How CDP Incorporates ISSB Climate Disclosures: A Unified Framework for Transparent Reporting

Imagine this: Your company is gearing up to enhance its sustainability efforts, but there’s a catch—you’re drowning in data and countless ESG topics. Should you prioritize carbon emissions? Or maybe focus on supply chain transparency? With so many issues on the table, it’s hard to know what really matters. If this sounds familiar, you’re not alone. Many businesses struggle with the same dilemma.

But what if there was a way to cut through the noise, streamline your reporting, and align with the global push for consistent climate disclosures? That’s where CDP and ISSB come in. These two frameworks have been working toward harmonizing sustainability data, and their alignment is a game-changer.

In this article, we’ll break down what CDP and ISSB are, why their alignment matters for businesses like yours, and how you can leverage this shift to enhance your climate disclosures.

What is CDP?

At its core, CDP (formerly the Carbon Disclosure Project) is the global leader in environmental disclosure. Launched in 2000, CDP has become a trusted platform where businesses, cities, and regions report their environmental impact, including greenhouse gas emissions, water usage, and deforestation.

CDP's mission has always been clear: to accelerate action on climate change by providing transparent, comparable, and comprehensive data that can be used by investors, companies, and policymakers. By responding to CDP's questionnaires, businesses communicate their environmental strategies and performance to the world. This allows investors and stakeholders to make informed decisions based on the company's climate risk exposure and efforts to mitigate it.

Over time, CDP has evolved beyond just carbon emissions. It now covers critical topics like water security, forest management, and supply chain sustainability. This broadens the scope of environmental reporting and challenges businesses to think about their environmental impact in more holistic terms.

What is ISSB?

Enter the International Sustainability Standards Board (ISSB). Established in 2021 under the IFRS Foundation, ISSB aims to provide globally consistent and comparable sustainability-related disclosures, with a particular focus on climate risk. The key goal of ISSB is to create a reporting standard that integrates financial and sustainability data, giving investors a clearer picture of a company’s climate-related risks and opportunities.

ISSB’s core standards, IFRS S1 and IFRS S2, provide guidance on how companies should disclose their sustainability impacts, with IFRS S2 focusing specifically on climate-related disclosures. These standards are built on the Task Force on Climate-related Financial Disclosures (TCFD) framework, but ISSB enhances it by emphasizing financial materiality—the potential financial impact of climate-related risks on a company's bottom line.

For businesses, adopting ISSB’s standards means aligning your sustainability data with global investor expectations and regulatory requirements. But here’s the catch—how does ISSB tie into existing frameworks like CDP? That’s where the magic happens.

Why the Alignment of CDP and ISSB Matters

At first glance, you might wonder: Why does this matter to me? Isn’t the process of reporting already complex enough?

The reality is, the world is moving toward standardization in climate disclosures, and businesses need to stay ahead of the curve. By aligning with ISSB standards, CDP is removing the complexity of having to navigate multiple reporting frameworks. Instead of maintaining separate reports for ISSB and CDP, companies can now use a unified approach to meet both requirements.

This alignment makes life easier for businesses in several ways:

• Simplified Reporting: No more juggling between different reporting standards. With ISSB and CDP on the same page, companies only need to focus on one cohesive approach.
• Better Comparability: Investors can now compare companies across industries and regions more easily, as they’re using the same standardized disclosures.
• Increased Transparency: By aligning CDP with ISSB, businesses ensure that their climate data meets international standards, making their disclosures more transparent and credible.
• Global Compliance: As regulatory requirements for climate disclosures grow, CDP’s alignment with ISSB ensures that businesses are prepared to comply with global regulations, such as the EU’s Corporate Sustainability Reporting Directive (CSRD) and the SEC’s proposed climate disclosure rules.

For businesses already reporting through CDP, the alignment with ISSB simplifies the process of meeting future regulatory expectations.

How CDP Incorporates ISSB Climate Disclosures

Now that we’ve established why the alignment is important, let’s explore how CDP has integrated ISSB’s climate-related disclosure requirements.

CDP’s climate questionnaires have been updated to reflect the key elements of ISSB’s IFRS S2 standards. This means businesses will now be asked to provide more detailed information on climate-related risks and opportunities, specifically focusing on how these risks might affect the company’s financial performance.

Here are the key changes you’ll see in CDP’s updated questionnaires:

1. Financial Materiality: ISSB’s emphasis on financial materiality means that CDP’s climate disclosures now ask companies to assess the potential financial impact of their climate risks and opportunities. This ensures that the data is not just environmental, but also relevant to investors.
2. Climate Risk Metrics: CDP’s questions now align more closely with ISSB’s framework, asking businesses to disclose the governance, strategy, risk management, and metrics around climate-related risks.
3. Emissions and Scope Alignment: CDP’s existing focus on Scope 1, 2, and 3 emissions is now aligned with ISSB’s requirements, making it easier to track and report emissions data in a standardized way.

These changes ensure that companies can seamlessly transition between CDP and ISSB reporting, without the need for separate disclosures.

Benefits for Businesses

So, how does this alignment benefit your business? Here’s why you should care:

1. Simplified Compliance: Aligning with both CDP and ISSB means you only need to prepare one set of disclosures, reducing the burden of reporting under multiple frameworks.
2. Improved Investor Confidence: Investors are increasingly seeking standardized, reliable climate data. With CDP incorporating ISSB standards, businesses can provide clearer, more actionable insights into their climate risk exposure.
3. Enhanced Transparency: With standardized disclosures, businesses can demonstrate their commitment to transparency and sustainability, strengthening their relationships with stakeholders.
4. Future-Proofing Your Reporting: By adopting ISSB-aligned CDP disclosures, your business is preparing for future regulatory requirements, ensuring that your reporting remains relevant as global climate disclosure regulations evolve.

How to Prepare for CDP Reporting with ISSB Standards

Feeling overwhelmed? Don’t worry—preparing for CDP reporting with ISSB standards is simpler than you might think. Here’s how to get started:

1. Understand the ISSB Requirements: Begin by familiarizing yourself with the IFRS S2 standards and how they relate to your current reporting practices.
2. Assess Your Data Gaps: Review your existing climate disclosures and identify areas where additional information may be needed to meet ISSB’s financial materiality requirements.
3. Update Your Reporting Systems: Consider using an ESG platform like Newtral to automate data collection and ensure compliance with ISSB and CDP standards.
4. Train Your Team: Educate your sustainability team on the updated requirements and ensure they’re ready to gather and report data accordingly.
5. Engage with Experts: If you need help navigating the complexities of ISSB-aligned reporting, consult ESG professionals who can guide you through the process.
   

Challenges and Considerations

Of course, no transition is without challenges. Adopting ISSB-aligned CDP reporting may bring some hurdles, such as:

• Data Complexity: As you assess the financial materiality of climate risks, you may need to enhance your data collection methods.
• Cross-Departmental Coordination: Climate reporting often requires input from various departments (finance, risk management, sustainability), so collaboration is key.
• Regulatory Changes: As ISSB standards evolve, businesses will need to stay updated and adjust their reporting practices accordingly.

Conclusion: A New Era of Climate Transparency

The alignment between CDP and ISSB is a pivotal moment for corporate climate reporting. It marks the beginning of a more unified, streamlined approach to disclosing climate risks and opportunities—one that is rooted in financial materiality and investor relevance.

By embracing this alignment, businesses not only improve their sustainability efforts but also future-proof their reporting to meet emerging global regulations. It’s time to take action—because the future of climate reporting is here, and it’s standardized.