Data is the solution to the net-zero problem

CDP’s new CEO, Sherry Madera, says more and better data is vital to meeting net-zero goals.

If there is one thing that almost everyone in the sustainable finance community can agree on, it is that data has a pivotal role to play in the journey towards net zero.

As such, CDP (formerly known as the Carbon Disclosure Project) has long been a high-profile actor on the climate stage. The non-profit group runs one of the world’s best-known mechanisms for disclosing climate and other environmental data.

We sat down with Sherry Madera, who recently took up her role as CDP’s chief executive, to discuss some of the key trends in climate and environmental disclosure ahead of COP28.

Madera tells us that she has had a “front row seat” in the growth of CDP, having worked with the organisation’s founders since shortly after it was established 23 years ago. Madera was previously senior vice-president for public policy at Mastercard, while also serving as chair of the Future of Sustainable Data Alliance, a group that includes the CDP.

It has been “quite a natural transition” for Madera to move to CDP, which she says is “absolutely foundational” for sustainable finance. Indeed, with demands around climate data becoming more sophisticated by the day, there is little doubt that disclosure will remain a key topic in 2024 and beyond.

One of the key outcomes of this COP28 will be the first ever ‘global stocktake’, in which stakeholders of the Paris Agreement report on their progress towards meeting the agreement’s goals.

‘Not on track’

CDP may have a unique insight into climate data, but Madera says it is “pretty obvious” for anyone with even a modest understanding of the subject that “we are not on track”. She points out that there are “masses of data” indicating that the world is on a pathway to see temperatures rising well above 2C compared to the pre-industrial era.

“If you set a target,
it’s completely
meaningless unless
it’s science-based”

Sherry Madera,
CDP

The situation is mirrored at the corporate level, Madera warns. She says only 24 percent of companies that disclose emissions data are on track to meet their climate targets.

Madera argues that future COPs need to go further in “marrying up” country-level and corporate-level data. “I do hope the global stocktake starts considering how it is that we are really looking at this as a whole-of-society, whole-of-economy stocktake.”

CDP is itself the repository of climate data disclosed by thousands of companies, but Madera says it is “still not completely clear” how this corporate data can be tied in with countries’ Nationally Determined Contributions. Correcting what could be described as a “failure of methodology” is vital to allow CDP data to play a “more powerful” role in measuring and managing emissions, she says.

Reporting ramps up

On the plus side, Madera is “delighted” by the significant increase in corporate disclosure over the past year.

More than 23,000 companies disclosed climate change data through CDP in 2023, a 24 percent increase from the previous year, and a 300 percent increase since the Paris Agreement was signed in 2015.

Madera argues that the questions asked by CDP are “encouraging companies to think differently” and that the growing complexity of disclosures are providing a wealth of valuable new data sets.

CDP has functioned as a voluntary disclosure mechanism for two decades. Now, however, disclosure regimes established through the International Sustainability Standards Board and the Taskforce on Climate-related Financial Disclosures look set to become mandatory for listed companies across a growing range of jurisdictions.

“We’re really excited about this journey,” says Madera. She notes that CDP has been aligned with the TCFD since 2018 and announced at COP27 that it would also align to the ISSB as part of its efforts to ensure CDP’s data fits into these standards.

But is there really still a need for CDP, given that the world seems to be moving from voluntary to mandatory climate reporting?

Firstly, Madera says, a mandatory disclosure regime that is fully harmonised across jurisdictions would be “fantastic” in theory. But she believes the chances of this happening in full are still remote. “I think we’re a really long way from that.”

She sees CDP continuing to play a vital role in providing the “data building blocks” that can have many different uses across different regimes. But she adds that organisations need to create the “ability to take action through data”, something that is not going to be achieved simply by “putting data into a compliance mechanism”.

“If I were an investor,
I would want to know
that the company
I’m investing in
understands where
[emissions] impacts
come from”

Sherry Madera,
CDP

Indeed, Madera points to CDP’s work in helping organisations build a picture of their supply-chain emissions as being particularly impactful. “One of the things that I found most exciting in my last month as CEO is the work that CDP does in the supply chain. It’s one of our fastest growing areas of engagement.”

Madera notes that improving supply-chain transparency can create the conditions where “actual change happens”, because customers can use data from their suppliers to help them reduce their emissions.

Forming an accurate picture of Scope 3 supply-chain emissions is, of course, far from straightforward, she says. “There is a collective understanding that this is complicated.” There is no shortage of complaining about the availability or quality of supply-chain data. But Madera says a redoubling of efforts is needed. “Data is the solution to this. Data is not the problem.”

She tells us that CDP is working on a project that aims to make granular supply-chain data more easily comparable.

And from the point of view of investor engagement, she says corporates should be able to demonstrate a good understanding at least of the suppliers that have the greatest emissions impact. “If I were an investor, I would want to know that the company I’m investing in understands where those impacts come from.”

Beyond targets

One of Madera’s key messages for corporates and investors is that setting targets and disclosing data are only preliminary steps on the journey to net zero.

“We have lived through an era of target setting,” says Madera. “If you set a target, it’s completely meaningless unless it’s science-based.”

She speaks with pride about CDP’s role in establishing the Science-Based Targets initiative, and argues that CDP will continue to play a vital role in ensuring that corporates have accurate data on which to base transition plans.

It is certainly not hard to find examples of companies that have set targets or made commitments or even defined transition plans, but are still lagging on action.

For example, Planet Tracker, a financial think-tank, published research into three global consumer goods companies in August, each of which have had emissions reduction goals validated by the SBTi. The study found that none of the companies are on a trajectory consistent with 1.5C.

Indeed, Madera says the “excitement” around setting targets has subsided after “the penny dropped” that a target has little value unless it is accompanied by a robust transition plan that is grounded in baseline data.

“If we’re talking about targets, we need to talk about transition plans. If we talk about transition plans, we need to talk about a baseline. If we talk about a baseline, we need to talk about data. And that’s where CDP fits in.”

Rising demand for nature data

Investors are realising that climate and nature are interminably linked

Many organisations have been accused of ‘carbon tunnel vision’ in recent years, having seemingly focused all their efforts on greenhouse gas emissions, at the expense of other environmental and social priorities.

The hyper-focus on emissions has clearly begun to give way to an understanding that a broader perspective is needed. Nature, in particular, has risen in prominence, with landmark global targets for protecting biodiversity agreed at the COP15 biodiversity conference in Montreal last year.

CDP already has mechanisms for organisations to disclose impacts on forests and water security. Almost 5,000 companies disclosed on water security in 2023, a rise of 23 percent from 2022; more than 1,100 disclosed on forests, a 10 percent increase. 

Madera says these figures give “real encouragement”, though she acknowledges that the number of firms disclosing on forests and water security remains far lower than the 23,000 disclosing on climate.

In fact, when it comes to nature, the problem goes beyond mere gaps in the data, Madera says: “There’s actually something what I’d like to call a ‘data hole’ – which is you don’t even know what data is actually necessary in order to be able to meet the needs of the investor, or the country, or the ecosystem, or the biosphere.”

She is optimistic that the launch of the Taskforce on Nature-related Financial Disclosures will mark a major step forward in this respect. She tells us that CDP is “working very closely with the TNFD team” to help define the data that needs to be disclosed and collected. “We need to create the data that fits underneath [the TNFD]. And CDP is in an incredible position to do that.”

Given that many corporates are new to the highly complex field of measuring nature-related impacts, Madera says there is a need to refrain from “pushing too hard, too fast and too much”. On the other hand, she says, this is no time to lack ambition. “Just because it’s complicated, it doesn’t mean we shouldn’t do it.”