ESG Glossary

A 1.5°C-aligned organisation has set GHG emissions reduction targets and established climate change mitigation measures that are consistent with the standards required to meet the target – set out in the Paris Agreement – of limiting global temperature increase to 1.5°C above pre-industrial levels. To meet this 1.5°C trajectory, scientists have estimated that the world must cut its emissions in half by 2030 and reach net zero emissions by 2050. 

Methods for reducing (e.g. increasing energy efficiency), preventing (e.g. transitioning to renewable energy sources), or eliminating (e.g. carbon capture and storage) greenhouse gas emissions. Abatement measures are key strategies in climate mitigation and corporate decarbonisation efforts. 

The difference between an organisation’s estimated GHG emissions levels and the volume of emissions it is responsible for in reality. The ‘gap’ between these two measures is usually the result of the methodologies and data used in emissions estimates. This can be mitigated by the use of comprehensive and science-backed carbon accounting. 

A measure used in carbon accounting to specify the unit volume of a particular product or material purchased by a company. The use of activity data typically allows for more accurate emissions calculations than spend-based data. 

A principle used in carbon accounting to evaluate carbon reduction or removal projects and a key criterion for carbon offset projects in voluntary and compliance carbon markets. The additionality principle helps to ensure that carbon credits or climate finance support projects that genuinely contribute to mitigating climate change, rather than rewarding actions that would have occurred regardless. 

For example, if a renewable energy project is funded using carbon credits, yet would still have been undertaken (through private financing) in the absence of carbon financing, then it would not meet the criteria of additionality. This may be the case if a country has strong mandates or subsidies for renewable energy projects. 

A negative consequence resulting from an action or inaction that harms the climate or increases climate-related risks. This term is often used in risk assessments, regulatory frameworks and ESG reporting. 

A negative consequence resulting from an action or inaction that harms society, human rights, or social well-being. ASOs are often discussed in the context of corporate responsibility, ESG frameworks and impact assessments. 

A business that has been certified by B Lab, an independent nonprofit, for meeting high standards of social and environmental performance, accountability and transparency. B Corps commit to balancing profit with purpose, demonstrating responsible business practices and often working toward sustainability goals such as net-zero emissions and equitable supply chains. 

An assessment that evaluates a company’s impact across five key areas to determine its eligibility for B Corporation certification. These five impact areas are Governance, Workers, Community, Customers and Environment. The assessment, developed by B Lab, measures a company’s social and environmental performance, accountability and transparency. 

A designated reference year against which an organisation measures changes in its environmental, social and governance (ESG) performance. In carbon accounting, a base year is used to track progress in reducing Scope 1, 2 and 3 emissions over time. The selection of a base year is critical for ensuring comparability and accountability in sustainability reporting. 

A carbon-rich liquid produced through pyrolysis (thermal decomposition in a low-oxygen environment) of biomass such as crop residues, forestry byproducts and agricultural waste. Bio-oil serves as a carbon removal method when injected deep underground for long-term carbon sequestration, effectively storing carbon and preventing its re-release into the atmosphere. It is also researched for potential use in renewable energy and industrial applications. 

A carbon-rich, charcoal-like substance produced through pyrolysis (thermal decomposition in a low-oxygen environment) of organic waste materials such as crop residues, wood and agricultural byproducts. Biochar acts as a carbon removal method by stabilising CO₂ in a solid form, preventing its release into the atmosphere. It is widely researched for its potential in carbon sequestration, soil enhancement and sustainable agriculture. 

The variety and variability of life forms within a given ecosystem, habitat or the entire planet. High biodiversity arises from species richness (the number of species), genetic diversity (variation within species) and functional diversity (the variety of ecological roles organisms play). Biodiversity is crucial to ecosystem health, stability, resilience and productivity. It ensures that ecosystems can adapt to changes, supports ecosystem services and helps to sustain natural resources. 

A market-based system designed to reduce greenhouse gas (GHG) emissions by setting a fixed limit (cap) on total allowable emissions. A central authority, such as a government or regulatory body, distributes or auctions a limited number of emissions permits, each allowing the holder to emit a specific amount of GHGs over a set period. Companies that reduce their emissions below their allocated amount can sell excess permits to others, while companies that exceed their limits must buy additional permits. Over time, the central authority progressively lowers the cap, thereby reducing total emissions and incentivising the adoption of cleaner technologies and practices. 

The process of measuring, tracking and reporting the total greenhouse gas (GHG) emissions of an organisation, country or project, usually expressed in carbon dioxide equivalents (CO₂e). It involves quantifying emissions from various sources, including Scope 1 (direct emissions), Scope 2 (indirect emissions from purchased energy) and Scope 3 (indirect emissions from the supply chain). Carbon accounting helps entities assess their climate impact, identify reduction opportunities and implement strategies for emissions reductions or offsetting. 

A trade policy tool designed to prevent carbon leakage (the geographical dislocation of emissions) by applying a carbon price on imported goods based on their embedded greenhouse gas (GHG) emissions. The CBAM ensures that foreign producers face similar carbon costs to those faced by domestic industries subject to carbon pricing regulations. This seeks to ‘level the playing field’ by disincentivising the import of foreign goods to circumvent carbon-related costs. 

 
Both the EU and the UK have announced plans to implement a CBAM. Regulations will come into effect in the EU in 2026 and a similar mechanism will come into force in the UK in 2027. 

Note: CBAM is one of the regulations within the scope of the EU Omnibus proposal. If adopted, the Omnibus would alter the parameters of CBAM in terms of applicability and implementation. 

A technology-driven process designed to capture, transport and either store or repurpose carbon dioxide (CO₂) emissions from industrial sources and power generation. This process helps reduce greenhouse gas (GHG) emissions by preventing CO₂ from entering the atmosphere. 

Key Components: 

1. Carbon capture – CO₂ is captured at the source, such as power plants, factories or through direct air capture systems, using technologies like absorption, adsorption or membrane separation. 

2. Carbon usage – The captured CO₂ is repurposed in industrial processes (e.g. enhanced oil recovery, synthetic fuels or concrete production) instead of being emitted into the atmosphere. 

3. Carbon storage – CO₂ is permanently stored underground in geological formations, such as depleted oil and gas reservoirs, deep saline aquifers or other stable underground sites. 

Tradable certificates representing the reduction or removal of one metric tonne of carbon dioxide (CO₂) or its equivalent in greenhouse gases (CO₂e) from the atmosphere. They are used in carbon markets to incentivise emission reductions and offset unavoidable emissions. 

There are two types of carbon credits: 

• Compliance credits – Issued as part of regulated carbon trading systems (e.g. the EU Emissions Trading System), where companies are required to hold credits to legally emit greenhouse gases and comply with emissions reduction targets. 

• Voluntary credits – Bought and sold in voluntary carbon markets, where organisations and individuals invest in climate projects (e.g. reforestation and renewable energy) to offset their emissions voluntarily. 

A colourless, odourless gas that occurs naturally in the atmosphere and is also produced by human activities, such as fossil fuel combustion, industrial processes and deforestation. As a greenhouse gas (GHG), CO₂ traps heat in the Earth’s atmosphere, contributing to global warming and climate change. Human activities have significantly increased CO₂ concentrations, driving climate change. 

A standardised unit used to compare the global warming potential (GWP) of different greenhouse gases (GHGs) by quantifying their impact relative to carbon dioxide (CO₂). CO₂e represents the amount of CO₂ that would have the same warming effect as a given mass of a different GHG over a specific period, typically 100 years. 

The total amount of greenhouse gas (GHG) emissions, expressed in carbon dioxide equivalents (CO₂e), associated with a specific product, activity, individual, organisation or event. It includes both direct emissions (e.g. burning fossil fuels for transportation or heating) and indirect emissions (e.g. emissions from the production, transportation, and use of goods and services). 

The phenomenon in which the implementation of a carbon removal or emission reduction project leads to an increase in emissions elsewhere. This occurs when measures to reduce emissions in one location result in shifts in production, deforestation or other activities that generate emissions in another region. Avoiding leakage is a key principle in high-quality climate investments and carbon offset projects. 

A business, organisation or activity is considered carbon negative (also known as climate positive) when it removes more carbon dioxide (CO₂) from the atmosphere than it emits. This goes beyond net zero, where emissions are balanced, creating a net reduction in global carbon levels. 

A business, organisation or activity is considered carbon neutral when it achieves a net-zero balance of greenhouse gas (GHG) emissions by reducing its emissions and/or offsetting any remaining emissions through carbon credits or removal projects. This means that, on balance, it does not add additional GHGs to the atmosphere. Carbon neutrality typically covers direct (Scope 1) and purchased energy (Scope 2) emissions, but may exclude Scope 3 emissions, which often make up the largest share of a company’s carbon footprint. 

A company, organisation or activity is considered carbon neutral when it balances the total amount of carbon it emits from its own operations by removing an equivalent amount from the atmosphere. This can be achieved by balancing total emissions with offsets, which means compensating for greenhouse gas (GHG) emissions by investing in projects such as reforestation or renewable energy through carbon credits. This approach is often criticised because: 

A) It relies on offsetting emissions rather than reducing them at the source, meaning that significant reductions may not occur at the operational level. 

B) It usually covers Scope 1 (direct) and Scope 2 (energy-related) emissions, but may exclude Scope 3 (supply chain, product lifecycle) emissions, which often account for the largest proportion of a company’s total carbon footprint. 

In contrast, a company, organisation or activity reaches net zero when it directly reduces its emissions across all areas (Scope 1, 2 and 3) as much as possible and neutralises all remaining, unavoidable emissions using permanent carbon removal methods. 

An economic mechanism that assigns a monetary cost to greenhouse gas (GHG) emissions, typically measured per metric tonne of carbon dioxide equivalent (CO₂e). The goal is to incentivise reductions in emissions by making polluters financially accountable for their environmental impact. 

 
Some examples of carbon pricing measures include: 

• Carbon tax: A fixed price per tonne of CO₂e emitted, paid directly by polluters. 

• Cap and trade: An emissions trading system where a cap on emissions is set, and companies can trade emissions allowances. 

• Internal carbon pricing: A voluntary system where companies assign a carbon cost to internal operations to drive low-carbon investments. 

The process of capturing and storing carbon dioxide (CO₂) to prevent it from entering the atmosphere and contributing to climate change. This can occur through natural or technological methods. 

 
There are two main types of carbon sequestration: 

• Natural sequestration: Involves the absorption and storage of CO₂ by forests, soil, wetlands and oceans. 

• Technological sequestration: Uses techniques such as Carbon capture and storage (CCS) or direct air capture (DAC) to remove CO₂ and store it underground or in long-lasting materials. 

A natural or artificial system that absorbs and stores more carbon dioxide (CO₂) than it releases, helping to reduce atmospheric CO₂ levels. Carbon sinks play a key role in mitigating climate change by removing and storing carbon over long periods.

Examples of natural carbon sinks include forests, soils, oceans and peatlands/wetlands. Technological (artificial) carbon sinks include geological storage, biochar and carbon capture and storage (CCS). 

A fee imposed on the carbon emissions generated as part of the production of goods and services. It is designed to reduce overall emissions by increasing the cost of high-emission activities, thus encouraging businesses and consumers to shift toward low-carbon alternatives. 

A global environmental reporting system that allows companies, cities, states and regions to disclose their environmental impact, particularly regarding climate change, water security and deforestation. CDP (formerly known as the Carbon Disclosure Project) provides a standardised framework for organisations to measure, manage and disclose their environmental data to investors, policymakers and the public. 

The process of making adjustments to systems, practices and structures to minimise the negative impacts of climate change and capitalise on potential opportunities. It involves proactive strategies and actions aimed at enhancing resilience to the changing climate, such as adapting to rising temperatures, extreme weather events and sea-level rise. 

Efforts aimed at reducing or preventing the emission of greenhouse gases (GHGs) into the atmosphere to slow global warming and its impacts. This includes reducing emissions from key sources such as power plants, industries, transportation and agriculture, as well as enhancing natural carbon sinks like forests, oceans and soil to absorb and store carbon dioxide. 

Refers to financial contributions towards projects and initiatives that reduce, remove or prevent greenhouse gas (GHG) emissions. This includes carbon offsetting, carbon compensation and carbon removal, where carbon is taken from the atmosphere and stored in a way that prevents it from contributing to climate change. 

A business, project or activity is considered climate positive (also referred to as carbon negative) if it removes more greenhouse gases (GHGs) from the atmosphere than it emits, resulting in a net decrease in atmospheric carbon levels. This goes beyond net zero, which only neutralises emissions, by actively contributing to climate improvement. 

The potential negative impacts of climate change on ecosystems, economies, businesses and society. There are two main categories of climate risk: 

1. Physical risks – posed by extreme weather events or chronic, long-term risks such as rising sea levels or global temperature increases. 

2. Transition risks – potential adverse effects (mainly incurred by businesses) of transitioning from fossil fuels and other carbon-emitting activities to more carbon-neutral approaches. Transition risks often refer to the costs of this transition, although businesses that fail to decarbonise adequately may face other risks, such as reputational damage, loss of market share and regulatory consequences. 

The annual United Nations climate summit where representatives from nearly every country gather to assess progress in tackling climate change. COP serves as the decision-making body of the UN Framework Convention on Climate Change (UNFCCC) and is responsible for negotiating and implementing global climate agreements, such as the Kyoto Protocol and the Paris Agreement. 

The CSDDD is an EU regulation requiring companies to identify, prevent, mitigate and account for actual or potential adverse impacts on human rights, the environment and good governance throughout their operations, subsidiaries and supply chains. To achieve this, businesses must carry out due diligence to assess, address and report on risks and negative impacts within their value chains. The Directive also requires companies to implement corrective actions and to establish grievance mechanisms for affected stakeholders. It aims to ensure that businesses contribute to sustainable development by holding them accountable for the impacts of their activities, both directly and indirectly. 

Note: The CSDDD is one of the regulations within the scope of the EU Omnibus proposal . If adopted, the Omnibus would alter the parameters of the CSDDD in terms of applicability and implementation. 

A European Union regulation requiring companies to report on their climate and environmental impact. Adopted by the European Commission in November 2022, the CSRD replaces and expands the Non-Financial Reporting Directive (NFRD) by introducing more detailed disclosure requirements in areas such as governance, environmental impacts, social issues and diversity. In its current form, it significantly increases the number of companies subject to mandatory sustainability reporting. 

Note: The CSRD is one of the regulations within the scope of the EU Omnibus proposal. If adopted, the Omnibus would alter the parameters of the CSRD in terms of applicability and implementation. 

Digital tools that are designed to help companies comply with the Corporate Sustainability Reporting Directive (CSRD) by collecting, analysing and reporting sustainability data in line with the European Sustainability Reporting Standards (ESRS). Such software is often used to streamline compliance, improve data accuracy and facilitate reporting to stakeholders like investors, regulators and consumers. Key features of CSRD reporting software include automated data collection, compliance tracking, standardised reporting, risk and impact analysis and audit-ready documentation. 

The process of reducing or eliminating greenhouse gas (GHG) emissions produced by activities, companies, sectors or countries. This objective is achieved through strategies such as transitioning to renewable energy sources, improving energy efficiency, adopting low-carbon technologies and changing business practices to minimise carbon emissions and their associated environmental impact. 

A technology-based process that captures carbon dioxide (CO₂) directly from the atmosphere. DAC systems use chemical processes to extract CO₂, which can then be stored (e.g. in geological formations) or converted into solid minerals through mineralisation, ensuring permanent removal of the captured CO₂ from the atmosphere. CO₂ extracted using DAC can also be utilised for various applications, such as the production of synthetic fuels, bioplastics and other materials, although these uses do not always result in permanent carbon removal. 

The practice of claiming the same carbon removal or climate investment more than once, either by selling the same carbon removal credits to multiple parties or attributing the same emissions reduction to more than one entity. This can lead to inflated claims regarding the total amount of carbon offset or removed. Preventing double counting is critical for ensuring the integrity and effectiveness of climate investment efforts. 

A concept in sustainability and ESG (environmental, social and governance) reporting that encompasses two dimensions of materiality: impact materiality, which considers how an organisation’s activities affect the environment or society, and financial materiality, which evaluates how environmental or social risks can affect the organisation’s financial performance. A sustainability issue or risk is considered to have double materiality if it has significance from either or both perspectives. The concept of double materiality is central to the Corporate Sustainability Reporting Directive (CSRD). 

The greenhouse gas (GHG) emissions that occur after a company has sold its products or services. These emissions are generated during the use, disposal, transportation or further processing of the company’s goods by consumers. They also include activities such as waste management and other downstream operations associated with the final product. 

A global platform that evaluates and rates companies based on their sustainability and ESG (environmental, social and governance) performance. The platform assesses a company’s management of sustainability issues, covering areas like environmental impact, labour practices, business ethics and supply chain management. Companies receive a sustainability score that can be shared with customers and other stakeholders. 

Learn more about EcoVadis here. 

The total greenhouse gas (GHG) emissions associated with the entire lifecycle of a product or construction project, excluding operational emissions. This includes emissions generated during the extraction of raw materials, manufacturing, transportation, assembly and eventual disposal or deconstruction at the end of the product or building’s life. Embodied carbon is a significant component of a product’s total carbon footprint, especially for materials used in construction. 

A coefficient that represents the relationship between the amount of pollutant (such as greenhouse gases) produced and the activity responsible for its production. It is typically expressed as the mass of a specific pollutant emitted per unit of activity, such as tonnes of CO₂-equivalent (CO₂e) emissions per unit of fuel burned or distance travelled. Emission factors are used to estimate emissions from various sources and activities. 

A market-based policy instrument that allows companies or governments to buy and sell allowances or credits that permit the emission of a certain amount of greenhouse gases (GHGs). The overall goal of emissions trading is to limit total emissions within a defined region, sector, or group of companies, while providing economic incentives for participants to reduce emissions more cost-effectively. It is designed to encourage innovation and investment in low-carbon technologies. An example of emissions trading is the EU Emissions Trading Scheme (ETS). 

A standardised and verified declaration that communicates the environmental impacts of a product throughout its lifecycle, based on a product life-cycle assessment (LCA). EPDs provide transparent, comparable and credible information about a product’s environmental footprint, allowing consumers, manufacturers and other stakeholders to assess the relative environmental impact of different products. 

A widely used framework for assessing the sustainability and ethical impact of organisations. In an environmental context, ESG refers to factors such as carbon emissions, resource efficiency, biodiversity and climate resilience. The framework also addresses social issues, including labour practices, human rights and community engagement, as well as governance concerns such as executive compensation, board diversity and business ethics. ESG considerations influence strategic planning, financing, corporate reporting and supply chain management, guiding responsible business practices and investment decisions.

A market-based policy tool aimed at reducing greenhouse gas (GHG) emissions across the European Union. It operates on a cap-and-trade principle, where a cap is set on the total amount of emissions that can be emitted by high-emitting sectors such as power generation, industry and aviation. Companies within these sectors are allocated a certain number of emission allowances, which represent the right to emit a specific amount of CO₂ or its equivalent in terms of GHG emissions. If a company emits less than its allowance, it can sell the surplus; if it emits more, it must buy additional allowances. The cap decreases over time, driving a continuous reduction in emissions. The EU ETS incentivises companies to reduce emissions cost-effectively by providing financial rewards for cutting emissions and penalties for exceeding limits.

A mandatory reporting framework that outlines the structure and disclosure requirements for companies subject to the Corporate Sustainability Reporting Directive (CSRD). The ESRS covers a comprehensive range of environmental, social and governance (ESG) issues, including climate change, biodiversity, human rights and corporate governance. It aims to ensure standardised, comparable and transparent sustainability reporting, helping businesses to assess and disclose their ESG impacts, risks and opportunities in line with EU sustainability goals. 

A package of legislative measures proposed by the European Union in 2021 aimed at reducing greenhouse gas (GHG) emissions by 55% by 2030, compared to 1990 levels. It is a central element of the EU’s European Green Deal, which strives for carbon neutrality by 2050. The Fit for 55 package includes a variety of policies across sectors such as energy, transportation, industry and agriculture, focusing on the clean energy transition, emissions trading, energy efficiency and the promotion of renewable energy, among other measures. 

The unintentional release of gases and vapours from industrial processes, equipment or infrastructure that occur during the course of an organisation’s activities. These emissions are part of a company’s Scope 1 emissions, which encompass all direct greenhouse gas emissions from sources that are owned or controlled by the company. 

Developed as a partnership between the World Resources Institute (WRI) and the World Business Council for Sustainable Development (WBCSD), the GHG Protocol provides the most widely recognised standard for greenhouse gas (GHG) accounting and reporting. It offers a comprehensive framework for businesses, governments and other stakeholders to measure and manage their direct and indirect emissions, as well as assess and report progress on reducing emissions and managing climate-related risks. The protocol categorises emissions into three scopes: Scope 1 (direct emissions from owned or controlled sources), Scope 2 (indirect emissions from the generation of purchased electricity, steam, heating and cooling) and Scope 3 (indirect emissions that occur throughout the value chain, including both upstream and downstream activities). 

The process of disclosing greenhouse gas (GHG) emissions data in a structured format, typically on a monthly, quarterly or annual basis, as part of a company’s financial or sustainability reporting. GHG reporting involves calculating and presenting key metrics to assess emissions performance and climate impact. These can include: 

1. Scope 1, 2 and 3 emissions from the company and its affiliates. 

2. Global warming potential (GWP) values of reported emissions. 

3. A comparison with a base year to track emissions trends over time. 

4. An intensity metric, such as emissions per employee, per unit of product sold or per unit of revenue. 

A gas that absorbs and emits radiant energy in the thermal infrared spectrum, trapping heat in the Earth’s atmosphere and contributing to the greenhouse effect. Major GHGs include carbon dioxide (CO₂), methane (CH₄), nitrous oxide (N₂O) and fluorinated gases. 

The practice of providing false, misleading or exaggerated claims about a company’s environmental impact, sustainability efforts or the environmental benefits of its products or services. Greenwashing can be intentional or unintentional, often resulting from a lack of transparency in emissions accounting (particularly Scope 3 emissions). 

An independent international organisation that develops widely used sustainability reporting standards. GRI provides frameworks, best practices and industry-specific guidance to help businesses, governments and organisations measure and disclose their environmental, social and governance (ESG) impacts. GRI standards enhance transparency and accountability by enabling organisations to report on areas such as greenhouse gas emissions, resource use, biodiversity, human rights and labour practices. 

A commitment by a company to eliminate all greenhouse gas (GHG) emissions across its entire operations and value chain, without relying on carbon offsets or removals. Unlike net zero, which allows for offsetting, a gross zero target requires reducing emissions to absolute zero. After achieving this, the company pledges to maintain a zero-emission status in subsequent years. 

Organic compounds consisting of hydrogen and carbon, primarily found in fossil fuels such as oil, natural gas and coal. In an environmental context, hydrocarbons are a major contributor to climate change, as their combustion releases carbon dioxide (CO₂) and other greenhouse gases. Hydrocarbons can also cause environmental pollution, including oil spills, air contamination and ecosystem degradation.

The practice of investing in greenhouse gas (GHG) emissions reduction or removal projects within a company’s own value chain or its associated communities. Unlike carbon offsetting, which involves compensating for emissions through external projects, insetting integrates sustainability initiatives directly into a company’s supply chain or operations, creating both environmental and business benefits. 

A tool used by companies to assign a financial value to their greenhouse gas (GHG) emissions, integrating this cost into business decision-making. By factoring in a price on carbon, companies incentivise emissions reductions and drive investment towards cleaner technologies and energy-efficient operations. ICP can take various forms, such as ‘shadow pricing’, carbon fees, or cap-and-trade mechanisms within an organisation. 

An independent organisation established at COP26 to develop global sustainability disclosure standards, ensuring consistency and comparability in corporate reporting. The ISSB’s primary objective is to create a unified global baseline for sustainability-related financial disclosures, helping investors and stakeholders assess climate- and ESG-related risks and opportunities. 

An internationally recognised standard for environmental management systems (EMS), developed by the International Organisation for Standardisation (ISO). ISO 14001 provides a structured framework for organisations to manage and improve their environmental performance, ensure compliance with legal and regulatory requirements and enhance sustainability practices. 

A framework for ensuring a fair, inclusive and equitable shift towards a sustainable, low-carbon economy. Companies or organisations adopting a just transition approach prioritise balancing environmental goals with social and economic equity by: 

1. Conducting a risk assessment to evaluate potential impacts on affected stakeholders, including employees, value chain partners and local communities. 

2. Engaging stakeholders to gather input, address concerns and promote inclusive decision-making. 

3. Implementing measures to prevent or mitigate adverse social and economic effects of the transition. 

A just transition seeks to protect workers and communities by ensuring access to fair wages, reskilling opportunities and social protections as industries and economies evolve. 

A systematic method for evaluating the environmental impact of a product or service across all stages of its life cycle – from raw material extraction and production to distribution, use and disposal. LCA helps identify areas where environmental impacts can be minimised, supporting more sustainable design, manufacturing and consumption practices. It is commonly used to assess a product’s carbon footprint, water usage and overall environmental performance, both informing corporate sustainability strategies and facilitating regulatory compliance. 

Key issues that have a significant impact on an organisation’s financial performance, operations or stakeholder relationships, particularly in the context of sustainability. Material topics often encompass environmental, social and governance (ESG) factors that influence business strategy and long-term viability. Identifying and reporting on material topics enables organisations to address critical risks and opportunities while aligning with stakeholder expectations and regulatory requirements. 

Actions taken to reduce or prevent the negative environmental impact of an activity, project or business operation. These measures aim to limit greenhouse gas (GHG) emissions, reduce resource consumption and protect ecosystems. Examples include improving energy efficiency, transitioning to renewable energy, minimising waste, adopting sustainable land use practices and enhancing carbon sequestration efforts. 

The stock of natural resources and ecosystems that provide essential goods and services to businesses, economies and societies. Natural capital includes assets such as air, water, soil, minerals, biodiversity and ecosystems, which support key functions like climate regulation, water purification, pollination and carbon sequestration. Managing natural capital sustainably is crucial for long-term environmental and economic stability. 

A state in which an organisation, company or country removes more greenhouse gas (GHG) emissions from the atmosphere than it emits. Achieving net negative status typically involves reducing emissions as much as possible through energy efficiency, renewable energy adoption and sustainable practices, while actively removing excess emissions via methods such as reforestation, carbon capture and storage (CCS) and soil carbon sequestration. 

A state in which the amount of greenhouse gases (GHGs) emitted into the atmosphere is balanced by an equivalent amount of GHGs removed, resulting in no net increase in atmospheric emissions. Achieving net zero means that the total concentration of GHGs remains stable over time. Net zero targets are typically set by companies, countries, industries and regions to guide their emissions reduction efforts. These strategies generally focus on reducing emissions as much as possible through energy efficiency, renewable energy adoption and sustainable practices, while offsetting any remaining emissions through carbon removal solutions such as reforestation, carbon capture technologies or other forms of carbon sequestration. 

An EU legislative framework that requires large ‘public-interest entities’ (large listed companies, insurance companies and banks) with more than 500 employees to disclose non-financial information on their environmental impact, social and employee matters, human rights and anti-corruption efforts. The NFRD aims to enhance transparency and accountability in corporate sustainability reporting. It is being replaced by the Corporate Sustainability Reporting Directive (CSRD), which introduces more detailed and standardised disclosure requirements, including a broader scope and stricter reporting obligations. 

The process by which a company, organisation, or individual compensates for their greenhouse gas (GHG) emissions by funding projects that reduce or remove an equivalent amount of carbon dioxide (CO₂) or other GHGs from the atmosphere. Offsetting is typically considered a necessary component of net zero strategies, especially for emissions that are challenging to eliminate directly. However, the effectiveness of offsetting is contingent upon the quality and credibility of the projects involved. Low-quality or poorly verified offset projects can contribute to greenwashing, where the actual volume of GHG reduction or removal is misrepresented or inaccurately quantified. 

The practice of relocating business activities or outsourcing operations to another country, often to reduce costs or meet strategic objectives. In an environmental context, offshoring may occur for reasons such as: 

1. Reducing a company’s reported emissions by shifting production abroad. 

2. Avoiding stricter environmental regulations in the original country by relocating to a country with more lenient laws. 

3. Taking advantage of lower labour costs. 

4. Exploiting weaker labour protections and rights in the destination country. 

5. Engaging in environmentally or socially harmful practices that would be illegal in the original country. 

6. Hindering progress towards a just transition, the UN Sustainable Development Goals (SDGs), or broader social and ecological objectives. 

While offshoring may lower direct emissions in the home country, it can lead to carbon leakage, where emissions are transferred to another location rather than eliminated, potentially undermining global climate objectives. 

An international climate treaty adopted in 2015, committing participating countries to limit global warming to well below 2°C above pre-industrial levels, with efforts to limit the increase to 1.5°C. Under the agreement, countries are required to set, periodically update and meet emissions reduction targets through Nationally Determined Contributions (NDCs) to collectively mitigate climate change. 

A global initiative led by the World Business Council for Sustainable Development (WBCSD) to improve transparency in Scope 3 emissions reporting. PACT establishes a standardised framework for calculating and sharing consistent, comparable and credible emissions data across value chains. By enabling data interoperability, PACT helps organisations track and manage their carbon footprints more effectively to meet decarbonisation targets. 

The environmental, social and economic impacts of a product throughout its entire lifecycle – from raw material extraction to production, use and end-of-life disposal. Product sustainability aims to minimise negative environmental effects, such as emissions, waste and resource depletion, while ensuring social equity and economic viability in the product’s production and use. 

Learn more about product sustainability here. 

Energy generated from naturally replenishing, non-fossil sources such as wind, solar, hydropower and biomass. Renewable energy sources are considered sustainable because they do not deplete over time and have lower environmental impacts compared to fossil fuels. 

Greenhouse gas (GHG) emissions that remain after an entity has taken all reasonable steps to reduce its emissions across its operations and value chain. These emissions represent the portion that cannot currently be eliminated through existing mitigation measures, technologies or feasible practices. Residual emissions are typically addressed by offsetting or other forms of carbon removal. 

A global initiative that helps companies establish greenhouse gas (GHG) reduction targets aligned with the latest climate science and the goals set out in the Paris Agreement. The SBTi offers both general and industry-specific guidance to enable companies to set and achieve science-based targets, thereby contributing to global efforts to limit global warming. 

Scope 1 emissions: Direct greenhouse gas emissions from sources owned or controlled by an entity, including emissions from fuel combustion, chemical production processes, refrigerant leaks and company-owned vehicles. 

Scope 2 emissions: Indirect emissions from the generation of electricity, steam, heat, or cooling consumed by an entity. While the emissions occur at the facility where the energy is generated, the responsibility for these emissions lies with the entity consuming the energy. 

Scope 3 emissions: Indirect emissions that occur across the entire value chain of an entity, excluding Scope 2 emissions. These include emissions from business travel, procurement, waste management, water usage and other activities not directly controlled by the company, but integral to its operations and products. 

A company’s commitment to operating in a way that benefits society while minimising negative social and environmental impacts. In an environmental context, this includes reducing pollution, conserving resources and adopting sustainable practices. Social responsibility also encompasses ethical labour practices, stakeholder engagement, philanthropy and economic decisions that contribute to long-term societal well-being. 

Spend-based emissions: A method of estimating emissions by using the monetary amount spent on goods and services, applying average emission factors for specific sectors or products purchased. This approach is often used when detailed data on specific activities is unavailable, but it may be less precise than activity-based calculations. 

Activity-based emissions: A method of calculating emissions based on specific activities or operational metrics, such as energy consumption, transportation or the number of products manufactured. This approach provides more accurate emissions estimates by directly linking emissions to the activities that cause them. 

A process used by organisations to identify and assess the gap between their current environmental performance and the target performance required to meet sustainability goals, regulatory standards, or industry best practices. This analysis helps pinpoint areas where improvements are needed, guiding the development of actionable strategies to close the gap and achieve the desired sustainability outcomes. 

Learn more about conducting a strategic gap analysis here. 

A set of ethical, social and environmental standards established by a company or organisation for its suppliers to follow. It typically covers areas such as labour rights, fair business practices and environmental sustainability, ensuring suppliers align with the company’s values and meet specific sustainability goals. The code may include expectations around working conditions, human rights, waste management and emissions reduction. 

Emissions that occur at any stage in a company’s upstream supply chain, including those from raw material extraction, processing and transportation. These emissions fall under Scope 3 emissions and are a significant source of indirect emissions for companies. Reducing supply chain emissions requires collaboration with suppliers and the adoption of sustainable procurement practices. 

The extent to which a company has oversight of its supply chain, including understanding the environmental, social and economic impacts of its operations. Achieving transparency enables a company to manage risks, ensure compliance with sustainability standards and effectively work towards environmental and sustainability targets by holding suppliers accountable for their practices. 

An organisation that develops industry-specific standards to guide businesses in disclosing material environmental, social and governance (ESG) information to investors. SASB’s standards focus on identifying sustainability factors that are financially material to a company’s long-term value, including aspects such as climate risk, resource management and governance practices.

The process of integrating environmental, social and governance (ESG) factors into an organisation’s strategy, operations and decision-making processes to reduce negative impacts, promote long-term sustainability and create value for all stakeholders. This approach involves monitoring, assessing and improving a company’s sustainability performance across its entire value chain. 

The level of progress an organisation has made in embedding sustainability principles into its strategy, operations and decision-making processes. Sustainability maturity is typically assessed through frameworks that measure an organisation’s governance, performance, commitments and impact across environmental, social and economic dimensions. Companies with high sustainability maturity demonstrate strong integration of sustainability into their corporate culture, supply chains and business models, aligning with global standards and best practices. 

Environmental, social or governance (ESG) events or conditions that may pose material financial or operational risks to a company, or impact its ability to create long-term value. These risks can arise from climate change, regulatory changes, social responsibility issues or governance failures. 

A long-term, integrated plan that aligns an organisation’s operations, decision-making and business objectives with environmental, social and governance (ESG) considerations. A sustainability strategy aims to reduce negative impacts, enhance resilience and create long-term economic, social and environmental value. 

A set of 17 global objectives adopted by the United Nations in 2015 as a framework for achieving sustainable economic, social and environmental development by 2030. The SDGs address issues such as poverty, inequality, climate action and responsible consumption. Goal 13 specifically calls for urgent action to combat climate change by reducing emissions and promoting renewable energy. 

A framework of principles and commitments guiding an organisation’s sourcing of goods and services to minimise environmental impact, uphold social responsibility and promote ethical supply chain practices. This policy typically considers factors such as carbon footprint, resource efficiency, fair labour practices and circular economy principles. 

The integration of social, ethical and environmental considerations into supplier selection and procurement processes. Sustainable sourcing helps companies mitigate risks such as supply disruptions, cost volatility and reputational damage while ensuring regulatory compliance. It also supports stakeholder expectations and promotes responsible environmental and social practices across the supply chain. 

The parameters a company defines when setting emissions reduction or net zero targets. These include the approach for establishing organisational boundaries (e.g. operational or financial control), the percentage of Scope 1, 2 and 3 emissions covered and the inclusion of all relevant greenhouse gases. 

A private association established to provide technical advice and expertise on financial and sustainability reporting. It plays a crucial role in shaping European views on accounting and sustainability practices, ensuring that reporting standards are aligned with both EU regulations and the interest of society at large. EFRAG also advises the European Commission on the implementation of non-financial reporting frameworks. 

An EU regulation requiring financial market participants and financial advisors to disclose sustainability-related information. It mandates transparency on how environmental, social and governance (ESG) factors are integrated into investment decisions and strategies, and the potential adverse impacts of those investments. The SFDR aims to enhance the transparency of sustainable investment products and promote investment in sustainable activities, fostering long-term sustainable economic growth. 

A strategic roadmap detailing how an entity will achieve its net zero or emissions reduction targets. It typically includes interim greenhouse gas (GHG) reduction goals aligned with the Paris Agreement, short-, medium- and long-term actions, financing strategies, the use of verified carbon credits for residual emissions, governance and accountability mechanisms, stakeholder risk mitigation and measures to ensure a just transition to a low-carbon economy. 

A voluntary initiative encouraging businesses to adopt sustainable and socially responsible practices. Participants commit to aligning their operations with ten principles covering human rights, labour, the environment and anti-corruption, and must report on their progress toward these commitments. 

Greenhouse gas (GHG) emissions that occur beyond a company’s direct operations, including both upstream emissions from suppliers (e.g. raw material extraction, manufacturing and transportation) and downstream emissions from product use, disposal and end-of-life treatment. Since value chain emissions often constitute the largest share of a company’s total carbon footprint, addressing them is essential for achieving meaningful emissions reductions and sustainability goals.