Glossary

CO2e (Carbon Dioxide Equivalent) is a standard unit for measuring and comparing the total greenhouse gas emissions based on their global warming potential relative to carbon dioxide. To calculate CO2e, each greenhouse gas is multiplied by a conversion factor to convert it into a single unit of measure. The specific conversion factors for each greenhouse gas may change over time depending on the concentration of the gas in the atmosphere.

The CDP is an international organization that has set a framework of standards for environmental reporting, including climate change, water security, and deforestation. The CDP works with individual companies, cities, and large regions to report their environmental information and receive a score based on their responses, serving to benchmark their performance, promote transparency into their operations, and identify risks and opportunities related to climate change.

A measure of the greenhouse gas emissions released into the atmosphere by a person, company, product, or activity. A larger carbon footprint indicates a bigger contribution to climate change. Calculating a carbon footprint involves summing up GHG emissions produced in three main categories: Scope 1, 2, and 3 emissions, and the final sum is typically presented in units of Carbon Dioxide Equivalent (CO2e).

A system designed to maximize the lifespan of products and materials by maintaining them in use for as long as possible. This approach contrasts with the traditional "linear economy," which involves extracting raw materials, manufacturing products, and disposing of them at the end of their life. In a circular economy, the goal is to minimize waste and the use of harmful substances by redesigning, reusing, recycling, and regenerating products and materials. This model promotes resource efficiency, reduces environmental impact, and creates value from waste by reintegrating it into the production process.

In the context of the circular economy, closing the loop refers to the practice of ensuring that materials and products are reused, recycled, or repurposed at the end of their lifecycle, rather than being discarded as waste. "The loop" represents the continuous cycle of resources within the economy, where products and materials are kept in circulation for as long as possible. When a company says they are "closing the loop," they mean they are implementing strategies to reclaim, recycle, or repurpose materials from used products, thereby reintegrating them into the production process. This approach helps reduce waste, conserve natural resources, and minimize environmental impact.

An obligatory reporting framework enacted by the European Parliament that applies to certain companies with operations taking place in the European Union. The mandate requires companies to report on specific ESG metrics, conduct a double materiality assessment (considering both the impact of the company on the environment and the impact of environmental issues on the company), and undergo third party assurance to verify the accuracy and reliability of their ESG disclosures.

Evaluates not just how the company’s operations affect the broader environment and society, but how external environmental and social issues may impact the company's financial performance and reputation. The CSRD mandate requires companies to report only on ESG issues deemed material, supported by their double materiality assessments. This approach provides a comprehensive understanding of risks and opportunities essential for navigating today's business landscape.

A comprehensive framework used to evaluate a company's commitment to sustainable and ethical practices. ESG encompasses three key areas: Environmental factors, such as a company's carbon footprint, resource usage, and environmental stewardship; Social factors, including employee relations, community involvement, and human rights; and Governance factors, which assess corporate leadership, transparency, ethical behavior, and stakeholder engagement. ESG criteria help stakeholders understand and evaluate a company's long-term sustainability and ethical impact on the world, guiding investment and operational decisions.

A detailed review of the Environmental, Social, and Governmental factors affecting a company and its stakeholders, including investors, employees, customers, communities, and shareholders. By considering these factors, stakeholders can get a more holistic and comprehensive view of the company's risks, opportunities, and impact. It examines the company's environmental impact (e.g., pollution, greenhouse gas emissions, biodiversity, water usage), social impact (e.g., employee welfare, community engagement, labor rights), and governance practices (e.g., corporate conduct, ethics, conflicts of interest).

The process of comparing a company's ESG performance to competitors in its industry. This can often be challenging as there is not a universal standard to normalize the data and easily compare it. Undergoing this process allows companies to identify the strengths and weaknesses of their ESG practices, ensure compliance with regulatory requirements, and leverage their ESG performance to apply for sustainability finance tools.

A score used to compare the ESG activities of different companies, that is commonly used by investors and customers to evaluate a company's risk and impact. Some popular ratings providers include: The Carbon Disclosure Project (CDP), MSCI, and Sustainalytics, among others. To achieve an ESG rating, companies typically have to undergo third party assurance for their ESG data in accordance with the rating agency's criteria.

An ESG reporting framework of universal standards, and industry-specific standards. They are the world's most widely used sustainability standards focusing on how a company's ESG reporting affects the economy. Reporting with the GRI is voluntary but are often employed to meet stakeholder expectations and adhere to regulations.

Gasses that allow light and heat from the sun to enter the earth's atmosphere, but trap heat on earth, preventing it from being released back into space. These gasses are believed responsible for human-caused (anthropogenic) climate change. The main GHGs that have an effect on climate change include: carbon dioxide (CO2), nitrous oxide (N2O), methane gas (CH4), refrigerant gasses (HFCs).

The action of a company choosing not to share its environmental, social, and governance (ESG) information with the public, including stakeholders and investors. This may be done to avoid accusations of greenwashing, manage concerns from investors, keep competitive secrets, or because their ESG practices are not strong or are uncertain due to changing regulations. By not sharing this information, the company limits transparency and makes it harder for others to evaluate how sustainable and responsible it really is.

A phenomenon where a company makes misleading or false claims to convince consumers that its products are more environmentally friendly or have a greater positive environmental impact than they truly do. This is often viewed as a critique of Environmental, Social, and Governance (ESG) practices because it undermines the credibility and effectiveness of ESG efforts.

An inclusive exercise where companies engage with stakeholders to identify the most significant ESG factors relevant to them. This process recognizes all key stakeholders to the company, such as investors, customers, employees, communities, ESG rating agencies, regulatory bodies, among others. Companies then compile material topics relevant to each stakeholder group and prioritize them based on their potential impact on the company's long-term performance and reputation.

Net Zero is a goal for reducing global greenhouse gas emissions to the point where the amount of emissions produced is balanced by the amount removed from the atmosphere. Net Zero goals are adopted by individual companies, cities, and countries to align their operations with climate science. Achieving Net Zero involves reducing emissions as much as possible and using carbon removal technologies or offsetting strategies to balance any remaining emissions.

A voluntary initiative that provides companies with a roadmap for creating a reasonable and actionable decarbonization plan grounded in climate science. The SBTi ensures that targets set by companies are in line with the latest climate science necessary to meet the goals of the Paris Agreement, promoting credible and ambitious climate action.

Greenhouse gasses that are directly emitted from the company's operational facilities and on-site vehicles. This can be the result of fossil fuel combustion (ie. burning coal for electricity, or gasoline from cars and trucks) or the release of refrigerants from industrial facilities. Data sources used for calculating scope 1 emissions can range from meter readings and invoices (most accurate), to company-wide financial data (least accurate).

Emissions resulting from energy that was purchased by an organization from external sources (primarily electricity and steam). Like scope 1 emissions, scope 2 emission data sources range from meter readings and invoices (most accurate), to company-wide financial data (least accurate). Scope 2 emission calculations require additional data on the electricity mix of a regional or national power grid in a given year.

Indirect emissions involved in producing a product, including upstream and downstream emissions. Upstream emissions relate to those activities that support the production of your product before manufacturing (ie. production and transportation of raw materials, business travel, capital goods, etc.) and Downstream emissions support the distribution and end-of-life of your product (processing of sold products, waste disposal, use of product, etc.) Scope 3 emissions are often the hardest to collect and typically account for the majority of emissions stemming from a product's production (for non-vertically integrated companies.

A framework that provides industry-specific standards to guide companies in reporting their ESG metrics. SASB standards highlight the most material ESG issues relevant to different industries, providing companies with specific guidelines to focus on in their reporting and decarbonization efforts.

A variety of financial instruments that take ESG factors into account when determining more attractive loan conditions or new investments. A sustainability-linked loan (or ESG-linked loan) is one example of this, where the terms of the loan are linked to the borrower's score on ESG indicators, including carbon reduction targets. Both the terms and indicators are tailored to the specific industry of the borrower.

The NFRD is an obligatory reporting framework enacted by the European Parliament that applies to certain companies with operations taking place in the European Union. The NFRD was enacted in 2016 and replaced in 2024 by the Corporate Sustainability Reporting Directive (CSRD).

The verification and validation of your sustainability report by an independent and qualified external auditor. The review process can be conducted to examine your data, methodologies, and disclosures against established standards, frameworks, or principles (e.g. the Carbon Disclosure Project (CDP), Corporate Sustainability Reporting Directive (CSRD), and many more). There are two different levels of assurance that can be received, limited (lower cost but less rigorous) and reasonable (more thorough and provides a higher level of confidence in the ESG data).