The article helps visualize CDP’s database offering and how it is positioned in our industry; not quite a competitor of Kloopify but a database offering that does not directly compete in the sustainable procurement space but offers marketing insights.
August 26, 2023
Carbon Emissions 101:
The Role of the GHG Protocol and CDP
In an era where environmental consciousness is no longer a choice but a responsibility, businesses are increasingly seeking ways to measure, manage, and mitigate their carbon emissions.
Carbon accounting has become a critical tool for organizations striving to align their operations with sustainability goals and contribute positively to their goals to become a sustainable supply chain. Two prominent players in this arena, CDP and Kloopify, have emerged as go-to platforms for carbon footprint visibility.
However, it's important to note that the purpose here is not to disparage any entity but rather to shed light on the nuances that differentiate these platforms to give you the best overall choice when considering your data sources and providers.
The Kloopify aim is to raise awareness and empower procurement leaders with insights that can guide their choice for a robust value chain carbon accounting partner.It's no secret that the Greenhouse Gas (GHG) Protocol guidelines are, at times, applied inconsistently and challenging to navigate.
Below is a video from the WRI Video Library highlighting corporate survey and topline findings and the plan to update reporting methods because of inconsistencies.
As organizations seek meaningful ways to address their carbon footprint, the variability in reporting methodologies can lead to confusion and ambiguity.
GHG is working to improve Scope 3 emissions in the next two years, Why put your company’s goals with outdated methods that leads to rogue data when Kloopify’s platform has the capabilities to provide best-in-class solutions to address Scope 3 emissions?
It's in this context that our focus shifts to a solution that stands out amidst the noise. Our offering is designed not only to bridge the gaps left by inconsistent protocols but also to provide a meticulously crafted platform tailored to the needs of procurement leaders.
Author’s Goal for the Comparison
In this blog post, we take a look into a comparative analysis of CDP and Kloopify – two leading carbon visibility platforms where we highlight their respective strengths and approaches.
The intention is not to speak cheaply on our partners to carbon transparency but to provide a comprehensive view that empowers businesses to make informed decisions. In the case of CDP, Kloopify does not consider itself a direct competitor of CDP but is more focused on actions that drive impact reductionsinstead of a repository of information.
It’s the difference between going to a library with older books shelved to thumb through a card catalog to find one answer as opposed to a machine learning,software tool with a dashboard that shows you real-time data like; smart monitors and goal tracking.
Why Choose the Kloopify Approach?
Our emphasis lies in offering a solution that addresses the existing inconsistencies with the application of the Greenhouse Gas Protocol Guidelines to provide a next-level carbon reduction visibility platform that meets the needs of procurement leaders.
We've meticulously designed a platform that stands as the foundation of reliability and accuracy, two qualities essential for modern procurement leaders dedicated to steering their organizations toward a sustainable future.We hope you enjoy this piece written by Ignacio Osioa Google scholar and an industry expert, that features CDP and Kloopify, while also exploring the broader realm of climate action solutions.
Let's equip ourselves with the knowledge to make choices that drive positive change, moving beyond competition and towards a collective goal of environmental stewardship.
Integrated Reporting Framework (IR) does not specify which types of GHG emissions to report and remains silent on Scope 3 emissions
Contributions of CDP
Besides sustainability corporate reports and glossary of terms, thousands of companies disclose their carbon inventories via Climate Change questionnaires to CDP. CDP formerly known as Carbon Disclosure Project is a non-profit that houses a comprehensive database based on voluntary, self-reported data on sustainability actions and indices.
It is important to remember that CDP Climate Change Questionnaires are based on the GHG Protocol, which suffers from the same limitations in use listed above. We’ve created a comparison chart to help visualize the differences.
Misuse of CDP Data Derivatives
Investors also misuse ad-hoc indices partially based on CDP data or similar:
MSCI builds on CDP and evaluates the weighted carbon intensity of 15,000 indices, but only divides Scope 1 and Scope 2 emissions by corporate sales
TruCost S&P Dow Jones Sustainability Index resorts to general public information and industry-specific questionnaires. Furthermore, Scope 3 data is not directly incorporated in the S&P indices.
We have made much progress in developing a common language, frameworks and indices to tackle the challenge of climate change across organizations worldwide.
However, it is important to understand the limitations of the current systems and metrics, which although well-intentioned, frequently fall short in assessing the massive contribution of Scope 3 emissions, particularly around upstream supply chains.
Comparing value propositions: CDP vs. Kloopify
Misuse of CDP data and its common intrinsic errors. Recently, Supply Chain, Sustainability, and Procurement professionals have resorted to CDP to rank supplier performance without being aware of common intrinsic errors in reported CDP data.
CDP Venn Diagram of Common Errors
These errors can be grouped into three buckets: report inconsistencies, boundary incompleteness, and activity exclusion:
Companies report inconsistently across different communication channels. Corporate Sustainability Reports routinely disclose lower GHG emissions figures than the CDP, particularly around Scope 3 emissions.
CDP may reinforce this behavior, as it does not require reporting consistency and the CDP scoring system aims to provide an indication of a company’s level of action to assess and manage its environmental impact instead of its level of sustainability
CDP fosters primary data collection, which is aligned with the GHG protocol guidelines, except that only 25% of the CDP “Supply Chain Program” 5,500 Tier-1 suppliers of 280+ members report Scope 3 emissions.
Therefore, companies cannot quantify emissions along their entire supply chain with primary data only, which results in boundary incompleteness if the gaps are not filled with secondary data.
Companies may neglect relevant Scope 3 activities altogether falling short of the GHG Protocol basic standard. CDP leaves it to participants to identify relevant categories.
For example, category 1 (purchased goods and services) alone may represent 50% of all Scope 3 emissions, but only 25% of reporting companies disclosed emissions for all the categories they consider relevant.
Conclusion
CDP does not enforce consistency across communication channels (e.g. corporate reports) and its evaluation scheme may give high-emitting suppliers a high score because of their future improvement plans, instead of their current carbon intensity.
In addition, only 25% of CDP disclosures account for Scope 3 emissions at all, the source of up to 80% of all emissions for most industries.
And of these “complete” CDP disclosures and by their own account only 25% report on all relevant categories including category 1 purchased goods and services, which frequently accounts for 50% of all Scope 3 emissions.
How Kloopify harmonizes CDP supplier disclosures
Kloopify uses an extension of the method described by Klassen and Stoll (Nature, 2021) to harmonize carbon footprints from suppliers.
We close the gap in carbon footprint from each error source independently to derive the combined correction effect:
If available, we compare Scope 3 emissions from Corporate Reports which may be subject to GRI, SASB, or IR frameworks versus the CDP Climate Change Questionnaire, and choose the larger of the two.
The GHG Protocol defines the minimum boundary for each of the 15 categories of Scope 3. If a category is incomplete, we derive category-specific carbon intensities for the peer industry group.
Kloopify uses key performance indicators (Figure 1) to correct carbon intensities excluding peer companies with incomplete emission figures and using the median to control for outliers.
Our SaaS platform applies uniform criteria to include activities in a given industry instead of accepting justification as unavailability of data, non-significant amount of emissions, or the lack of evaluation avoiding different interpretations in favor of enhanced comparability.
How Kloopify closes the gap of supplier-specific primary data
Aside from harmonizing CDP disclosures and correcting its gaps, errors, and omissions, Kloopify has developed its own powerful methods to calculate emissions, focusing on what is most actionable by companies and organizations.
EPA Business Goals for Scope 3 Emissions
We start by taking a procurement-centric approachto emissions. We demonstrate that this is the most impactful approach any organization can take to reduce its footprint and achieve its goals and commitments. We explore this topic in a separate blog.
This approach feeds high-quality granular data to carbon inventory reports, but more importantly, allows organizations to act on this information triggering a transformation of the organization itself and its supply chain.
To truly solve the gaps and omissions of inconsistencies, incompleteness, and neglect of critical activities, Kloopify analyzes every single transaction of all purchased items.
This includes Scope 2 and Scope 3 emissions under the categories:
1- Purchased goods and services
2- Capital goods
3- Fuel and energy emissions not associated with Scope 1 and Scope 2
4-Upstream transportation and distribution
6- Employee commuting
All of their activities are under the control of the purchasing organization and therefore subject to leverage from purchasing power. Kloopify provides a purchasing emissions baseline and then follows the spirit of the GHG Protocol to refine it, with the important caveat that no gaps are left behind.
If primary data becomes available, transactions and inventory are updated accordingly:
In the process of updating transactions, Kloopify, and its customers pursue better quality primary data on commodities and suppliers following the best return on investment on sustainability information (ROSI), guided by spend, absolute carbon emissions, and carbon intensity.
In summary, looking at key differences between CDP & Kloopify-the main differentiator is that Kloopify builds a bottoms-up, transactions-based approach (similar to a financial infrastructure) in which no item or activity is left out.
Goods and services and their corresponding suppliers with the largest influence are refined to replace the initial estimates. Progress is then planned, monitored, tracked, and implemented by commodities, suppliers, and buyspaces giving the procurement organization full control and negotiation leverage, armed with the best possible information to systematically advance towards departmental or organizational goals.
Kloopify Creates a Competitive Landscape
The Kloopify team further outlines the differences between our approach and our competitors. Check out our complete competitive landscape article complete with an easy-to-use chart that shows the different features of our competitors that directly align with our platform capabilities.
The article helps visualize CDP’s database offering and how it is positioned in our industry; not quite a competitor but a database offering that does not directly compete in the sustainable procurement space but offers insights for marketing pros.
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