When completing this year’s Climate Disclosure Project’s (CDP) annual questionnaire, have you and your company noticed that the 2024 format looks different than before? That’s because it is! The survey, which originally consisted of three separate questionnaires for climate, forest, and water, is now under a single questionnaire. Companies previously could choose which questionnaires were public, but now disclosures need to be entirely public or private, prompting respondents to answer all three categories.
This change represents a larger trend of integrating nature and climate issues and their solutions. The world is fighting to limit a global temperature rise to no more than 1.5°C over pre-industrial levels and nature offers solutions, such as carbon sinks—which removes greenhouse gases—to increase climate resiliency. This is why corporations are now adopting policies and initiatives to protect nature. According to CECP’s Investing in Society: 2024 Edition, over 50% of Fortune 500 companies and close to two thirds of S&P Global 1200 companies have biodiversity policies in place (a respective 14.8 and 16.1 percentage point increase from 2019). There has also been an increase in voluntary reporting and many reporting frameworks have added additional guidelines and questions to build a more robust picture of how nature fits into business strategy. Recent CDP’s changes reflect the latest evolution of several frameworks, such as the Taskforce on Nature-Related Financial Disclosures (TNFD), Global Reporting Initiative’s (GRI) biodiversity standards, and CECP’s Integrated Long-Term Plan Framework.
Following the same structure as the Task Force on Climate-Related Financial Disclosures’ risk management, the TNFD’s four pillars provide a comprehensive framework for reporting on nature-related issues. The Governance pillar includes the board’s oversight of nature-related impacts, risks, and opportunities and management’s role to assess them. The Strategy pillar is comprised of disclosing the effects of nature-related threats and impacts on the organization’s business model, strategy and financial planning where such information is material. The Risk Management pillar consists of a company’s process to identify, assess, prioritize nature related value chain mapping, and stakeholder engagement. The final pillar covers any nature-related metrics and targets associated with land, water, resource use, and pollution. In addition to an increase in voluntary disclosures, mandatory reporting is also progressing.
In March 2024, the Securities and Exchange Commission (SEC) finalized its climate standards, requiring all U.S. based public companies to disclose current climate risks and their process for overseeing them. This rule will also include reporting on Scope one and two emissions. Large, accelerated filers—defined as companies with over $700 million in public float—will need to report on these metrics for the 2026 reporting cycle. And then all other accelerated filers –$250-700 million in public float—will begin mandatory reporting for the 2028 reporting year. Both will require limited assurance after three years of implementation.
In response to the changing investor landscape, CECP’s Integrated Long-Term Plan Framework and its accompanying assessment were revamped in 2023 for companies to share their forward-looking strategy. Three new themes including stakeholder engagement, climate risk, and biodiversity were added, and then financial performance as well as capital allocation were consolidated into a single category. Both the new framework and assessment are included in CECP affiliation and provide a centralized index for how well a company is disclosing forward-looking metrics across the eleven categories and makes personalized recommendations for effective communication with key stakeholders. stakeholders.
Updates to the broader reporting landscape highlight the value of forward-looking reporting. Companies that effectively identify their material risks are better equipped to manage changes in the regulatory and reporting ecosystem. Let us know how we can support you and your company with this work today: insights@cecp.co.