher than a company’s scope 1 and 2 emissions will be, it’s imperative that the majority of reporting companies either get on their Supplier Collaboration journey now, or take decisive steps to move their company’s supplier sustainability management strategy from moderate reductions to intensive ones.
One of the most extensive and well-known sustainability disclosure platforms, CDP provides environmental scoring information for investors whose assets total $130 trillion US dollars. These investors can evaluate the climate risk of their portfolios by using CDP scores to discover which companies are integrating sustainability into their business strategies and practices.
The need for accurate climate disclosures has never been greater, especially in light of the grave threat that the climate emergency poses to our global economy, and the short window of opportunity we have to slow down global warming and achieve net-zero emissions.
The rise in CDP disclosure this year appears to be evidence of the influence the investor community has over disclosures, and specifically, looking at the impact of supply chain activity on overall greenhouse gas emissions.
Our partnership with CDP
Vizibl is a Silver CDP accredited software provider for 2022/23, and is the only software company to cover value chain engagement, scope 3 services, and stakeholder engagement via the Vizibl Supplier Collaboration and Innovation platform.
With the 2022 reporting cycle now complete and the 2023 cycle underway, our relationship with CDP and the provision of their annual scoring data will underpin the Supplier Sustainability Management module within the Vizibl platform.
Our Supplier Sustainability Management module allows companies to track both their suppliers’ CDP performance from the current reporting period, and create new projects, collaborations or innovation rounds with their suppliers in order to meet their science-based targets.
To find out more about our software partnership with CDP, visit our CDP Partnership Page.
Or to learn more about how our Supplier Sustainability Management model incorporates CDP and SBTi data to help you hit your supplier sustainability goals, visit Vizibl SSM.