Sustainability buzzwords

Sustainability buzzwords

September 02, 2024

Are you getting tangled up in the ever-expanding list of sustainability terms?

Has your company announced a commitment to be carbon neutral or have net-zero emissions? Are your colleagues suddenly talking about your Scope 1, 2 and 3 emissions? Are you reading about the progress of other peer organisations and wondering about all of these sustainability buzzwords?

The concept of sustainability is so familiar that it hardly needs an introduction. However, every year there seems to be a new suite of sustainability terminology and buzz words. With so many acronyms and a long list of terms, not everyone is clear on them all.

To help you understand the terms and get a better grasp on what sustainability means for your business, I have drafted a glossary to explain some of the key words. This will help you become more familiar with some of the commonly used terms that you may need when attending meetings, both internal and external, to discuss your company's sustainability journey.

Corporate Sustainability Terms:

Corporate Sustainability

Corporate sustainability is an approach to conducting business that creates sustainable, long-term shareholder, employee, consumer, and societal value by pursuing responsible environmental, social, and economic (or governance) (ESG) strategies as opposed to focusing on short-term financial gains.

ESG

ESG means using Environmental, Social and Governance factors to evaluate companies and countries on how far advanced they are with sustainability. It is a term that originated in the financial sector, having evolved out of the concept of 'responsible investing'. Once enough data has been acquired on these three metrics, they can be integrated into the investment process when deciding what equities or bonds to buy.

CSRD

The Corporate Sustainability Reporting Directive (CSRD) is an European directive that requires large companies and listed companies to publish regular reports (e.g. annual report) on the social and environmental risks they face, and on how their activities impact people and the environment. The aim of this EU directive is to create a culture of transparency about the impact of companies on people and the environment globally. The public reporting of social and environmental information also ensures that investors and other stakeholders have access to the information they need to assess investment risks arising from climate change and other sustainability issues. The transposition into Irish legislation came into effect on 6 July 2024, entitled the European Union (Corporate Sustainability Reporting Directive) Regulations 2024. There is a phased timeline of compliance for companies within scope beginning with Public Interest Entities (PIEs) in the EU (over 500 employees & currently covered by the NFRD) publishing an annual report beginning from the fiscal year 2025 (on FY2024 data).

Scope 1, 2 and 3 emissions

Essentially, Scope 1 are those direct emissions that are owned or controlled by a company, whereas Scope 2 and 3 indirect emissions are a consequence of the activities of the company but occur from sources not owned or controlled by it.

• Scope 1 emissions

Scope 1 covers emissions from sources that an organisation owns or controls directly - for example from burning fuel in your fleet of vehicles (if they're not electrically-powered).

• Scope 2 emissions

Scope 2 are emissions that a company causes indirectly and come from where the energy it purchases and uses is produced. For example, the emissions caused when generating the electricity that you use in your buildings.

• Scope 3 emissions

Scope 3 encompasses emissions that are not produced by the company itself and are not the result of activities from assets owned or controlled by them, but by those that it's indirectly responsible for up and down its value chain. An example of this is when your company buys, uses and disposes of products from suppliers. Scope 3 emissions include all sources not within the scope 1 and 2 boundaries.

Double Materiality

The CSRD regulations use the concept of conducting a 'double materiality' assessment when examining issues and their impact, looking at the outward impact and the inward impact of an issue on your organisation. The outward impact examines how big of an impact does your organisation have on this issue (on people, the environment, the economy). The inward impact examines how big of an impact does this issue have on your business (on financial performance, on organisational resilience).

CS3D (often called C S Triple D)

The Corporate Sustainability Due Diligence Directive (CS3D) is a European directive that requires companies that are in-scope of the legislation to engage in a thorough due-diligence process encompassing identification, assessment, prevention and mitigation of negative impacts on human beings and the environment. To mitigate adverse impacts on human rights and the environment, a broad range of elements must be addressed, including child labour, forced labour, greenhouse gas emissions and deforestation. Importantly, companies are required to examine and document findings beyond their immediate operations, encompassing both up­stream and downstream supply chains. Consequently, companies that are out of scope may still be impacted where they are direct business partners of in-scope companies who may request due diligence information from them. The EU Directive entered into force on the 25th of July 2024 and Member States will have two years to implement the legislation in Irish law.

Decarbonisation

Decarbonisation refers to the process of reducing 'carbon intensity', lowering the amount of Greenhouse Gas (GHG) emissions produced by the burning of fossil fuels. Generally, this involves decreasing CO2 output per unit of electricity generated by switching to alternative low-carbon energy sources.

Carbon Neutral

Carbon Neutral means a product or company is removing the same amount of carbon dioxide (CO2) that it's emitting into the atmosphere. Companies can use carbon sinks, such as forests and oceans which naturally absorb and store carbon. When companies invest in carbon sinks, this is referred to as 'offsetting' where no more emissions are being put into the air than are taken out, maintaining a balanced carbon footprint.

Net-zero emissions

Similar to carbon neutral but different in its scale, net-zero refers to all Greenhouse Gases (GHGs) rather than just carbon dioxide (CO2). The term net-zero is defined as (for CO2 at least) the state at which global warming stops. A company that is working towards a net-zero emissions goal is abating its Greenhouse Gases as much as possible (rather than removing the same amount as they are emitting with carbon neutral targets). The 'net' in net-zero is important because it will be very difficult for any company to reduce all their GHG emissions to zero on the timescale needed, therefore a company commits to reduce as much as possible through efficiency, electrification, renewables, etc, and only 'offsets' the essential emissions that remain.

European Green Deal

The European Green Deal is a package of policy initiatives, which aims to set the EU on the path to a green transition, with the ultimate goal of reaching climate neutrality by 2050. It supports the aim to transform the EU into a fair and prosperous society with a modern and competitive economy. The package includes initiatives covering the climate, the environment, energy, transport, industry, agriculture and sustainable finance - all of which are strongly interlinked, underlining the need for a holistic and cross-sectoral approach in which all relevant policy areas contribute to the ultimate climate-related goal.

This article is the 2nd in our series helping to de mystify sustainability terminology, you can read the 1st article in our series Climate Change - Don't be bamboozled by buzzwords here.

Resources

Last summer we published our Climate Action toolkit. This resource can help your business develop a robust and enduring climate action strategy. Using our 5-step approach, will help you to calculate your carbon footprint, how to set targets and strategic implementation, and conclude with the measurement, monitoring and communication of your progress. The toolkit can be downloaded here - Climate Action: A toolkit for business along with our accompanying podcast - listen here.

Ibec training division, Ibec Academy run a suite of training courses on business operations and Environmental, Social & Governance (ESG). These range from a 1 day course helping you to understand the Foundations in Sustainability and ESG for business, a 4 day CPD Certificate right through to a training programme specifically designed for board members and for senior business professionals ESG Competent Boards for Senior Business Professionals. All of these public training courses can also be offered as customised training tailored to your company's needs.

Anne Murphy
Senior Executive
Ibec Networks

Public link

Please use the above public link if you want to share this noodl on another website.