CDP Supply Chain and Reporter Services Team recently held an online webinar on the title of: The Journey to Environmental Leadership for SMEs. Ms. Vicky Su, Managing Director of JYG Consutling was invited to talk about how SMEs can respond to CDP Questionnaire. 

Below is a summary of the webinar content and a recording for your reference:

1. Regulations and Market Drivers: Increasing Environmental Disclosure Requirements for SMEs
For SMEs, environmental disclosure has become an increasingly critical trend driven by regulatory requirements and market demands. For instance, the EU’s Corporate Sustainability Due Diligence Directive (CSDDD) mandates that companies and their supply chains establish climate transition plans. CDP’s SME Questionnaire, aligned with the full framework, is designed with simpler questions to facilitate an easy entry point for businesses. The questionnaire can be approached using the 5W1H framework:

• WHEN: Reporting cycle
• WHY: Drivers of climate-related risks and opportunities
• HOW: Methods to achieve targets
• WHO: Responsible parties
• WHERE & WHAT: Climate-related sustainability indicators

2. Starting from Scratch: Providing Detailed Climate Risk and Opportunity Assessments
For businesses aiming for continuous operation and profitability, it is essential not to overlook the impacts of climate-related events on the company and its financial performance. Establishing a climate risk assessment procedure can begin with the TCFD (Task Force on Climate-related Financial Disclosures) framework. For example:

• Understand how transition and physical risks may manifest and which areas of the company might be affected.
• Evaluate these risks from a financial perspective.

Take carbon taxes as an example: even if a company is not directly subject to carbon taxation, price increases in raw materials due to upstream suppliers paying carbon taxes may indirectly affect its operations. Additionally, companies should adopt a cross-departmental approach and assess impacts across their operations and value chains to ensure a comprehensive risk inventory.

3. The "Path Dependence" Effect of Emission Reduction Goals: Setting Goals is Half the Battle
When setting emission reduction goals, companies often benchmark against industry peers or follow national standards. However, for those aspiring to lead, adopting Science-Based Targets (SBTi) should be considered. Initial emission reduction targets can significantly influence subsequent financial planning and implementation timelines. Adjusting goals midway without a cohesive strategy often incurs higher costs.

Lastly, while environmental disclosure may seem like a burden, companies are encouraged to turn this pressure into motivation. Begin by conducting internal carbon audits, implementing relevant systems, and understanding the sources of emissions in both operations and value chains.

The information is translated from articles provided by the CDP Supply Chain and Reporting Team.