A- – or why it matters to be transparent about and learn from setbacks on our path to decarbonization

LinkedIn is a platform where you will mostly find posts depicting corporate successes. As much as I would like to add another one of those to the roster, today’s post is actually about a setback: after 12 years of being part of a small group of companies with a solid A rating on climate and other sustainability areas from CDP (the Carbon Disclosure Project), we learned recently that for 2023, we received an A- rating. This might feel like a small difference for you, but for #teambayer it was sobering news. So sobering that I wanted to write about it today. Before I do that, I want to congratulate many of my fellow peer companies for their A rating. You can find this year’s best performers here .

Also, allow me to step back for a moment to describe the bigger picture as to why CDP and our performance matters.

Following the ground-breaking signature of the Paris Agreement in 2015 many major corporations, including Bayer, have pledged to become net-zero by 2050.

Regulators, civil society groups and policymakers then rightly ask the following question: How will you do it?

Data and disclosure form the foundation of our sustainability efforts

Back then, we signed without having all the answers – and to a great extent, we are still seeking them. But we can begin by borrowing the business adage that

“you can’t manage what you don’t measure”

and accurately detailing Bayer’s footprint, as well as the activities and investments we undertake to mitigate it. After tracking this data, we also must disclose it, because transparency on GHG emissions is a fundamental condition of success. We operate on five continents in many sectors – and in all of them we report the emissions of our suppliers and our own operations. Additionally, we have established a baseline of the greenhouse gas intensity across our main crops (crop-country-combinations), and in 2025 we will start to report reductions against this bi-annually. We believe this can contribute significantly to reducing in-field emissions as agriculture is increasingly prioritized in global climate negotiations.

Collecting and disclosing this data is a mammoth undertaking, creating months of work for our sustainability team, not to mention the auditors we mandate solely to ensure the numbers add up. Sceptics may ask if this is time and resources well-invested: wouldn’t these be hours better spent in developing and implementing concrete actions instead?

I can understand this criticism – but I strongly believe that scrupulously tracking our progress is necessary to setting ambitious targets, correcting our course where necessary and thus contributing to a sustainability shift. And speaking from a purely corporate perspective, it is much easier for companies to justify sustainability investments if they have a favorable short-term outcome (in the case of the CDP, a higher score) on top of their long-term benefits to society.

Setting standards in environmental accountability.

Which brings me to CDP , the nonprofit that holds companies to account and drives sustainability ambition by pushing sustainability reporting far beyond the boundaries of legally enshrined disclosure requirements.

CDP, initially known as the Carbon Disclosure Project, is a widely used database of organizational environmental impact information e.g. greenhouse gas emissions, water use, deforestation and forest degradation.

Initially, CDP leveraged investor pressure to convince companies to participate in the disclosure process, and while capital markets signatories still stimulate participation, companies, cities and public authorities increasingly use the CDP reporting process to disclose their environmental impact at their own initiative.

For more than a decade, CDP has empowered companies to measure and share environmental information, focusing on three main buckets: greenhouse gas emissions, water security and deforestation (last year they added “plastics” to the list for the first time, too). Soon, they will also begin incorporating nature and biodiversity loss metrics into their classification system . And their disclosure process, not to mention the Science Based Targets Initiative and Supply Chain Initiative that draw on its results, accomplishes many great things.

First, in being voluntary, and demanding qualitative examples as well as quantitative results,

CDP reporting encourages companies to go beyond minimal legal requirements if they want to score well.

A lot of companies have the capacity to do more, and we shouldn’t wait for regulation to catch up in the short term. Second, CDP reporting provides a rich and informative database – filled out voluntarily by participating companies – for many interested parties, including investors, governments and our peers who want to see how much (or how little) the world’s biggest and most impactful companies are doing. That includes sustainable management strategies for reducing a company’s greenhouse gas emissions, effective business management approaches to climate change, and honest assessments of the challenges and opportunities that climate change is bringing to companies. Third, the reports’ score-based system has created a competitive league of its own, incentivizing companies to do even more by putting a tangible value on sustainability initiatives. And lastly, CDP reporting forces us to be upfront. All the data and information shared with CDP is automatically made public and is open to scrutiny, which means we have to be both thorough with our own accounting and transparent with our stakeholders.

Data-based reporting not only assesses sustainability – it accords it concrete value.

Once the reporting cycle is complete, CDP analyzes individual companies’ responses and ranks them according to pre-defined criteria. They then identify an “A list” of companies ranked highest by for their leadership in environmental transparency and for their performance in one or more of the areas listed earlier. The companies that make that list are recognized as “leaders” in addressing climate change, which means they must demonstrate best practice in strategy and action as recognized by the TCFD, Accountability Framework and other such frameworks. They also should set science-based targets, create a climate transition plan, develop water-related risk assessment strategies, or report on deforestation impact for all relevant operations, supply chains and commodities.

Less than 2% of the 21,000 companies who disclose their environmental performance get the A rating, and traditionally Bayer is amongst them. For 2023, however, we missed out on the accolade, receiving an A- in climate change.

Given our efforts to drive decarbonization, the minus does not feel like a small downgrade – it really matters a lot to me. And given how systemically relevant Bayer is for decarbonization, we need to return to a vanguard position.

Chasing the A: Bayer's renewed drive for top sustainability scores

Arguably, an A- score in the CDP’s “Climate Change” program still reflects a strong performance, as do our improved or steady ratings among ESG institutions like Sustainanalytics and MSCI.

But A- is neither where we want to be with our CDP score, nor where we have been previously.

Bayer’s ambitions are high, and in most of the twelve years we have reported with CDP, we were proud to have made the “A list” in the climate category. This was thanks to numerous measures and the tireless commitment of many of my colleagues.

We will use this year’s assessment as a competitive spur, benchmark our progress, and seize the challenge of making our way back into the “A list” next year.

Our forthcoming Sustainability Report will highlight some of the measures we are using to achieve this goal, like switching 100% of our energy supplies to renewable sources by 2030, transitioning our fleet to electric vehicles, and better harnessing our 100€/mt internal carbon price by expanding the concept to include our Scope 3 emissions.

Moreover, we can use CDP’s data smartly to enhance our sustainability efforts. By crunching the numbers and analyzing the approaches taken by “effective decarbonizers” versus “carbon laggards”, the CDP identifies the core elements of a sound climate transition plan . These findings are not rocket science – they conclude that “effective decarbonizers” measure and disclose their emissions, set ambitious targets, progress on target delivery, set management incentives (including internal carbon prices) and embed decarbonization into their business models – but it is both interesting and helpful to see sustainability success factors identified on the basis of benchmarking and data.

This can be a source of inspiration for our own climate transition plan, which is due to be published this year and will outline our pathway towards net-zero by 2050.

Our plan on mitigation, adaptation, and access will demonstrate that we are following through on our commitments, and share insights into our implementation measures, like extending our renewable energy share and improving efficiencies across our entire value chain. In addition, it will outline how Bayer’s product portfolio will play a crucial role in helping the world adapt to the impacts of climate change through our innovations like short-stature corn , direct-seeded rice and our FieldView digital platform.

We have so many sustainability initiatives to be excited about at Bayer – they will undoubtedly help us make 2024 an A-grade year as we continue on our path to net-zero.