CDP India runs a global disclosure system for investors, companies, cities, states, and regions to manage their environmental impacts. The not-for-profit organization over the last two decades has created a system that has resulted in unparalleled engagement on environmental issues worldwide. Prarthana Borah, Director, CDP India in an exclusive interview with Climate Samurai has shared about CDP India operations, ISSB climate-related disclosure standards, Challenges for India, and more. Here is the excerpt:-
- Please share with our readers about CDP. its India operation and how does it work?
As India is one of the fastest-growing economies in the world, transforming the development paradigm to include climate action is the need of the hour. CDP India is committed to facilitating India’s transition to a sustainable future by engaging with the private sector and driving climate action through a science-based disclosure process that is data driven and proves companies with insights on internal processes and strategies which can reduce the impact of climate change. Active since 2012, CDP India has evolved to become one of the most effective disclosure platforms with more than a 100 companies disclosing in 2021. Every year the number of Indian companies choosing to disclose through CDP has steadily increased by 30-40 percent. Our data is used by investors worldwide for investment decisions that can support climate-friendly transitions, water resilience and forest conservation by businesses.
“Our data is used by investors worldwide for investment decisions that can support climate-friendly transitions, water resilience and forest conservation by businesses.”
- We understand CDP’s work is closely aligned to what global organizations do for ESG related issues like sustain analytics and ISS, One issue of importance in ESG ratings is whether the ratings are relative to a particular industry or not. For example, a particular oil and gas firm may be viewed as deserving of a negative ESG rating based on environmental concerns due to its line of business but may be viewed as deserving a positive rating if it is a leader in ESG-related concerns within its industry. How does CDP plan to have the “standardization” to compare different environmental impacts from different companies belonging to different industries? Also note that there has been criticism of the heterogeneity of ESG-related ratings for the same firms across ratings agencies (Moody’s , S&P and Fitch)
CDP runs an environmental disclosure platform where our focus is specifically on Environmental metrics. We have 3 different questionnaires on Climate Change, Water, and Forests. Since 2022 we have also included questions that cover companies’ contribution to protecting Biodiversity and their use of plastics. We have aligned our questionnaire to incorporate recommendations from TCFD which was until recently the globally accepted standard for climate reporting. We have recently at COP27 announced our alignment with the ISSB which is a step in standardizing global disclosure and will transition from the TCFD. In India, our disclosure is aligned with BRSR where almost 60 of the 120 questions have a complete or partial match. While we are not a rating agency we do provide scores based on the quality of disclosure but our primary objective is to drive companies towards climate action using data, especially through a process of identifying risks and opportunities.
“We do provide scores based on the quality of disclosure but our primary objective is to drive companies towards climate action using data, especially through a process of identifying risks and opportunities”
Companies disclose Emissions, Energy, Risks and Opportunities, Value Chain Engagement, and Governance. While the metrics are environmental our questions do touch upon social and governance issues. The rigor of our questionnaire is expected to support companies to explore and look at operations and value chain engagement processes in a critical manner with the objective of identifying risks to the company in terms of climate, water and forests but also look at opportunities that can provide a business case for clean energy transition or sustainability in sourcing. Since this is a process that helps support and explore sustainability to ensure the reduced impact of climate risks the issue of green washing is less probable.
- How do you motivate companies and cities to disclose their environmental impacts? What is the parameter on which you create data to provide it to the decision-makers?
CDP’s Disclosure platform is designed to help companies assess climate, water, and forest risks so that the company can re-look at internal strategies to benefit and prepare necessary models to address climate impacts. In the last 3-4 years companies have identified climate and wate related opportunities and this itself serves as motivation for decision-making. Of the 88 companies that disclosed to CDP in 2021, 90 percent had board-level oversight on climate issues.
“In the last 5 years we have also seen a steady rise in the number of companies disclosing to CDP by 30-40percent. “
We have also seen that of the companies that disclose to CDP by the third year of disclosure these companies have also set emission reduction targets and have emission reduction projects. Indian companies are also ahead in terms of science-based target setting. In the last 5 years we have also seen a steady rise in the number of companies disclosing to CDP by 30-40percent. A study by CDP of companies who disclosed revealed that 70 percent of companies disclosed because of good reputation while 60 percent said it made good business sense to disclose.
- In Your India Second handbook, its stated that carbon price has been long advocated as an effective way to reduce GHG emissions. Let’s take the example of Taloja MIDC in Navi Mumbai. In 2022 11 industries in Taloja MIDC have been served closure notices by Municipality. We want to know at ground level if CDP was involved with any of this activism, if not how CDP propose to involve with such companies violating emission norms and encourage Governments to apply external carbon prices or emission prices if we may generalize this.
CDP runs the largest environmental disclosure platform, where we ensure transparency on environmental matrices to all relevant stakeholders. Our work is to drive climate action by companies with data insights. Our data is made available to 600+ investors globally to make informed decisions. Advocacy is not our mandate although we are happy to share our data within our data-sharing protocols to organizations who would like to accelerate climate action by the private sector.
- CDP recently announced to incorporate ISSB climate-related disclosure standard, can you please elaborate what does it mean and what kind of impact it is going to create?
On 8th November, CDP announced its intention to incorporate the International Sustainability Standards Board (ISSB) climate-related standards into our global environmental disclosure system. ISSB standard is rooted in the framework provided by the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). CDP’s disclosure system has been aligned with the TCFD recommendations since 2018.
“They will focus on the impact of sustainability on value creation – the impact on the firm, so-called single materiality.”
CDP supports the ISSB standard as a global baseline for climate-related disclosure for financial markets. It is an important step towards more transparency, accountability, and efficiency within financial markets. The development of the ISSB standards represents the institutionalization of CDP’s work: we have transformed capital markets so that climate and environmental disclosure are now accepted as a norm for the effective operations of markets and management of risk.
However, these standards will not represent the entire sustainability reporting scope, in terms of both metrics and topics. They will focus on the impact of sustainability on value creation – the impact on the firm, so-called single materiality.
At CDP we will continue to innovate and drive disclosure globally in terms of the metrics that really matter and what is needed to deliver on the Paris Agreement and Sustainable Development Goals. We will keep taking significant steps in bridging it to other standards and enhancing its scope. From 2023 companies will disclose on plastics while biodiversity was already included in 2022
- In your India Disclosure Report it’s been informed that, between now and 2030, India will reduce its total projected carbon emissions by 1 billion tonnes. However, a June 22 report by CSE states: For all its proclamations of climate promises and pledges, India is off-target in 15 of the 17 government initiatives (such as achieving 175 gigawatts of renewable energy) that have a deadline this year. What do you foresee as challenges for India, which is poised to be a manufacturing hub? Do you foresee greenwashing as a major challenge and how would you see through that?
India’s biggest challenge is the development targets set vis a vis the net zero target. India needs to grow fast and the challenge is in making this fast a sustainable fast. This is where the transition from coal will play a role and therefore the Prime Minister Shri Narendra Modi has set high targets for renewables, particularly solar.
“The private sector can accelerate climate action by supporting research, technology and innovation especially in the context of a country that has a high development goal.”
However, we are a big country with diversity of problems. Implementation has always been a challenge in the country in spite of targets and plans. This is why the role of the private sector is more important for India. The private sector can accelerate climate action by supporting research, technology and innovation, especially in the context of a country that has a high development goal. The private sector can support the government by converting a growth path to a sustainable growth path by mobilising resources to advance this journey and convert a challenge into an opportunity.
- SEBI has mandated Business Responsibility and Sustainability Reporting for the top 1000 listed companies from the year 2023, is it going to improve transparency, check companies from selling dream targets of Net Zero and scale up the flow of climate finance?
It is certainly expected that as the markets mature and adopt the BRSR in true letter and spirit, the importance of non-financial/sustainability disclosures will grow in prominence thereby leading to more transparency. It is encouraging to note that the investor community and financial institutions are coming forward to reiterate their commitments to low-carbon economies.
“Companies disclosing their ESG standards and strategies gain a reputable edge in the market over their competitors and are likely to attract more capital.”
The enabling policy environment driven by ESG disclosure regimes such as BRSR (along with international standards) has accelerated and scaled up climate finance. Companies disclosing their ESG standards and strategies gain a reputable edge in the market over their competitors and are likely to attract more capital. The increased alignment of global and national frameworks would also increase climate finance and support evolving dynamics of capital markets.
Earlier this year CDP India undertook an analysis of mapping the alignment of CDP’s questionnaire with the BRSR format and interestingly overall, 65 out of 140 BRSR Questions overlapped with the CDP questionnaire. Further, the environmental questions of CDP also have a social lens attached to them. The new disclosure standards will indeed lead to flow of more climate finance. We have also seen an increase in the number of companies disclosing to CDP following the BRSR mandate.
- In CDP’s case study on Mahindra and Mahindra, we learn that Mahindra has adopted an internal carbon pricing policy and has committed to reduce its scope 1 and scope 2 GHG emissions by 47% per equivalent product unit by 2033 from a 2018 base year. However, if we look at what they did since 2010, it paints a different picture on their commitment. They bought the Reva from Chetan Maini and killed it. They announced the eKUV and killed it. How do you see then this company is on the right track to achieve what they claim?
If we have a closer look at the company’s target on reducing scope 1 & scope 2 emissions by 47% per equivalent product unit by 2033 from a 2018 base year, it is validated by Science-based Target initiatives. They have to reach their mentioned targets by year 2033, depending upon the available methodology for decarbonization. SBTi globally is already working on developing the measurement and verification system for the same. Also, once the company takes such targets, the company has to report the progress through their annual reports y-o-y. Rest we might not be the right person to comment on the operational and collaborative successes or failures.
- You recently participate in COP27, what are the key takeaways for India?
This COP was inclusive. While the negotiations were happening in a much more closed space than earlier, the side event space was a COP in itself. Adaptation was a major area that showed prominence in presence as did private sector engagement.
“Battling climate change requires multi sectoral involvement and partnerships.”
One of the biggest takeaways of this COP is the spirit of partnership. Industry meetings in environment pavilions is good news for the environment as it shows mainstreaming environmental issues into business dialogue. Innovation was a dialogue that was evident in many pavilions as was youth engagement. Battling climate change requires multi-sectoral involvement and partnerships. Hope this COP will build stronger partnerships to drive climate action.
- What advantages may one expect from precise carbon reporting and monitoring?
“What gets measured gets managed”, Identifying and quantifying CO2 emissions helps to identify excessive energy usage or other inefficiencies. Lowering GHG emissions typically goes hand in hand with increasing efficiency and cost-effectiveness in an organization’s processes. It also helps customers feel good about the business and make it ahead of regulations.