Interview - CDP and Climate Disclosures: a Corporate Perspective
What are climate disclosures such as the CDP (Climate Disclosure Project) really like? In this interview, we spoke with Ermanno Camerinelli, Sustainability Specialist for an Italian SME who completed their first climate disclosures. Hear firsthand what parts of the CDP were really important, where the data came from, how you should use it, and how participating in the CDP benefited his company. You can also watch the video of the interview on Youtube.
SC: Thanks for joining me today.
EC: Thank you for for asking me.
SC: Sure. This is for this book I'm putting together about climate investing, and I wanted to have a section from somebody who's done the carbon disclosure project CDP disclosures to hear firsthand from you what your experience was. So I had some questions that I sent you earlier and if you could just start telling me about it, I'll prompt you and follow you along.
So if you could tell us a little bit about the company that you work for and why they decided to do this in the first place.
EC: Well I work as a sustainability specialist in an Italian fashion company that supplies fashion accessories to the most important fashion brands worldwide. We supply natural materials like corozo or mother of pearl and also synthetic materials like polyester or metal. Since we supply also natural materials of course we have a lot of standards we have to comply with. We have many regulations we have to to comply with of course, so our company has always been committed to sustainability from the very beginning of its from its early life.
We started to get into the CDP carbon disclosure project because my boss collaborates with the some working groups in the United Nations, and some entities thought this could be a good opportunity for us to disclose our commitment to sustainability. We only filled the environmental and climate change fields of the CDP. The CDP is divided into different areas: climate, water, and another area, but we are not into that because we do not hold a production department in our facility, so we only showed our commitment to sustainability in the sense that we commit to all the regulations of fishing or the fishing of the shells.
We also comply to many of the SDG's not only water or climate SDG's. We also comply to many social SDG's because our company was the first one to locate the production and the cultivation and fishing of shells in protected areas, where the shells are born, in middle Asia, Australia, Tahiti.
We also involved the native populations in those processes so we gave working job opportunities to people who had no job opportunities. Of course all these areas are protected and controlled. So this is why we decided to join the CDP.
I personally filled the CDP questionnaire. The main challenges of the CDP: Since we are a very small company, it was really hard for us to gather all the information, because all the information we hold in our company are not stored on an online platform. It's just me. They are just stored in a in a database. We didn't implement a blockchain technology yet, so we have no automatic data collecting or data analysis. So it was hard for me to analyze the data, because it was my very first experience with CDP and with the sustainability. So I started to get into sustainability just from that experience, and massive quantitative quantitatives of data were involved. It was difficult to me in the first place to understand what scope 1, scope 2, and scope 3 were, but then of course I was able to manage it.
The advantages we received from filling the CDP: Actually we gained a lot of competitive advantage because we got in touch with many companies after we filled the CDP that were really interested in our commitment and in our activity, just because they read our CDP disclosure. So I think it's a great opportunity for companies to disclose their commitment not just to their clients or potential clients but also to investors and to other stakeholders. It's a great opportunity because CDP is an online platform, so it's open. Everyone can join, and everyone can see what other companies are disclosing. So this is a great opportunity.
SC: Okay interesting. So did you only do CDP or did you do some of the other ones like GRI, the Global Reporting Initiative, or TCFD?
EC: Not yet.
SC: CDP was the only one by far. And did you make quantitative disclosures like your full scope 1, 2, and 3 emissions footprint?
EC: Yes. So sorry let me just add one thing. Another weakness of the CDP I think is that at least for the area I personally covered, the questions asked were whether we used some science-based targets or international standards that are internationally recognized. But I think it is not good that CDP does not provide standards itself. After all, the information are gained and all the information is collected. I think a good thing CDP could do is to develop some standards that could be internationally recognized.
SC: OK. So what kind of standards?
EC: Maybe qualitative standards. Not just quantitative but qualitative standards for climate change, forests that's what the the additional area was, and water.
For example, a lot of their questions are "do you have a policy in place" or "who is in charge" kind of qualitative. So are you saying some kind of standard on how an organization should manage its climate impact rather than just having people answer those questions?
SC: Okay. That's a good point, to develop a set of best practices, if you will.
So coming back a little bit to the quantitative data. So scope 1 is the energy that you consumed at your facilities, and scope 2 is the purchase of electricity, and scope 3 is supply chain -- up and down your customers as well as your vendors.
So how did you do all three of those segments?
EC: It was very very easy for me because after understanding what scope 1, scope 2, and scope 3 meant, it was really easy for me. Since we are a very small company, we do not have much data. It was hard to me to understand because it was my first experience, but this year 2021 was the second year that i filled the cdp questionnaire. Of course it was way easier.
The Scope 1 data was just collected by me by asking my colleagues. Actually we do not have official reporting processes in place, nor do we have measuring processes in place. We are working to implement one but we do not have one yet.
SC: So scope 1 is usually like a manufacturing plant where they're burning some kind of natural gas to make a product. Do you actually do that very much like direct machinery?
EC: We do not have direct productions. So we do not okay so I just highlighted that our facility in Asia or in Turkey or in Europe are compliant to the Ecotex or GRS, GSR standards.
No massive CO2 emissions are registered in those companies but they are also committed to compensate it, to offset.
SC: Scope 2 is electricity.
EC: Yes it was the manual collection of data, of electricity bills. I only included the electricity for light and for heating and cooling because the only electricity.
SC: Did you use emissions factors for different countries’ utilities or how did you go from the electricity data to the carbon emissions of the electricity? How did you calculate the carbon emissions from the electricity bills or was there a database or or service that did that for you?
EC: Actually it was just something that was amateur. I did it manually. I searched how this CO2 equivalent tons can be calculated, and then I tried to calculate it, because we actually don't have uh external services that do it for us.
SC: There's public data sets for that information that you used.
So now the most difficult part is scope 3. How did you calculate your scope 3 emissions?
EC: I asked our suppliers for scope 3. I had the idea of making my own questionnaire that I shared with my suppliers where my question was just something like the interview in December if you remember. It was just do you have a reporting process in place? Do you have a measuring process in place? If yes, how do you measure and how do you disclose your emission data? Do you have any any projects to offset your CO2 emissions? Of course some of this information was a bit confidential so it was not included in the CDP, but our suppliers are compliant with all the regulations. Some of them have some projects to offset their emissions, so it was just an interview to my suppliers.
SC: Did a lot of them provide you that information, most of them did, or about half?
EC: Most of them did provide the information. Of course i shared the questionnaire with all our suppliers, but the main suppliers that actually produce the majority of our buttons or our accessories are really a few. They all disclosed their impacts.
SC: So what kind of information did they give you? Did they actually tell you how much CO2 emissions per dollar, or per pound or kilogram, or per unit of product?
EC: No it was just from zero to one ton, from one ton to two tons, two tons to three tons. It was just an approximate range.
SC: So they give you a range of results like one to three tons.
So you mention offsets. Are they including offsets? Are you using some form of offsets in terms of their emissions footprint calculations? My company? Yes, your company and your suppliers. Do you use offsets in your emissions calculations?
EC: I don't know. I cannot tell you from my supplier's point of view because I did not investigate much deeper. Our company does not have offsets initiatives because we do not emit a lot of CO2, so our company is not required to compensate or to offset its emissions.
SC: OK. There's a lot of other questions on the CDP like management processes and who's responsible and kind of just soft questions. So did you answer that?
SC: Did you interview people at your company or was it just basically you're the person so so that's the answer?
EC: Actually we are just seven of us in our company. It's just seven employees so it was really easy to understand who is in charge of what, and of course we all work in the same facility. It's just one building, and I speak to all my colleagues every day. So I already had all the needed information because I know what people are in charge of in my company. There is my boss, there is me, there is the production manager, and there is the sales manager. My boss is in charge of investigating all the new standards our company must comply with. I'm in charge of finding the best way to comply with those standards. Our production manager is in charge of telling our suppliers that products must be made in a certain way to be compliant with environmental standards, product standards, or working standards. Our sales manager with me, we are both in charge of disclosing our commitment through awareness campaigns, through marketing campaigns, to our our stakeholders, clients, and financial institutions. So this is basically how our company is made.
SC: OK. So how big, how many pages, are your disclosures all together?
EC: Let's see, front and back--it is approximately 20 to 25 pages 30 pages. Actually some of my answers were quite long, so I think it's 30 pages.
SC: And you're saying this is available on the CDP website now? I might have to ask you for the link just to see. because I wasn't able to find the answers.
So let me ask you now that you've done this: I'm looking for example at the Adobe CDP disclosures so I'll share my screen with you. This is theirs and it's really long. Theirs is a hundred some pages long for a very large company.
So what do you think is important to read? What do you think are the most useful and important questions? Here's one: detailed risks. This one is talking about risks. Before they're talking about different organizational types of risks and whether they're relevant or not, and then there's a lot of different material here.
EC: Many people say this kind of questionnaire can be also problematic for many companies, especially large companies, because they ask for sensitive information like potential financial impact figure. This can be information that some companies may think is sensitive. Some companies may not be willing to disclose such information, so the cost to realize the opportunity in the section is something that can be omitted or can be altered by companies.
I think the most important sections here are of course the impact magnitude and the risk area. Are there organizational or operational risks connected to your activity or to your companies? This is one of the most important areas. Others of course are the scope 1, 2 and 3 emissions reporting.
SC: Okay so the company is going through a list of all their different types of risks. And did you do a similar analysis for your company, like of all the different risk types of climate-related risks to your operations?
EC: Yes of course it was way simpler than this, but yes we did do it.
SC: What about sections like strategy in terms of a transition plan or scenario analysis.
EC: This could either be something that can be useful or something that can distract companies or readers from the scope of CDP.
SC: That's a good answer thank you.
So taking a step back like what do you think was good and bad, strengths and weaknesses of the disclosures? How do you think it could be better?
EC: I think, as I told you earlier, it's a great opportunity for companies especially small companies to be more present on the market, to give a better impression of themselves, and to reach more and more readers, more and more stakeholders in a very short time, because CDP is followed by and read by thousands of companies or thousands of users every day. So it's a great opportunity. I think one weakness can be that the CDP actually asks for some sensitive information that companies may not be willing to disclose, for example the strategies or the cost and opportunities. The risk session is really helpful, but again this can be a tricky question to many companies.
SC: Yes I see that. How do you think it could be better if you were to try to improve the whole disclosure process?
EC: Well it's a good question. Maybe fewer questions I think, because it can be too many questions.
It would also be very helpful if the answers are guided answers and you have different options, and then you have to write your comments in. For example in the risks and opportunities sections you have some options that you can choose from, and then you have to only write your comment. So I think it's a very good thing if there are maybe fewer questions. That's my only concern.
SC: so are you saying it is currently guided or is it kind of open-ended?
EC: Yes, it's guided.
SC: Okay so basically the key is fewer questions and just the important ones like the risks and the scope 1, 2, 3 emissions reporting.
EC: Well actually the opportunity section is also useful to stakeholders like clients or financial institutions, but for the very scope of the CDP carbon disclosure project I don't think it's very useful for this purpose.
SC: So it's useful but not for the carbon and climate.
EC: Yeah. It should be a different section of the CDP platform.
SC: Okay so how was it prepared? Was it just one big document that you sent back to them ?
EC: In the first year in 2020 I downloaded the questionnaire on excel and then I uploaded it and submit it on the website. In 2021 I just filled it online. This was way way simpler to do.
So I'm just very quickly looking at their website now. Let me share with you. So where do I find the results of the companies in the cdp website? Or how are people finding the surveys that you filled out? Actually I don't know from here since we are logged in in the CDP, we have our account, so I have the results of my questionnaire there on my account. I guess it could be on data and insights, or you go on the research icon on the the top part in on the right.
SC: Over here right? Search response. Okay search for company. Please sign in or register. So you need to register. I did not know because they also have data sets that they sell to companies of the responses so I didn't realize where you could actually find these but this is helpful to actually be able to find it on their website as well.
So anything else I should know? I'm trying to ask a lot of questions but you're the expert here.
EC: No I'm still learning about this, about the CDP. I'm sorry I can only help you on the climate section because we were not asked to fill the water and forest sections, but I guess they are very similar to the one I filled.
EC: Yes, my suggestions can always be good for forest and ocean sections.
SC: Great. Well thank you very much. Really helpful information and I'll put this together and send it to you.
EC: Good thank you for having me.