Companies react to CDP’s new reporting fee
Reporting to CDP can be a big time-suck for corporate sustainability executives and, with the new fee to file, companies weigh the cost-benefits of continuing to participate. Read More
If there’s one thing many corporate sustainability executives love to hate, it’s reporting on what they do for a living. And recently they found another reason to be irked — when CDP announced it would begin to charge an administrative fee for filing.
The $975 annual administrative fee comes into effect this year for North American and Western European companies, according to CDP, and must be paid before they submit their 2016 response. Firms need only pay the fee once each year regardless of how many CDP programs they respond to. If a company responds to CDP’s program on climate change, water and forests, for example, the annual fee covers all three.
“As a not-for-profit organization we’ve relied on funding from a range of sources for the last 15 years including philanthropic and government grants, sponsorship and fees for services,” said CDP’s Chief Partnership Officer Marcus Norton, in an email to GreenBiz explaining the fee’s rationale.
“To meet the scale of the work that we still need to do and the levels of service that businesses require to leverage CDP to best advantage, we now need a small contribution towards our costs from both companies and investors participating in our system.”
Fair enough — nonprofits need funds to grow and an annual fee of $975 is barely a drop in the bucket for most large companies. But the beef some firms have with the new fee isn’t so much the additional financial burden as it is the principle of charging to participate. Reporting to CDP never really has been free, when one considers the significant time and manpower costs it takes to achieve a good score.
“Several companies we surveyed feel it is a bit disingenuous to ask someone to do all the work that filling out CDP requires and then ask you to pay for the pleasure,” said GreenBiz Vice President and Senior Analyst John Davies, referencing a February 2016 survey of the GreenBiz Executive Network — which includes 75 companies representing 8 million employees and $2.4 trillion in revenue.
“They think that CDP should be charging the users of the data, not the providers of the information,” he said.
Granted, CDP already does charge commercial users for the data — its pay-for-play Reporter Services membership gives organizations data, support and insights to reduce emissions, improve water management and enhance business performance. It also allows firms to benchmark performance against peers and identify material risks and opportunities.
Certainly, it would be possible for CDP to pass some more of its costs to paid corporate memberships, but the organization said research prior to introducing the fee indicated that the vast majority of firms see value in participating in CDP and will continue to do so even with the new fee.
In other words: CDP maintains that most participating companies believe the juice is worth the squeeze.
The cost-benefits of reporting
“We recognize the enormous effort that companies put into their CDP responses and wholeheartedly applaud those that participated in 2015,” Norton said. “Disclosure provides a framework that helps companies build their understanding of environmental risks and identify possible gaps in organizational processes and strategies for tackling these risks. It also enables companies to benchmark progress against peers and learn faster through shared best practice.”
Meanwhile, expectations around corporate transparency on climate are growing. With the convening of the Task Force on Climate-related Financial Disclosures and the imminent introduction of non-financial reporting regulation across Europe, for example, participating in CDP and/or other reporting schemes could be a good way for companies to prepare.
At the same time, businesses save an average of $1.2 million annually in interest payments when they disclose their carbon emissions via CDP, according to Norton. CDP data also increasingly is being used to create financial products such as the STOXX Low Carbon Indices and the New York State pension fund’s $2 billion low-carbon investment fund.
“Participating in CDP in particular provides companies with a highly visible, internationally recognized platform for communicating their sustainability performance and strategy to a range of stakeholders,” Norton said. “This brings a number of benefits to companies’ bottom-lines including access to lower-cost capital and attracting investment. “
“We also see wider business benefits from increased disclosure and committed environmental action, with positive impacts on corporate reputations, their ability to attract and retain talent and wider stakeholder engagement.”
Businesses will stick with CDP
While none were thrilled about the new fee, most companies GreenBiz surveyed indicated they would continue to report to CDP. One said it found the new fee surprising, but saw it as part of a trend of most rankers/analysts moving in this direction.
Another firm said the principle behind a fee did open up the conversation of whether or not it should continue with CDP, but it decided to continue in 2016 given the increasing number of suppliers that request its data via CDP. One company said the fee never even came up because the only people who pay attention are those responsible for reporting.
While many companies view reporting as homework, they also believe it helps them raise sustainability as important to the rest of the organization. One of the primary concerns is whether or not people are using the data.
Reporting evolves in the digital age
It’s true that more and more stakeholders — from customers to investors — are demanding increased flows of corporate sustainability information. But the frustration companies are feeling about reporting, not just to CDP but to the other sustainability rankings/ratings such as the Dow Jones Sustainability index and CR Magazine’s rankings, may stem from the fact that sustainability reporting seems to have stalled.
Companies are wasting time and money creating lengthy reports that few people read. Consequently, businesses are failing to tap into the potential value of reporting and transparency — value that could provide vital information to more directly inform decisions that drive better financial and social outcomes.
But companies’ qualms with the time-suck of sustainability reporting may soon be moot. The days of the annual corporate sustainability report are numbered, according to recent research from the Global Reporting Initiative, as the future of reporting will involve digitally-enabled real-time sustainability data exchanges. Reporting and disclosing for shareholders and regulators will be digital and tagged, and done more frequently. This will be coupled with a new role for stakeholders — who will be empowered by almost real-time interactions with companies.
