Triple A Scores Became Tougher in Latest CDP Rankings

For companies vying for the highly prized CDP recognition, “triple A” scores became much tougher to attain in 2018. While 140 companies were named to the 2018 list, only two, Firmenich and L’Oreal, received triple A scores in performance against all three areas surveyed: climate change, water security and forests.

CDP, formerly the Carbon Disclosure Project, is widely recognized as one of the world’s leading sustainability reporting frameworks. It represents the interests of over 650 investors with assets of $87 trillion.

In 2018, it changed its methodology to add emphasis to water security, given the urgency of the issue, investor pressure and to align with the data being requested by the Task Force on Climate-related Financial Disclosures.

Of the 6,800 companies CDP scored from A to D-, only the top 2 percent made the A List. In addition to the triple A hitters, noted companies within this ranking include Johnson & Johnson, Mitsubishi Electric, Nestle, Best Buy, UPS, Unilever and Apple (which was once publicly shamed for not reporting to CDP).

The weight of water

“If climate change is the shark, water risk is the teeth, the area where the effects of climate change will be felt most acutely,” Dexter Galvin, global director of corporates and supply chains at CDP, said in an interview with Ethical Corporation. “Last year the number of companies receiving A’s [in water risk] didn’t reflect the level of preparedness in the marketplace. . . . This year we’ve been more probing in our questions on water and looked more deeply into the water impacts in supply chains.”

Firmenich, the world’s largest privately owned flavor and fragrance business, scored in the top 2 percent, based in part on its commitment to renewable energy. Today 100 percent of its European manufacturing sites rely solely on renewable electricity; it is aiming to have all of its plants powered by renewable energy by 2020.

CDP also took notice of Firmenich’s state-of-the-art wastewater treatment plant in China, which allows it to operate a manufacturing plant that provides almost double the company’s previous manufacturing capacity.

L’Oreal commits to zero deforestation

On the climate front, L’Oreal said it has reduced the emissions of its industrial sites by 73 percent compared to 2005 by lowering the greenhouse gas emissions of its plants and distribution centers, using renewable energy and improving its energy efficiency. As evidence that it can grow its business while minimizing its carbon footprint, in the same period, L’Oreal’s says its production volume increased by 33 percent.

The company has also committed to zero deforestation by 2020 and already sources 100 percent of its palm oil derivatives from sources certified by the Roundtable on Sustainable Palm Oil, according to its CDP report.

Top marks for innovation

Other examples of leadership and innovation in the CDP ranking include

ACCIONA, Gap, Ford and KAO Corporation, which are among the more than 25 companies on the A List for their water security action.

Seven companies received an A for their efforts to address deforestation, including Beiersdorf, Tetra Pak and UPM-Kymmene.

Other companies received kudos for a range of initiatives that earned them A rankings:

Best Buy US: By promoting ENERGY STAR certified products, the retailer helped American customers save more than US$45 million in utility bills in FY18, an energy saving which equates to removing nearly 55,000 cars from the road for a year.

Lego Group: The Danish toymaker launched the first LEGO elements made from plant-based plastic sourced from sugar cane and has committed to making all LEGO products from sustainable materials by 2030.

LG Display: From 2013 to 2017, the Korean electronics company developed and invested in 156 water-related reduction (water reuse) technologies, to save about KRW 4.61 billion (US$4 million).

Even if it is more difficult than ever to earn that elusive triple A, CDP is likely to continue to be one of the most anticipated recognitions of top sustainability performance. Since 2013, the number of organizations reporting to CDP has risen 55 percent. 

Outperforming the index

And the investors who value so highly the CDP scores for evaluating companies’ ESG risks are being rewarded. The STOXX Global Climate Change Leaders Index – which is based on the CDP A List – outperformed the STOXX Global 1800 by 5.4 percent per annum from December 2011 to July 2018, according to CDP.

“This demonstrates that the leadership on environmental issues shown by the A List goes hand in hand with being a successful and profitable business,” Galvin noted in CDP’s announcement.

Image credit: NASA