What does CDP’s incorporation of the ISSB climate disclosure standard mean for European companies?

This is an important step: our 2021-2025 strategy sets out to incorporate all high-quality global and regional reporting standards in our disclosure system.

Incorporating the ISSB will reduce the reporting burden for the nearly 20.000 companies – including over 5.800 in Europe – currently using CDP. It ensures that the data they report is in line with the global baseline for climate disclosure – much like when we aligned with the Task Force on Climate-related Financial Disclosures (TCFD) recommendations in 2018.

And it helps ensure the financial institutions, corporate procurement teams, and the wider ESG ecosystem that relies on our data, continues to have the most comparable, consistent data in the world, used for investment, lending and buying decisions, regardless of geography or regulatory requirements.

It’s critical to point out, however, that the ISSB standard is a global baseline. Jurisdictions like here in the European Union are busy developing their own sustainability reporting standards, which benefit from being legally mandatory, unlike the ISSB which would need to be adopted by individual countries if it were to become mandatory.

In the EU, last week's passing of the Corporate Sustainability Reporting Directive (CSRD) through the European Parliament has paved the way for the groundbreaking European Sustainability Reporting Standards (ESRS). Approved on 15 November 2022 and submitted to the European Commission for final review and approval, the ESRS is significantly more comprehensive in terms of what companies will need to report. For example, European corporates will have to report their impacts on biodiversity and ecosystems across their direct and indirect operations - and disclose transition plans in line with limiting warming to 1.5 degrees.

The European standards will have a significant global impact. All large and listed companies, including non-EU firms with a subsidiary here, will be required to report under the ESRS. And EU corporates will need to collect data from their suppliers around the world.

To truly meet our global environmental challenge, it’s critical that disclosure according to the ISSB standard, which focuses on sustainability-related financial disclosure for value creation, is paired with disclosure that covers all impacts on people and planet. This is the approach the EU is rightly taking with the ESRS.

Companies disclosing data through CDP are already well-placed according to the investor-focused demands of the ISSB standard. In 2022, a total of 4.000 corporations disclosed on their water security and another 1.000 on their forests’ impacts – these companies are already reporting data that impacts their business value and the environment.

However, many business practices have hugely polluting impacts on our planet but are not yet always recognised as material risks from a financial perspective. Limiting warming to 1.5 degrees and transitioning to a nature-positive model demands they are seen as material.

The good news is that the EU and ISSB are committed to interoperability and working on harmonization where the standards overlap. In practice, for example, the EU has said that when a company discloses according to the EU standard on climate (ESRS E1), it will be aligned with the ISSB standard (IFRS S2).

CDP, as the only global environmental disclosure platform, is implementing standards in the real world. We are as committed to incorporating major standards like the ISSB and the US SEC proposed disclosure rules on climate-related risks, as we are to the European Sustainability Reporting Standards. In fact, CDP is piloting from 2023 questions that ask companies for their activities under sustainable finance taxonomies such as the EU Taxonomy.

Disclosure is the bedrock of action: what we don’t measure, we can’t manage. CDP will continue to ensure that what gets measured is done in the most standardized and comparable way. That has been our mission for the past two decades.