CDP: Business nature disclosures still majorly lagging behind climate

The disclosure platform has today (15 March) released its annual report on engagement across the private sector, with a focus on how larger companies are engaging with suppliers to collect better environmental data and reduce their negative environmental impacts across the value chain.

The report shows a major uptick in climate disclosures, with 42% more companies reporting through CDP’s climate platform in 2022 than in 2021. Yet, despite increased reporting on water, biodiversity and forests year-on-year, there is still a stark difference, with climate reporting far more common.

Some 18,600 companies reported on climate change, compared with just 1,000 on forest-related impacts. The number of companies reporting on water security increased 16% year-on-year but still only just exceeds 4,000. This is despite the fact that the three topics are all interconnected.

Disclosures on biodiversity are also far less common than climate-related disclosures. Around 7,700 companies reported via CDP’s biodiversity platform in 2021, just 41% of the number reporting via its climate platform.

CDP is warning that, unless nature-related disclosures become far more common and the quality of disclosures improves steeply, businesses will not be prepared for forthcoming regulatory changes.

The Treaty agreed upon by more than 180 countries at the UN’s 15^th biodiversity COP in December 2022 includes a commitments for nations to mandate nature-related reporting from larger companies by the end of the decade. Such a commitment was advocated for by hundreds of businesses but, as the CDP report proves, a great many thousands more are not ready.

To make nature-related corporate reporting more common ahead of any disclosure mandates, CDP is advocating for businesses to ensure that nature is a board-level priority. Three-quarters of the businesses reporting on climate to CDP said they incentivized their C-suite to take climate action, compared with just one-quarter being incentivized on forests and 6% being incentivized on water stewardship.

CDP is also calling on businesses to begin engaging with their suppliers more deeply on nature. 7,000 companies have told CDP that they work with suppliers on climate to some extent, compared with 915 on water stewardship and 543 on forests. Moreover, only 30% of the companies reporting on biodiversity assess the impact of their entire value chains.

CDP’s global head of value chains and regional director of corporations Sonya Bhonsle said: “COP15 couldn’t have been clearer in the call to action on corporate reporting on nature. If a company is not preparing for future regulations on nature in the supply chain, they are open to a wide range of risks and could also be missing out on the opportunities that safeguarding nature will bring.

“Quite simply, if a company wants to be in business in the future, they need to start embedding nature into the way that they buy and collaborating with suppliers to drive action in the supply chain.”

According to the World Economic Forum (WEF), $44trn – more than half of global GDP – is exposed to risks from nature loss.

Scope 3 in the spotlight

While there has been a sharp uptick in corporate climate-related disclosures, CDP’s report raises concerns about how quickly the quality of the disclosures is improving, with the disclosure of indirect (Scope 3) emissions proving a sticking point.

Almost six in ten of the companies reporting on climate to CDP included no information on supply chain emissions in their 2022 disclosures. There was virtually no increase in supply chain emissions disclosures year-on-year.

For those 41% of businesses who are engaging their suppliers to collect emissions data and drive decarbonisation, the average proportion of suppliers participating was just one-third.

Change could be coming. CDP found that 11% of the businesses include climate-related requirements in supplier contracts and a further 36% plan to do so in the next two years. CDP is urging companies to ensure that requirements are clear and science-based.

CDP is emphasising that Scope 3 emissions disclosure requirements are set to be tightened in several markets, including the UK and the US. On a global scale, the International Sustainability Standards Board (ISSB) has confirmed that Scope 3 emissions reporting will be included in its first global standards, due to launch by June this year.