Environmental issues are no longer distant risks on the horizon. They are present, influencing markets, investor sentiment, and regulatory environments in real time. As the global climate emergency intensifies and stakeholder demands become acute, companies are being held to account for their environmental impact. That’s where CDP reporting comes in, not as a tick-box exercise, but as a powerful tool for transparency, accountability, and strategy. 

What is CDP? 

CDP Reporting, previously the Carbon Disclosure Project, is a globally recognized platform that allows companies to report their environmental data in a standardized, science-aligned format. Through comprehensive CDP questionnaires, companies provide details on everything from their greenhouse gas emissions and supply chain risks to governance mechanism and sustainability reporting target progress. 

The strength of CDP program lies in the scale and credibility of its ecosystem. According to CDP Global Environmental Disclosure Report 2023, more than 23,000 organizations were reported through CDP disclosure in 2023, including 1,224 cities, states and regions. These reports amount to US$67 trillion in capitalization. The platform is backed by over 740 institutional investors managing over $136 trillion in assets. These investors use CDP reporting information to inform capital allocation and assess climate readiness. 

For companies, participating in CDP program is more than a reputational signal. It offers a structured way to identify environmental risks, monitor performance, and build resilience. For most, CDP program forms the building block for a broader sustainability strategy and ESG compliance landscape. CDP reporting encourages leadership to evaluate the business’s exposure to climate-related risks, reconsider water management, and revisit supply chain practices, often uncovering what might otherwise have gone unseen without such sustainability reporting frameworks. 

Moreover, CDP disclosure is evolving alongside the global regulatory landscape. Its framework aligns closely with several emerging policies and sustainability reporting standards, which is covered in this blog.  

Understanding CDP Scores 

Related Read: CDP Reporting Made Effective: Timeline, Preparation and Internal Coordination

Once a company decides to disclose through CDP program, the next question often is: how are these disclosures assessed? Understanding CDP scores is critical because they don’t just reflect how much information is shared, they reveal how deeply environmental risks are embedded into business strategy, governance, and day-to-day operations. 

Categories of Reporting 

Carbon disclosure project offers three core disclosure categories: Climate Change, Water Security, and Forests. Each category represents an essential dimension of environmental impact, with distinct risks, stakeholders, and regulatory pressures. Based on the nature of its operations and its supply chain, a company may be required to respond to one or more of these CDP questionnaires.

1. Climate Change 

This is the most widely responded CDP questionnaire. It focuses on how a company understands, manages, and mitigates its contribution to climate change. Companies are required to report on the following: 

  • Greenhouse gas (GHG) emissions, including Scope 1 (direct), Scope 2 (indirect from purchased energy), and increasingly, Scope 3 (indirect emissions across the value chain)
  • Carbon reduction targets and whether they are science-based
  • Climate-related risks and opportunities, identified through ESG frameworks like TCFD
  • Energy consumption, transition to renewable energy sources, and adoption of low-carbon technologies
  • Governance structures, such as board oversight and management responsibility for climate issues

These areas are core parts of the CDP questionnaire that determine overall evaluation. Climate-related disclosures are in high demand in ESG frameworks from financial institutions, rating agencies, and investors, who use this data to assess future risk and resilience. For example, lenders may analyse a company’s carbon intensity before deciding on green financing. Climate disclosures also help governments and regulators assess industry readiness for net-zero transitions and carbon pricing mechanisms.

2. Water Security 

Water is often overlooked in ESG compliance disclosures, yet it is becoming one of the most urgent operational and reputational risks, especially in water-stressed regions such as South Asia. Under the Water Security category, companies report on following key parameters: 

Related Read: CDP Reporting for Indian Industries: Understanding the Strategic Value

  • Water withdrawal, consumption, discharge, and recycling practices
  • Water-related risks, such as physical risks (floods, droughts), regulatory risks (water-use permits), and reputational risks (social tensions)
  • Water-related targets, efficiency improvements, and watershed-level engagement
  • Water management, from board level oversight to operational responsibility

Water-intensive industries, such as manufacturing, energy, textiles, and agriculture, are under increasing scrutiny from regulators, ESG investors, and local communities. Poor water management can result in production shut-ins, regulatory penalties, or loss of social license to operate. Investors increasingly looking to water-related disclosures as an indicator of long-term operational stability. 

3. Forests 

This category applies to companies that produce or source forest-risk commodities. These include raw materials often linked to deforestation such as cattle products, palm oil, wood, soy, and rubber. Disclosures under this category include: 

  • Sourcing practices, including traceability and certification (e.g., FSC or RSPO)
  • Commitments and progress toward achieving deforestation-free status
  • Supplier engagement strategies
  • Impacts on biodiversity and indigenous rights

Deforestation is a major driver of climate change and biodiversity loss. Companies with global supply chains are facing increasing pressure from international buyers, NGOs, and trade policies to prove that their products or services are not contributing to ecosystem destruction. Failing to do so may result in exclusion from export markets, particularly in Europe, where deforestation-linked imports are strictly regulated along with other ESG compliances. 

Scoring Methodology 

Once a company submits its response to any of the above themes, Carbon Disclosure Project evaluates it using a four-point scoring system: 

  1. Disclosure scores (D) indicate that a company has started sharing ESG compliance disclosures but may still lack complete, structured responses. 
  2. Awareness scores (C) suggest that the company understands the ESG compliance related challenges it is facing but may not yet have robust systems to address or mitigate them. 
  3. Management scores (B) mean that the company has established policies, set targets, and taken actions to manage its environmental impacts. 
  4. Leadership scores (A) reflect the highest level of performance. These companies demonstrate environmental stewardship through verified data, science-based targets, and integration of ESG framework into core business strategy. 

For example, a company disclosing detailed Scope 1, 2, and 3 emissions in CDP reporting, backed by third-party verification and linked to board-approved net-zero targets, is more likely to receive their CDP scores in the leadership than a company simply providing energy bills and high-level goals. 

Scoring is conducted independently by accredited scoring partners trained by Carbon Disclosure Project. The process is transparent, and updated from time-to-time to reflect advances in climate science, ESG frameworks and stakeholder expectations. In 2023, fewer than 2 percent of over 21,000 disclosing companies achieved an “A” score, highlighting the demanding nature of the Leadership category. (Source: CDP Scores and A List 2023). 

Why These Scores Matter 

Related Read: Strategic Compliance with EU Sustainability Laws and IFC Standards

CDP scores are not just internal benchmarks of ESG compliance. They are used widely by investors, ESG analysts, and financial institutions to quantify a company’s environmental maturity. A strong score can help source financing aligned with ESG frameworks, improve supply chain competitiveness, and build investor trust. Conversely, a lower or non-disclosure score may raise red flags, especially in carbon- or water-intensive sectors. 

Moreover, companies can compare their performance to industry and regional peers, helping them set more targeted improvement goals through CDP reporting. Carbon Disclosure Project also provides feedback and guidance for rising the score curve, making it a continuous improvement journey in sustainable reporting. 

Understanding the details of each theme and the expectations from CDP scores is the key. But to fully appreciate its strategic relevance, companies must also explore the growing importance of ESG frameworks such as CDP reporting for Indian industries. 

Conclusion 

CDP reporting has rapidly progressed from voluntary disclosure into global best practice for environmental accountability. As investors, regulators, and supply chains call for greater transparency in ESG compliance, firms that engage with CDP program gain benefits of far more than just scores, they build market credibility, mitigate long-term risks, and position themselves for sustainable growth. For Indian companies, specifically, CDP reporting is emerging as a gateway to international capital, compliance preparedness, and climate resilience in a rapidly changing climate-conscious economy. Adopting CDP program today is not merely a matter of staying aligned with global sustainability reporting standards, it is about structuring a future-ready business strategy. 

Why Choose InCorp Global? 

InCorp Global offers guidance to develop a tailored sector-specific disclosure strategy, market exposure, and stakeholder expectations, especially within the Indian regulatory and investment landscape. Our team brings deep expertise in climate, water, and forest disclosures, offering benchmark-based gap analysis and customized scoring roadmaps. We also provide sector-specific insights and disclosure alignment strategies. InCorp offers end-to-end support, from drafting, documentation to submission. To learn more about CDP Reporting or other ESG services, you can write to us at info@incorpadvisory.in or reach out to us at (+91) 77380 66622. 

Authored by:
Rucha Trivedi | Sustainability & ESG  

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