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IR/PS CSR Case #08-05

Carbon Disclosure Project:
Credible Platform for Emission
Data?
By: William Gorham

GRADUATE SCHOOL OF INTERNATIONAL RELATIONS AND PACIFIC STUDIESUNIVERSITY OF CALIFORNIA, SAN DIEGO

Prepared for Professor Peter Gourevitch
Edited by Kristen Parks
Corporate Social Responsibility
Fall 2008

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Table of Contents
Introduction....................................................................................................................... 3
Workforce and Board....................................................................................................... 4
Workforce ........................................................................................................................ 4
Advisory Board/Trustees ................................................................................................. 7
Funding .............................................................................................................................. 8
GHG Protocol.................................................................................................................. 11
Institutional Investors..................................................................................................... 14
Requesting Data .............................................................................................................. 20
Verification.................................................................................................................... 22
Global Partners............................................................................................................. 24
Reporting ......................................................................................................................... 24
Website .......................................................................................................................... 24
Reports .......................................................................................................................... 25
Leadership Rankings ...................................................................................................... 28
Other Initiatives .............................................................................................................. 30
Conclusion ....................................................................................................................... 32
Recommendations ........................................................................................................... 34
Appendix A: Selected Corporate Reporting Figures................................................... 36
Appendix B: Carbon Intensive vs. Non-Carbon Intensive Industry Designations... 38
Appendix C: CDP Signatories ....................................................................................... 39
Appendix D: CDP6 Global 500 Questionnaire............................................................. 42

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3“Many of the companies we work with tell us the Carbon Disclosure Project Questionnaire was areal trigger in their decision to start working strategically to address climate change.”– Steve Howard, CEO, Climate Group, 2008

“Climate change and the impact that it will have on key industries such as agriculture, tourism,
energy, transport and insurance, is as important as interest rate risk and exchange risk. As amajor global investor, we support the CDP and value the information that it provides to help us
make informed decisions on the subject.”– Henri de Castries, Chairman of the Board and CEO of AXA“But although the CDP website contains the world’s largest repository of corporate GHG
emissions data and information on business strategies to address climate-related risks andopportunities, the CDP itself acknowledges that its information ‘still falls short of the quality
expected of traditional financial data’.”– Toby Proctor, Writer, ClimateChangeCorp.com

Introduction
The Carbon Disclosure Project (CDP) was founding in 2000 at 10 Downing Street
in the United Kingdom. Being the residency of the UK Prime Minister, this symbolic
birth was meant to demonstrate the new emphasis of cooperation between the public,
private and non-profit sectors, as well as the international flavor of the goal of halting
humankind’s effect on the planet in the new millennium.
Beginning in 2003 the CDP began requesting data on carbon emissions from the
500 largest companies in the world, publishing its first annual report, the CDP1 – Global
500. Currently in its sixth year, the Global 500 report has grown substantially with aCopyright 2008. No quotation or citation without attribution.

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significant percentage of requested firms publishing1. The CDP has also expanded
beyond the largest global companies, to publish similar data for individual countries andregions. 14 individual countries are reported on, ranging from the United States andJapan to Brazil and China, along with the Asian and Nordic regions more generally2.
Today, the CDP has grown to be the world’s largest repository of corporate emissions
data and business strategies addressing climate change3.
The CDP is registered charity number 1122330 in the United Kingdom, having
done so in the past year (2007). It is also represented by the Rockefeller Philanthropy
Advisors as the CDP’s fiscal agent and sponsor liaison in the United States, providing the
CDP with 501(c)3 charitable status. With research it appears that the CDP had only beenregistered in the United States under the Rockefeller Philanthropy Advisors until this past
year’s registry in the UK.

Workforce and Board
Workforce
In 2007 The Carbon Disclosure Project team included 12 individuals. Between the
publication of the 2007 workforce and the present time, the CDP team has grown to
include 24 personnel, including the following:

1 From 47% in 2003 to 77% in 2008.

Carbon Disclosure Project, Carbon Disclosure Project,
December 2008, <http://www.cdproject.net/index.asp>.
2 Carbon Disclosure Project, Carbon Disclosure Project, December 2008,<http://www.cdproject.net/index.asp>.
3 Toby Proctor, "ClimateChangeCorp.com," 21 August 2008, ClimateChangeCorp.com,
December 2008 <http://www.climatechangecorp.com/content.asp?ContentID=5570>.

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Paul Dickinson (Chief Executive), Paul Simpson (Chief Operating Officer), RoyWilson (Chief Financial Officer), Alicia Ayars (Project Officer), Marieke
Bechmann (Officer, Communications and Corporate Partnerships), Patrick
Crawford (Supply Chain Project Manager), Matt Greenbaum (Development
Officer), Lois Guthrie (Technical Director), Jenni Hagland (Client Services),
Amanda Haworth-Wiklund (Nordic Director), Kirstin Hill (Project Officer), Sue
Howells (Head of Global Operations), Tim Keenan (Vice President), Joanna Lee(Director of Communications and Corporate Partnerships), Kate Levick (Head ofGovernment Partnerships), Michiyo Morisawa (Director CDP Japan), Zoe Riddell(Vice President – USA), Tom Rivett-Carnac (Cities and Public Sector Supply
Chain Projects), Andrea Smith (Technical Manager), Leah Stern (Project Officer),Pete Stupple (Central Services Officer), Nigel Topping (Development Director),
Daniel Turner (Project Manager), Frances Way (Head of Supply Chain)4This significant growth in the number of individuals and positions within the CDP has anumber of reasons and consequences. On the positive side, an increase in the size andscope of the project means that more individuals can focus on more areas with greater
precision. This would explain the significant increase in staff within a year’s time andthe reorganization of existing staff into more specific roles. The increased focus of eachindividual lends credibility to the organization as it means each person has more time tofocus on specific issues, rather than spreading time and energy around such a potentiallylarge area.
However, the considerable increase in staff and shuffling to different posts has anegative side as well. By constantly changing roles and hiring on new individuals it may
be easier for companies that have published with the CDP previously and who know thestrong and weak points of the process to exploit this information to provide erroneous andinconsistent data without the knowledge of the CDP. Staff that have been with the

Carbon Disclosure Project, Carbon Disclosure Project, December 2008,<http://www.cdproject.net/index.asp>.
4

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project since its inception and that have been working on the same issue have the benefitof past years to call on, making it much more difficult for companies to find weak links inthe publishing chain. The effect on credibility of these two issues is mixed, and it islikely that the overall credibility of the organization is enhanced much more with more
staff and focuses roles than is lost by constantly changing staffing. In the long run, staff
will come and go, the turnover will likely decrease as the CDP becomes more mature, but
the increased precision wrought by the greater number of positions at the CDP willremain.
One other important aspect of the staffing is the skills this group of individuals
brings to the table. Every member of the CDP staff has years of experience in the areas
they work, including many with history in the finance and regulatory fields, and mostwith side involvement in charitable and/or environmental groups. This mix ofindividuals gives the CDP credibility because it means it can honestly work withcorporate partners in ways that elicit real and valuable information, while also remaining
outside the influence of their interests and demands. Finally, if there is some extra
credibility to non-governmental organizations gained from the “activists” that make thechoice to work in this field, the CDP would benefit from similar logic, employing suchindividuals who put the needs of the community, nation or world above that of personal
gain5.

5 Although the author is dubious about this assertion.

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Advisory Board/Trustees
After having registered as a charity in the United Kingdom the CDP moved fromhaving an advisory board to being governed by trustees. These trustees are currently only
from the private sector, although speaking with an individual at the CDP it became
known that the organization has requested other individuals to join the trusteeship.
The information on the advisory board or trustees is rather difficult to obtain to
the lay observer. To begin, there is no mention made on the CDP’s website about
whether an advisory board or trusteeship exists in the first place. This information is only
available at the end of the annual reports, with little distinguishing it from other financing
information. Only upon calling a CDP employee was the information made clearer about
the ultimate governing responsibility. On top of the difficulty in finding the make up of
the board, it was impossible to determine any information beyond the names of theindividuals of the past boards with the search that was conducted. In 2007, the make upof the advisory board was as follows:
James Cameron (Chair), Alan Brown, Andrew Dlugolecki, Colin Maltby, RobertMonks, Robert Napier, Eckart Wintzen, Doug Bauer, Martin Whittaker, Caroline
Williams6.
Most importantly, the mere fact that this information is not made explicit to the public
pulls down the credibility of the organization. The first thought is to wonder what
information is so important about the past board members or current trustees that keeps itfrom being published. It is possible that the governing members of the CDP felt the
Carbon Disclosure Project, Carbon Disclosure Project, December 2008,<http://www.cdproject.net/index.asp>.
6

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make up of the board exhibited some conflict of interest issues and it did not want the
public to know this. If most of the board represented industry, it is much easier to write
off the independent nature of the CDP than if the board includes members from the pubic,
private and non-profit sectors, as well as from the many different nationalities supposedly
represented by the CDP. Ultimately, if the new trustees do indeed represent sufficiently
differing backgrounds there is little lost from the lack of advisory board information to
the public, aside from the perception that the CDP may not be as well balanced as hoped.

Funding
The Carbon Disclosure Project is funding from a number of different sources,
some private, some public, and some non-profit. As of 2008 the funders include:

•
•
•
•

Private: AXA, Merrill Lynch, Pictet Asset Management,
PriceWaterhouseCoopers, Standard Charter
Public: DEFRA (UK), EPA (US), NUTEK (Sweden), VROM (Netherlands)
Foundations: DOEN Foundation (Netherlands), Esmie Fairbaim Foundation(UK), Nathan Cummings Foundation (US), Oak Foundation (Switzerland)
NGO: REEEP, WWF (UK, Germany, India)
The most important thing to notice from this list of donors is that it is quite varied.

The inclusion of both private and public funds would seem to limit the influence that one
sector might have over the standards and practices of the CDP. If the sole source offunds was the private sector it would be easy to imagine that the CDP would be beholden
to these private companies, setting standards unnecessarily low and making it easy forcompanies to cheat. On the opposite end, if the sole funders were public institutions thegoals may be subverted under regulatory red tape, neglecting the realities of business.

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With the happy intersection of both, the CDP can maintain a semblance of independence
from the market while still requiring sufficiently realistic reporting demands such that it
doesn’t scare off private firms.
The second importance is the mix of national/multi-national institutions. With
representatives from many different nationalities it becomes harder for one method ofreporting to win over other methods. Each nation has its own way of looking at the issue,
with special interests in certain areas, and as such, it would be difficult to discuss
benchmarking when some firms are not familiar with or unwilling to work with
proprietary methods. However, with the large variety in nationalities represented
deciding on a truly international standard for reporting and assessing carbon emissions
becomes both necessary and ideal.
Unfortunately, the funding setup of the CDP is not a complete panacea, and a few
questions still remain. To begin with, the CDP website and publications give no
indication as to what the percentage of funding from each source is. It is perfectly
possible to list a large number of public institutions and foundations as donors if theygive even a pittance, but if the majority of the money comes from the private sector, it
doesn’t really answer to whom the CDP actually responds. The same can be said for any
iteration of funding, if the majority came from the public sector institutions, or American
institutions, etc.
The American arm of the non-profit administration of the CDP does not allow foreasy financial research of the organization. As part of the Rockefeller Philanthropy

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Trust, there is no independent report for the CDP in the United States.7 The recent filingof the CDP as a charity in the United Kingdom means that, in the future, their
independent financials will be reported, and the money received from each source canpotentially be assessed. Going into the future, the organization may become a bit morecredible with regard to their funding, although not offering this information directly on
their own website still gives pause.
Another important point is that much of the foundations that contribute money to
the CDP change year-on-year, as would be expected of such institutions. This can lead toa de-facto loss of power to this sector as new foundations come and go, but public andprivate institutions remain the same. The foundations would in such a case be the lastpeople to be consulted on how money is spent, especially if it is for longer term projects
that last beyond the time line of funding from the non-profit groups. It also leads toquestions of sustainability of this leg of the funding pot. If the CDP must continuallyseek out new donations from various foundations it may at some point find this aninefficient use of resources and fall back on the more long term potential provided byprivate of public institutions. It is interesting to note that all funding in the first years wasfrom foundations, having only been diversified later.
Finally, the funding source of the research conducted by the CDP is either
predominately or completely from private sources. The effect of this is not clear. On the
one hand, these reports have the potential to be as much for benchmarking individual
investors as they are for companies to benchmark against their competitors. In this case,

7 As far as the author is aware.

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the companies’ and CDP’s incentives have the potential to be weakly, but still positivelyaligned for accurate reporting. On the other hand, if specific companies can influence theaccuracy of the report in their favor8, or if companies care little about having data on theircompetitors in comparison to the costs of accurate reporting, there are strong incentives
for companies to influence the direction and accuracy of the reports. Like other areas, it
is difficult to say what possibilities exist for influencing the CDP on reporting due to theuse of common GHG emission reporting standards, self-reporting and the general natureof the majority of the reported data, which is by definition objective9.

GHG Protocol
The Carbon Disclosure Project is partially predicated on the idea that publishingcarbon emission data allows companies and investors to benchmark companies against
each other. The CDP website states: the “CDP provides the private and public sectors
with a clear framework within which to report and discuss the development of climatechange strategies.” 10 In order for this to occur a standard must be set in how companies
report their data. The CDP has chosen the GHG Protocol “from the Greenhouse Gas
Protocol Initiative, which is itself a joint initiative from the World Resources Institute(WRI), a U.S.-based environmental NGO, and the World Business Council for

8 The use of Merrill Lynch and PriceWaterhouseCoopers as “strategic partners” while receiving asignificant amount of operating money from these companies is an excellent example of thisissue. Both have their own carbon emission programs and could benefit from favorable treatmentby the CDP reports, compared to other financial institutions involved in the reports.
9 Aside from the verification issue, which is discussed later in this paper.
10 Carbon Disclosure Project, Carbon Disclosure Project, December 2008,<http://www.cdproject.net/index.asp>.

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Sustainable Development (WBCSD), a Geneva-based coalition of 200 international.”11 It
is “[t]he most widely recognized (sic) and used” standard in the world.12 As
SocialFunds.com writer William Baue puts it so succinctly:“One of the strengths of the GHG Protocol is the fact that is serves as a model orbasis for so many other emissions reporting, reduction, and trading programs.
These include the Global Reporting Initiative (GRI), the US Environmental
Protection Agency (EPA) Climate Leaders Initiative, the Chicago Climate
Exchange (CCX), and the European Union Emissions Trading Scheme (ETS).
The International Organization for Standardization (ISO) has also signaled its
intent to be compatible with the GHG Protocol.”13
This common usage of the GHG Protocol offers credibility to the CDP because it meansthat it is using the world standard in emissions reporting, rather than a watered down
version companies would rather see. The robust nature of the GHG Protocol gives thesignal that the information provided by companies to be published by the CDP has a far
higher likelihood of being accurate and provides the information required of an in-depth
and meaningful emissions report. It also makes benchmarking against companies easierfor institutions and individuals, making it difficult for companies to report emissions datathat is wildly off from the industry norm. Finally, using a standard method makes it
easier for auditing companies or non-profit verifiers to check the validity of the publisheddata.
It also has the longer-term effect of increasing the incentive for the CDP to
11

Pete Foster, "CDP6 Responses," 26 September 2008, The Green IT Review, December 2008<http://www.thegreenitreview.com/search/label/CDP>.
Toby Proctor, "ClimateChangeCorp.com," 21 August 2008, ClimateChangeCorp.com,
December 2008 <http://www.climatechangecorp.com/content.asp?ContentID=5570>.
13 Baue William, "Carbon Disclosure Project Report and Greenhouse Gas Protocol Release
Second Editions," 19 May 2004, SocialFunds.com, December 2008<http://www.socialfunds.com/news/article.cgi/1426.html>.
12

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provide accurate data. This is because as the standard becomes more widely accepted,
and reporting options for companies proliferate, the CDP can only maintain its dominantmarket position by providing the most accurate data that investors seek. If the CDP
didn’t help champion this common reporting standard it may not create this situation foritself in the future; but it also might not ever grow in the first place without the credibility
a robust reporting standard provides.
Unfortunately, as with a number of aspects of the CDP the reporting standard has
a down side. While it would be excellent for all companies to be required to use the
GHG Protocol, it is only recommended by the CDP. Their website states: “Allcompanies are encouraged to report their emissions data using the Greenhouse Gas(GHG) Protocol: the most widely used international accounting tool in respect ofemissions and one which global governments and industrialists are familiar with.”14 Thismeans that some credibility is lost because some companies don’t use the standard.
However, the credibility issue is deeper than it first suggests because of the difficulty indetermining which companies use which methods from simply looking at company
reports. Only by delving into each company response does the reporting information
become apparent. But comparing specific companies against each other is also difficult
and time consuming15. This means that unless one determines which standard allreporting companies are using, all information must be suspect in the CDP reports. The

Carbon Disclosure Project, Carbon Disclosure Project, December 2008,<http://www.cdproject.net/index.asp>.
15 It costs $9000 for a spreadsheet version of the data, making such quick comparisons very
costly for the individual investor. Toby Proctor, "ClimateChangeCorp.com," 21 August 2008,
ClimateChangeCorp.com, December 2008<http://www.climatechangecorp.com/content.asp?ContentID=5570>.
14

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CDP also makes no mention of this issue with reporting standards, papering over theissue by not discussing it in the first place in the hopes that investor take little notice.
In sum, there are three major ways to see the use of the GHG Protocol. First, thegood: by using a common standard the CDP may get more companies to report accurate
information and actually begin projects toward reducing their emissions due to the public
scrutiny and benchmarking available with this standard. Second, the bad: if companies
have a difficult time offering wildly incorrect information they have a greater incentive tointerfere with other areas of the CDP, such as special preference in reports. However, as
an outsider, it is difficult to say what areas besides reporting of hard data that thecompanies can influence the information provided by the CDP, and therefore whether
this is a significant threat to credibility or not. Third, and most importantly, the bad
again: since companies are not required to use the GHG Protocol they may get away withpublishing poor data with a less stringent reporting mechanism, in the hope that most
won’t recognize the difference.

Which effect ultimately dominates is difficult to say.

Institutional Investors
The CDP website and publications all make reference to the number of
institutional investors signed onto the CDP project. As of this writing 385 investment
institutions are represented, controlling an estimated $57 trillion dollars in assets.16 The
idea behind the display of support is to give force to the requests for emissions data fromcompanies. With investment houses involved there is the potential for real losses to asset
Carbon Disclosure Project, Carbon Disclosure Project, December 2008,<http://www.cdproject.net/index.asp>.
16

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values because they can recommend or shy away from assets based on carbon emissions
data. A number of questions then arise from this assumption, the underlying being
whether the publication of carbon emissions information affects the valuation ofcompanies and if companies believe this to be the case.
On the first questions, if investors don’t care about carbon emissions informationor what programs the companies have in place to affect these emissions then the value tothe information provided by the CDP is worthless. The whole purpose of the CDP ispredicated on the belief that climate change will have an effect on companies, whether it
be government intervention in markets, such as carbon taxes, emissions trading regimes
or other environmental regulation, or disruptions in the market itself, such as lower
consumer demand for products from high emissions companies/high emissions products
or increased costs due to climate change issues. It doesn’t matter whether the claim istrue or not, what matters is that investors believe it to be true because they will theninclude this information in the valuation of companies.
If investors care little about the emissions of carbon by companies, then there isno cost to the investment houses to sign onto the request for information by the CDP; therequest is hallow. It also means that companies have little incentive to report therequested information, and if they do, there is little incentive to give information that isaccurate and detailed. Public relations wins out over accuracy in this situation, and only
third party activists will push for detailed and accurate information, as is the case in manyother industries and with other issues. That isn’t to say that some companies won’t
publish their full carbon emission information, or that that information won’t be accurate,
but that far fewer will do so, and that it is likely that only the companies that stand toCopyright 2008. No quotation or citation without attribution.

16

benefit from publishing that information in some way will be the ones doing so.
Companies such as Patagonia or Third Generation, whose consumers have the belief that
their environmental impact is important in-and-of-itself. However, the idea thatenvironmental impact should be minimized as an intrinsic necessity, versus the idea thatenvironmental impact actually has an effect on potential company performance are twodifferent things. In this situation credibility doesn’t even matter because the CDP would
likely never have gotten to the size that it is today; few firms would ever need to publish
data.
If the latter situation holds, that investors do believe that carbon emissions havethe potential to affect future company performance, then the publication of suchinformation has market value. However, simply having market value doesn’t make theinformation valuable relative to other information. If investors assign low probabilities
to the potential loss to companies from high carbon emissions then it changes the final
expected value of returns very little, changing the underlying asset values insignificantly.
In this situation, as the last, accurate data on carbon emissions is of little use to investors,
even if they do care in some small capacity, and therefore companies will do little toprovide this accurate data, if they do at all. Firms will have a small incentive to give
data, but only inaccurate and misleading data, putting the credibility of the CDP inquestion.
However, we know that the number of reporting companies has risen rather
dramatically over the six years the CDP has been asking for this data, standing at 77%17

17“The overall response rate for CDP6 is 77%” The 77% is for the Global 500. The rate ofCopyright 2008. No quotation or citation without attribution.

17of requests as of the sixth year, as has the number of investment houses signed onto theproject (38518), so there must be some value to this information that induces investment
houses to ask for it, and for companies to report it. It is highly unlikely that a large
majority of US, UK and Japanese firms have suddenly bought onto the intrinsic need forenvironmental protection. The more likely case is that investment houses have seen an
increased demand from consumers for accurate and detailed information on how thecompanies they invest in are dealing with issues related to their carbon emissions because
this has the potential to negatively (or positively) affect many of these companies in thenear future. As Tom Stevenson of the newspaper the Telegraph writes, “If you are notalready planning your portfolio on the assumption that climate change is right at the topof the business, political and regulatory agenda, you should be.”19 As Bob Massie of the
Coalition for Environmentally Responsible Economies says, "Climate change is going tohave such a broad impact that the risk is embedded in virtually every institutional
portfolio."20 In this way, the information on carbon emissions and company programs towork on reducing these emissions becomes very similar to the myriad of other data
published by public firms for investors to assess the true health of the company.
Unfortunately, this situation creates a conflict between the investment houses andresponse for the S&P 500 is lower, at 64%, as is the FTSE 500, at 67%. Carbon Disclosure
Project, "Carbon Disclosure Project Report 2008 - Global 500," viii. 2008.
Carbon Disclosure Project, "Carbon Disclosure Project Report 2008 - Global 500," viii. 2008.
Tom Stevenson, "Global Warming Finally the Hot Topic for Business," 31 October 2006,
Telegraph.com, December 2008 <http://www.telegraph.co.uk/finance/2949901/Investmentcolumn-Global-warming-finally-the-hot-topic-for-big-business.html>.
18
19

20

David Lazarus, "Bush Sticks His Head in Sand," 9 July 2002, SFGate.com, December 2008<http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2002/06/09/BU175023.DTL>.

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reporting companies because the companies will have an incentive to cheat or paint arosier picture than reality in the short run21. There is a cost borne by the investment
houses to demand this information because it causes conflict. Rather than being a neutral
third party assessing companies’ information, as it currently is with standard financial
data, the investment houses must actively fight companies for carbon emission data thatis factually correct and of sufficiently depth. More so, there may be a potential conflict
between investment houses and their customers. If the cost to obtain accurate
information from companies becomes greater than the cost from poor investment choices
related to companies hurt by carbon emission issues then the investment houses will havean incentive to play along with the companies’ misleading or weak data publication. In
the end, the brokerage firms make money by investing in these companies and it is in
their interest that the companies they invest in do well. Whether these institutions choose
the path of detailed, accurate information, with a more adversarial relationship, or thepath of complicity with poor information depends on the situation each firm faces.
One question that comes up in this analysis is whether the adversarial relationshipwould actually exist. If carbon emissions do have an effect on business, then wouldn’t
businesses have an incentive to change, and wouldn’t publishing accurate information begood for business because it allows investors to see how the business is positioning itself

21

The argument that in the long run false information reported by companies will be revealed bytime, leading to the market accurately valuing the companies that report falsely has already been
waged in regard to financial data and the regulation of public companies. The reality that mostinvestors will lose their shirts, with companies closing their doors before the long run can evercome negates many of these laissez fair arguments. As a society we have already deemed it inour best interest to regulate industry in this way, and the regulation of carbon emissions seems to
be much the same.

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better for the future? This is true, except the issue is not about guaranteed effects on
business, but rather potential (perceived) effects on business. Investors may have a muchdifferent understanding of how carbon emissions will affect the future business thancompanies, they may not have as good an idea of the true costs for the company to pursue
certain policies, or companies may find it less costly to keep on the current course.
This is why the credibility issue with for the CDP is difficult to assess in this case.
On the one hand, companies that would rather keep with the status quo have an incentive
to misreport carbon emissions to the CDP. However, if a change in business practices
towards reducing carbon emissions can indeed improve profitability then publishingaccurate information can be useful and is why some companies may have an incentive toreport it in the first place – to align the interests of investors and the company. As
described in the CDP6 Report, “[f]or some CDP6 respondents, this translates into a ‘wait
and see’ strategy. Others clearly feel that late starters risk missing out on opportunities.”22
The first group in this statement has an ambiguous incentive on accurate reporting
because they are not yet sure whether their carbon emissions data will affect futurebusiness or that it is worth doing anything about them. However, the second groupclearly feels they will benefit and therefore has an incentive to accurately publish dataand how they are improving over the long-term.
Another benefit the investors add to the credibility of the CDP is their multinational make up. By having institutional investors from all over the world signed onto
the CDP it helps to set the multi-national tone that the CDP is attempting to keep,

22

Carbon Disclosure Project, "Carbon Disclosure Project Report 2008 - Global 500," x. 2008.

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meaning it is harder for one country’s standards or requirements to win out over a more
inclusive and worldwide standard. The use of the GHG Protocol is a good example ofthis case.

Requesting Data
The CDP collects data from companies annually on a voluntary basis under its
annual “Information Request”. As stated in the 6th annual report:“The process of capturing, analyzing and disclosing data on carbon emissions
should become continuous and embedded. Key actions can be undertaken to movethis process along a path towards the point where disclosure is robust, informative
and transparent. Within this report these key actions have been defined as follows:
1. Respond to the CDP;
2. Report on wider climate change issues in an annual company report;
3. Disclose actual levels of emissions;
4. Independently verify the emissions data;
5. Disclose targets for the reduction of carbon emissions; and6. Disclose emissions forecasts.
The CDP questionnaire requests that companies do all of the above except foractions 2 and 4. Companies are also asked to disclose whether they have taken
actions 2 and 4, and CDP support such actions.”23First, the idea that the process should assist in the development of programs for dealing
with carbon emissions is a good, if not ideal one. However, it does little to give realcredibility to the organization beyond a perception that the CDP has a noble goal. The
more important aspect of the data request has to do with how the data is demanded and23

Carbon Disclosure Project, "Carbon Disclosure Project Report 2008 - Global 500," 2008.

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21

how in depth and realistic it is. In this vein the CDP is mixed. As already discussed, theuse of a common standard for reporting emissions, the GHG Protocol, gives the CDP agood deal of credibility in the data it is providing. However, as explained in the above
citation, as well as the earlier in the paper, the use of this protocol is not required, thereby
throwing doubt on the data provided by the companies that do not use it. The lack ofmore obviously specifying the companies that do and do not use the GHG Protocol also
gives doubt to the validity of all of the data, as it is difficult for one to figure out whichdata is reported in the preferred method and which uses a more lax approach to reportingin the CDP’s annual reports.
In general, the request of data has begun to hold real weight in the corporate
world as more firms publish, and more investors begin to see emissions as a potential
business threat. This puts firms that do not respond to data requests into an interesting
light, because although investors may not have specific figures for carbon emissions, thelack of this data can be as telling as if it were available. In some cases, companies that inreality wouldn’t be hurt as much from publishing may suffer from the perception thatthey have something to hide. This benefits the credibility of the CDP as a reporting
institution, which provides the most comprehensive database, although not necessarily as
an institution providing accurate information.
Having a threshold number of firms also offers the potential for required accuracy
in reporting. With fewer firms in the market, it is easy to work on false reporting
numbers. However, as more firms provide data, and some of them accurate data, it is
impossible for similar firms to publish wildly inaccurate information without incurring asuspicious eye. The more firms reporting and the longer they do so, the higher theCopyright 2008. No quotation or citation without attribution.

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likelihood that there are firms alike enough and who will make the commitment to(relatively) accurately report to result in sufficiently accurate data indefinitely24.

Verification
Another major issue with the data request process is the lack of verification, either
by the CDP or by other third party verifiers in the case of the majority of reporting
companies. The lack of verification by the CDP has benefits and costs, so it does notentirely ruin the credibility of the organization. One benefit is that there is one less areafor negative influence by companies for favorable reporting of their data. If the CDP wasin the position of assessing how accurate their published data was, it would no longer be
a neutral forum for publishing information and instead have a bias in favor of accurate
data in the GHG Protocol format. It would also be undertaking an expensive and time
consuming part of the emissions publication industry, thereby taking time and energy
away from lobbying companies to report information in the first place, whether it is very
accurate or not. Finally, if companies were required to have their information verified by
the CDP (or any organization for that matter) it might keep many from reporting
anything, undermining the CDP’s goal of having all companies reporting something,whether accurate or not, or in depth or not.
The obvious cost comes to the credibility of the data provided by the companies to
the CDP. However, at the end of the day, individuals can determine which companies
use which methods, and which have reliable third party verifiers (on some level) and
24 Those that decide to break with accurate reporting will be penalized due to obvious differences

to past data.

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which don’t. It is up to them to properly value the assets based on this information and
the CDP relies on this fact to negate potential loses in credibility from not verifying thedata itself and not requiring companies to report in the GHG Protocol format. The CDP
states their own belief that investors do have an effect on verification:“Responding Companies, effectively reporting to shareholders or their customers
through CDP, recognize (sic) the importance of the production of accurate
information. Although CDP does not currently require it, an increasing number of
responses are independently audited. Companies are encouraged to follow the GHG
protocol (www.ghgprotocol.org), a globally respected greenhouse gas accounting
standard, to measure emissions.”25
Whether the CDP’s view meshes with reality is difficult to say.
One problem with this assessment is the underlying assumption that individuals caneffectively utilize the information provided by the CDP. The website is rather user
friendly for individual company responses, but aggregating this information is costly.
The CDP currently charges $9000 for the company reports in a spreadsheet format. As
previously stated, the annual reports tend to neglect important information, such as which
companies are using the common GHG Protocol and which verify their information. If
investors can only get value from the information held by the CDP through third parties,
like investment firms, the potential for cheating by companies increases significantly, as
already discussed. The bottom line is that this information represents a potentially large
new market for investment houses to target, and it is no wonder that these firms havesigned on to the CDP with such speed.

Carbon Disclosure Project, Carbon Disclosure Project, December 2008,<http://www.cdproject.net/index.asp>..
25

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Global Partners
The existence of the global partners is a huge issue for the CDP to address in the
publication of accurate data. The CDP currently has “partner organizations (sic) in ten
countries and operates through four CDP offices, based in New York, Paris, Stockholm
and Tokyo, each of whom also work with partner organizations (sic).”26 These
organizations assist the CDP in its regional data collection and report writing. The
benefit of having these partner organizations is the local knowledge they bring. By
having native speakers and people familiar with the local culture, it is likely easier for the
CDP to collect accurate data. It also facilitates the goal of full participation of requested
companies by creating a familiar and friendly, rather than foreign and quarrelsome
relationship. However, the Global Partners also create more areas for inaccurate
reporting and potential weak points in the reporting chain for companies to exploit.

ReportingWebsiteThe bulk of the information provided by companies to the CDP is available on thewebsite. Their database is very user-friendly, and provides the unadulterated responses
from the companies for all years that they have responded. The reason why thisinformation is able to be unfiltered is that companies log on to the CDP websites andrespond to the questionnaires themselves. Staff of the CDP need not touch thisinformation between the company and the end user. Companies also have a strong

Carbon Disclosure Project, Carbon Disclosure Project, December 2008,<http://www.cdproject.net/index.asp>.
26

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incentive to make sure the information they publish is in fact the information used anddisseminated by the CDP, so there is little worry about the data users can find on thewebsite. On this aspect, the CDP scores rather well on its credibility.
However, there is one small problem with the information provided on thewebsite. Unfortunately for individual investors, the information is not easily compiled.

For a spreadsheet version of the data provided by companies, investors need to fork over
$9000. While it is theoretically possible to pull all of the information out of theindividual company reports, it would be rather time consuming to do so. This means
using data to compare more than 2 or 3 companies is difficult and the information must
be gathered from another source, such as an investment firm. As already stated, this may
be a large reason investment firms have been so keen on becoming part of the CDP.

Reports
The CDP currently publishes three major reports on companies’ carbon emissions
and programs, along with numerous other country specific reports, all of which areavailable on their website. The Global 500 focuses on the 500 largest firms in the world,
the S&P 500, the 500 largest in the United States, and the FTSE 350, the 350 largest in
the UK. The purpose behind publishing data on these companies is to work mostefficiently. The “Global 500 reporting companies account for around 5.8% of global
total emissions – on the basis of direct, or Scope 1 emissions which were 2,690 million
metric tons of CO2-equivalent (MtCO2-e).”27 Rather than attempting to get all companies

27 Carbon Disclosure Project, "Carbon Disclosure Project Report 2008 - Global 500," viii.

2008.

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to reply to the CDP, a daunting and expensive task, the CDP is instead attempting tocreate precedent by getting the largest and most important carbon emitters to join.
The assumption behind this strategy is that with a majority of the large players
participating, not only will other large companies feel compelled to publish their own

data, but other, smaller firms will need to as well. As they mention in the Global 500 and
FTSE 350 reports, respectively: “…analyzes responses from the 500 largest corporationsin the FTSE Global Equity Index Series, the ‘Global 500’. As of March 2008, the market
capitalization of these companies was US$22 trillion,”28 and “…analyses responses fromthe 350 largest corporations in the UK (FTSE 350, an amalgamation of the FTSE 100 and
FTSE 250), covering all key sectors and regions of the UK economy. As of March 2008,
the market capitalization (sic) of these companies was £1.5 trillion.” With such a large
amount of money behind these reporting companies it becomes difficult not to report.
One issue with this focus on large companies is the ability of these companies tomeasure and report their data. The size of the companies reporting seems to correlate
positively with the willingness to publish data. This makes sense because of the cost to
publish such data. The question then arises whether this allows large companies to pushcertain reporting standards over others: what requirements make it into the GHG Protocolin the first place, or what implicit reporting practices are used within the CDP, as alreadydiscussed. On this front it is difficult to truly assess the effect on credibility due to the
convoluted and complicated processes involved.
Returning to the reporting done by the CDP, a number of important things bear

28 Carbon Disclosure Project, "Carbon Disclosure Project Report 2008 - Global 500," vii.

2008.

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mentioning. The first important aspect of the reports published by the CDP help toalleviate some of the issues with company assessment by individual investors. The
reports offer a detailed and well-parsed industry and country analysis of the reporting
companies. While comparing between a few specific firms may be somewhat difficult,benchmarking against the industry within or across countries is easy with these reports.
This can highlight obvious incongruities with data reported to the CDP, as well as compel
firms to implement similar strategic plans as their direct competitors.
On the surface, the value from these reports appears to offer protection against
credibility issues from poor data and usability by individual investors. But with a bit ofdigging, it again becomes obvious that the assumptions necessary to hold up thisargument need not hold. Specifically, if firms fail to report using the GHG Protocol thereport doesn’t capture this difference, nor does it make any effort to explain this potential
shortcoming. Also, the reports fail to distinguish companies that verify their data fromthose that do, resulting in skewed industry and country reports if sufficient numbers ofcompanies are reporting inaccurate data. The credibility of the reports is then left open toquestion if the data the CDP uses to push the idea of benchmarking is itself anomalous.
This isn’t to say that the data is necessarily inaccurate, but that without a threshold ofcompanies responding to the CDP with proper data, the accuracy of the CDP’s reports
cannot be guaranteed. This means that if, as has been suggested previously, the CDP as
repository of information can induce firms to provide proper data, then this issue
disappears.
Another important aspect of the reports is their division of firms into two bins,
carbon intensive industries and non-carbon intensive industries. By dividing all firms

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into these two categories it becomes much easier to compare accurately the emissions
data and plans in place in companies of relevant backgrounds. It makes little sense tohold a coal-mining firm to the same standard as a tech firm, because they will havedifferent business requirements and demands. This differentiation also, therefore, helps
to separate firms that have successful emissions programs in place in the carbon intensive
industries from firms that are not doing as well in non-carbon intensive industries. In
other words, it becomes harder for certain firms to hide in the data. This pushes for moreaccuracy and thus enhances the credibility of the information providing capabilities of the
CDP.
One last aspect of the reports is their author. By contracting this out to otherfirms, Innovest for the first 5 years, PWC in the last and future editions, the CDP canremain a neutral party. While this does open the potential for influence from companies
on the firms that write the reports, by creating a financial incentive for the authoringfirms to accurately write the reports there is a much lower probability that these efforts ofcheating will be successful.

Leadership Rankings
The CDP includes a ranking of firms based on their reporting depth in eachannual publication. Rather than assess how effective firms are in reducing carbon
emissions, or how good their carbon strategies are, it merely measures how completely afirm reports on this information. As Melanie Collinson explains, “[t]he index that
identifies the leaders does not assess a company’s climate change performance or risk

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29

exposure. It is purely a measure of the coverage, depth, and detail provided.”29
At first glance, the fact that the Carbon Disclosure Leadership Index (CDLI)
rankings only assess the level of reporting, rather than the actual carbon emissions
programs in place by companies appears to give the index more credibility. It keeps the
CDP from putting their own subjective take on how “best” a company can tackle carbon
emissions, especially when many of the companies come from very different industries
and with their own unique challenges. It also reduces undue influence that would
ultimately arise out of the power any such reporting agency would have on which
practices are considered “best” in reducing emissions.
However, the index is not as clear-cut as it is made out to be. First off, thereporting done by companies includes both quantitative as well as qualitative data. The
methodology used to assess how “deep” or “detailed” qualitative reporting would need
to be published, to allow all those using these rankings to know how a company can bedeemed a “good reporter”. Thankfully, the CDP provides a complete explanation of themethodology as well as the scores of all firms at the end of each report. This is very
valuable information and should be made more easily accessible. Looking at themethodology doesn’t confer much hope, however, as at least half or more of the variables
are not binary (0 or 1 point). The very nature of assessing the quality of qualitative data
makes comparisons between companies difficult and means that in reality the assessing
institution does make some judgment calls on what it feels is good reporting versus badin the CDLI rankings.

Melanie Collinson, "Get It Done," February 2008, OilWeek.com, December 2008<http://www.oilweek.com/articles.asp?ID=521>.
29

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Another positive aspect of the CDLI rankings is that the CDP is not the institutionthat does the ratings. This job is contracted out to a third party firm to complete, again
keeping the CDP neutral. Whether the CDP has a say in how the rating firm chooses torate qualitative data is not clear, and can negate the benefit of not doing the entire rating
themselves, but on the whole, the CDP’s efforts at remains neutral are somewhat
admirable and do help the credibility of the CDP as a reporting platform.
Finally, firms that do not allow the CDP to publically publish the companies’
responses are not included in the rankings. As the group states, “It should also be noted
that, in contrast to previous years, any CDP6 response that is ‘not public’ was notconsidered for inclusion in the CDLI on the grounds that this is not within the overall
spirit of the disclosure exercise.”30 By keeping these firms out of the ranking, the CDP
keeps the report (mostly) transparent, important for any effort at maintaining credibility.

Other Initiatives
The CDP has initiated other areas for carbon emission data reporting besides
private, big brand companies. The first is the supply chain initiative, which, while new,does not have the same kind of response as the corporate data gathering. Only 44%31 of
the solicited companies chose to respond in the first (and most recent) report, and “thequantitative data on greenhouse gas emissions [is] disappointing.”32 The reason for the

Carbon Disclosure Project, "Carbon Disclosure Project Report 2008 - FTSE 350," 22. 2008.
Carbon Disclosure Project, "Carbon Disclosure Project SCLC Pilot Report," 2008.
Pete Foster, "CDP6 Responses," 26 September 2008, The Green IT Review, December 2008<http://www.thegreenitreview.com/search/label/CDP>.
30
31
32

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two outcomes, in contrast to the reporting by the largest global firms has much to do withthe target market. Because those companies down the supply chain have an indirect,
rather than direct relation to end-users there is less incentive for them to participate in the
CDP data collection efforts. In other words, because it is not really their name that
suffers from not reporting carbon emissions they will not do it, or will only do so withsparse data. Only if the CDP can somehow induce these companies to report their data,and give them an incentive to supply accurate information are the reports on the supply
chain companies going to be credible.
The second and third areas of interest are on the public sector, with the CDP’s
Cities Programme and the Public Procurement effort. The first of these efforts will likely
have a much better response than the supply chain initiative, and will in fact, probably beeven more credible than the corporate data publishing. Again, this has to do with thetarget market, both in terms of whom the information is for, but also in who is providing
the data. The Cities Programme is a partnership with cities from around the world, andthey not only have an incentive to offer real data, but they are actively working to do so.
Given that the funding for the public sector is from the taxpayers, if taxpayers demandthat these institutions publish and reduce their emissions, they will do so (for the mostpart). The results for the Public Procurement effort is somewhat mixed, but in the end, if
the institutions that these companies supply to, the government, demand they publish
data, there is little besides not providing goods and services to the public sector that thesecompanies can do. The only caveat is on accuracy, and these companies will only
provide accurate data if they are required to have legitimate verifiers.

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Conclusion
All the discussion so far has been dancing around one important factor: what isthe purpose of the CDP. The demands placed on this organization ultimately determine
how credible of an institution it really is, and how each of the above aspects play into thatcredibility. For those that run the CDP, the organization is in place first and foremost to
push companies to begin thinking about how their actions affect climate change and toquantify this affect. Their goal is to become the preeminent carbon emission repositoryand sign on as many institutional investors to make further that purpose.
Looking at the credibility of the CDP through this lens is quite different from how
many other would like to see it. If the main goal is to simply get as many organizations
to report in a coherent and public way, then issues of data validity aren’t as important.
For the CDP, just getting firms to provide data means they are helping to change thecorporate culture to think in a more environmentally friendly way. Having firms that
acknowledge that their practices may be hurting the environment and may have anegative effect on business is a huge win for the CDP. Certain aspects of the setup of theorganization do further the goal of accurate data collection, such as the use of the GHG
Protocol and the framing of the incentives in such a way as to show that the value of thefirms’ equity is tied to their emissions practices and reporting. As the CDP stands now,
however, accuracy is not the main goal and its credibility as a reporting platform
shouldn’t be assessed based on this factor.
But this then begs the question, does merely providing data from all the firms inCopyright 2008. No quotation or citation without attribution.

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the industry really create a culture of action, especially if much of that data is wrong? On
this score the credibility of the CDP is mixed. If firms use the organization as agreenwashing tool, by providing inaccurate data and playing on their publication as amethod for improving sales or equity values, then the CDP does little to truly change thebusiness culture to begin factoring in environmental impact. Getting firms to publish
data, any data, shouldn’t be the end-all be-all, but only the beginning. Working to makesure that the information is accurate is an important part of truly changing the culture ofbusiness. Because at the end of the day, the really fundamental purpose of the CDP is insolving the climate change problem, and their actions at present, while admirable andimportant, will not get our society to the finish line.
Thankfully, as already stated, much of the setup of the organization does lead to anatural move toward more accurate and public data, but the CDP needs to recognize theimportance of this aspect and work towards this goal once it has reached a sufficientsize33. At present, the CDP appears locked in a semantic battle between the goals of
massive data publishing and reaching critical mass, and the goals of accurate data
publication and a true business interest in emissions issues because it is impossible toignore the conflict between the greenwashing of the former and true change of the latter.
Only time will tell whether the actions of the CDP and reporting platforms in general
have helped spur the business community into dealing with their carbon emissions in ameaningful way.

33 The author recognizes the valid point of creating a critical mass and turning the CDP into anindispensible organization before being able to move on the greater goal of affecting accurate
reporting.

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Recommendations
The CDP must work on greater transparency in much of its dealings. The
following is a list of recommendations for greater disclosure:•

Trustees or Board Members should be listed on the website in an easily accessible
location;•

Financial information for the organization should be provided on the website aswell, and ideally with an accurate and up-to-date chart on which institutions haveprovided the CDP funding and for how much and how long;•

The verifying organizations used by all the published companies should be listed
in a specific location on the website with links to their own websites to allow
individuals to assess their credibility;•

Whether a firm has used the GHG Protocol or a third party verifier should be
displayed prominently in any publication, allowing individuals to see thecredibility of the data at first glance;•

There should be more clarity on the CDLI methodology and how non-binary
scales are decided. This should also be published on the CDP website.

In the future, when the CDP reaches critical mass as an indispensible organization (i.e.,companies would lose too much not to publish) it would be in the best interest of the
CDP to require companies to use the GHG Protocol and third party verifiers chose by theorganization.

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Discussion Questions
1. Does the governance of the CDP hinder or help in the cause of publishing
factually accurate information?
2. Where does the CDP get its funding and how do these different sources affect thecredibility of the organization?
3. What benefits and costs accrue from the use of the GHG Protocol?
4. What effect do the institutional investors have on the CDP’s ability to carry out its
purpose?
5. How does taking monitoring out of the hands of the CDP affect its credibility?
6. Who uses the information in the CDP database? Is it user-friendly or does it
require an intermediary? How does this affect the dissemination of informationand ease of false reporting?
7. If the CDP starts ranking companies based on more than just depth and detail ofcarbon disclosure, how will this change the role of the CDP?
8. Who is the target market for the CDP? How does this affect the information
provided or the services offered?
9. What is the cost to the CDP for getting information wrong? For incorrect
reporting? Publishing information that is purposely inaccurate (i.e., companies
knowingly provide incorrect information)?
10. Does it matter if negative publicity is created about the CDP?

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Appendix A: Selected Corporate Reporting Figures
The following figures highlights the major performance gaps between:• The FTSE 350, S&P 500 and Global 500 populations and the number responding to
CDP, respectively; and• The number of companies disclosing emissions and the number that have theiremissions data verified;• Other comparative information.
FTSE 350

S&P 500

Global 500

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Appendix B: Carbon Intensive vs. Non-Carbon Intensive Industry Designations
The following show the different industries in the carbon-intensive and non-carbon
intensive categories from the FTSE 350 Report.

Carbon Intensive:

Non-Carbon Intensive:38

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Appendix C: CDP Signatories

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Appendix D: CDP6 Global 500 Questionnaire

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