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<v ->Hello, I'm Diana Dimitrova,</v>

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a managing director and partner

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from Boston Consulting Group.

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Today I have the pleasure to be joined by Sonya Bhonsle

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and James Chamberlayne.

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CDP is a not-for-profit organization

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that collects the world's climate data.

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Sonya, could you tell us a little bit

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about last year's disclosure cycle?

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<v ->Absolutely. Last year was a successful year for CDP.</v>

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Over 23,000 corporates reported their climate-related data

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to us. That's the most we've ever seen.

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The quest for net zero really hinges

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on transparency and disclosure.

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What is measured gets managed.

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<v ->This year, I think it's our third annual</v>

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CDP and BCG Supply Chain Report.

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We start with an earth-shattering fact.

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Scope 3 upstream now houses 26 times

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the emissions of Scope 1 and 2.

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So that's a more than doubling of last year's findings.

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<v ->The ratio between upstream to operations has gone up.</v>

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What we are not seeing is more Scope 3 emissions.

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What the data's telling us

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is that there are more companies reporting their emissions.

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They're assessing those emissions better,

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and as they're doing so, they're really shining a light

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and illuminating the scale of the upstream problem.

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We looked at which companies were setting targets

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on Scope 3 and taking action on Scope 3,

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and we tried to identify what factors they had in common.

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We identified three.

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The first was having a climate-responsible board.

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The second was a supplier-engagement program.

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And the third, and this was interesting

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because we've never seen this before,

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was setting an internal carbon price.

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<v ->Bringing in BCG's experience with the CDP information,</v>

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we do see the concept of fiduciary accountability

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between boards and management

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to be a really important linchpin.

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I think the key is the definition, right?

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A climate-responsible board is two things.

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It's at least one climate-competent individual on the board,

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and it is climate oversight that that board should have.

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<v ->That's exactly right.</v>

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The top really makes a difference

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to the rest of the organization.

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But what we are seeing is that only 34%

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of the corporates who have reported to CDP

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had that climate-responsible board.

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<v ->Supplier engagement, that's the second factor.</v>

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You've been running the supply chain program

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for over a decade. Any insights

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about how we actually move up the ladder

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of supplier engagement?

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<v ->Supplier engagement is crucial.</v>

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The war of climate change is going to be won or lost

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on the Scope 3 front.

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So what we need to see is more companies

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talking to suppliers about climate change

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and driving that knowledge and capacity down the line.

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The CDP Supply Chain Program absolutely does that.

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What we're seeing is that the companies

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that are actively engaging with their suppliers,

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they're six times more likely

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to have a 1.5-aligned transition plan and Scope 3 target.

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But there's still so much more work to be done.

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Only four in 10 corporates are currently engaging

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with their suppliers on climate change.

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We're seeing only one in 10 collaborate with their suppliers

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to drive action on climate change.

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Only three in 100 corporates are asking their suppliers

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to set targets aligned to climate science,

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and that's the transition that we need to see happening.

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<v ->The third factor that you mentioned</v>

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is the concept of the internal carbon price.

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And we know those that have an internal carbon price

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are four times more likely to have the 1.5 transition plan

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and to have Scope 3 targets.

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So clearly it works.

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Can you tell me a little bit about what we have uncovered

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for the first time this year?

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<v ->It's a really interesting finding.</v>

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We this year found an implied carbon liability

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of $335 billion associated

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with reported Scope 3 emissions.

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<v ->It illuminates how much liability we're missing, right?</v>

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James, you look after the investor community,

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could you give us a bit of a sense of what they need to do

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to contribute to our quest for net zero?

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<v ->Yeah, as you said, disclosure's absolutely crucial</v>

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for investors and more broadly

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the financial community at large.

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Firstly, from the finance, the investor side,

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it's using that data for those portfolio assessments,

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identifying those risk-adjusted returns,

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factoring it into benchmarking,

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factoring it into engagement as well.

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And then on the other side,

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it's also we're seeing a rise in discussions

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around how can it be factored into funds,

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indices, and those innovative products,

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whether that be green sustainability-linked loans, bonds.

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<v ->It seems that half of corporates</v>

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meaningfully report on the financial risk that is out there,

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but only one in three evaluate those financial risks

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from the upstream emissions and in the context

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of their financial performance.

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<v ->Out of the 400 investors, asset managers,</v>

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asset owners who disclosed to CDP in 2023,

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one in three have investment policies

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that include climate-related requirements for their clients.

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Less than one in 10 leverage

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and require clients to disclose Scope 3 upstream emissions.

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Now, if you're listening

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to what we've just been talking about there, right?

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That's a massive blind spot,

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and you're not really getting on top

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of your risk assessments.

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And so when it comes to looking at CDP's role in this,

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it's never been more crucial.

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<v ->James, Sonya, thanks so much for your time today.</v>

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