1 in 5 Companies Have Disparities between CDP GHG Emissions Reporting and their Sustainability Reports
New research from Clarity AI, the leading sustainability technology platform, reveals discrepancies in one in five companies between their reported CDP data and the emissions data reported in their own sustainability reports.
A study conducted by Clarity AI encompassing around 1,500 data points from more than 850 companies that disclosed climate data to the CDP in 2022, revealed that one in every five companies disclose different GHG emissions in the CDP questionnaire and in their Annual or Sustainability reports.
This pattern was the same for both Scope 1 and Scope 2 emission values. While 10% of the discrepancies were smaller than a 10% difference, roughly 20% of instances showed significant variations of over a 50% difference in their values.
The research indicates that external verification is key to ensuring asset managers have access to trustworthy data. The data shows that the discrepancy rate drops from 27% for non-verified companies to 15% for verified companies.
Furthermore, discrepancies were found to be more prevalent in emerging economies compared to Europe and North America. Specifically, companies from Asia exhibited higher discrepancy rates (31% compared to ~14% in Europe and North America).
These differences are explained by human errors in 80% of the cases when companies report to the CDP, or by the use of inconsistent reporting methodologies -for example when companies report only their headquarters' emissions to the CDP and their full emissions in their own reports.
Patricia Pina, Head of Product Research and Innovation at Clarity AI, said: "As the world transitions to a low-carbon economy, investors recognize the need to incorporate environmental, social, and governance (ESG) factors into their investment decisions. The widely recognized Carbon Disclosure Project (CDP), which runs a global disclosure system, plays a key role in ensuring the availability of accurate data for Greenhouse Gas (GHG) emissions.
Despite the advancements and great progress in GHG emissions disclosure, some challenges around data quality still remain. Corporates are navigating a number of known reporting challenges but it is critical that asset managers have access to trustworthy data; they need confidence and consistency in the GHG emissions data they use."
About Clarity AI
Clarity AI is a sustainability technology platform that uses machine learning and big data to deliver environmental and social insights to investors, organizations, and consumers. Clarity AI's capabilities are an essential tool for end-to-end sustainability analysis related to investing, corporate research, benchmarking, consumer e-commerce, and regulatory reporting. As of August 2023, Clarity AI's platform analyzes more than 70,000 companies, 420,000 funds, 201 countries, and 199 local governments, which represents more breadth than any other player in the market. One way Clarity AI delivers on its mission to bring societal impact to markets is by ensuring its capabilities are delivered directly into clients' workflows through integrations with partners like BlackRock - Aladdin, Refinitiv an LSEG business, BNP Manaos, CACEIS, and SimCorp. Additionally, Clarity AI's sustainability insights reach more than 150 million consumers across more than 400,000 merchants. Clarity AI has offices in North America, Europe, and the Middle East, and its client network manages tens of trillions in assets and includes companies like Invesco, Nordea, BlackRock, Santander, Wellington, and BNP Paribas.