Sustainability is a broad and complex, encompassing an array of industry terms and acronyms, which can make navigating the landscape particularly tricky.
We have compiled a list of the top 10 sustainability terms to help you understand the essential concepts underlying sustainability and the ways they apply to your specific context.
#Corporate social responsibility (CSR)
Corporate Social Responsibility (CSR) refers to a company’s commitment to having an ethical and sustainable operation, while considering its impact on society, the environment, and the economy.
Corporate social responsibility can include, implementing sustainable business practices, reducing the company’s carbon footprint, investing in community development initiatives, ensuring fair labour practices and human rights standards in the supply chain, and supporting social and environmental causes.
The goal of CSR is to create a shared value for all stakeholders, rather than just maximising profits. By acting responsibly and contributing to sustainable development, companies can enhance their reputation, strengthen their relationships with stakeholders, mitigate risks, and improve long-term financial performance.
CSR is often conflated with ESG (environmental, social, governance), that we’ll explain further on.
Commonly confused with the entry below (carbon neutral), net zero refers to the balance between the amount of greenhouse gas emissions produced, and the amount removed from the atmosphere.
To achieve net zero, an organisation or country must reduce its emissions as much as possible through strategies such as increasing energy efficiency, transitioning to renewable energy sources, and improving transportation systems. Any remaining emissions can be offset through activities that remove carbon dioxide from the atmosphere, such as reforestation (including protection against deforestation) or carbon capture and storage.
The 2015 Paris Agreement emphasises the urgency of achieving net zero emissions by stipulating an overarching goal to restrict the rise in the average global temperature to well below 2 °C above pre-industrial levels, with a strong preference to limit the increase to 1.5 °C in order to mitigate the adverse effects of climate change.
Carbon neutral is when the net carbon emissions of an entire entity are at zero. This means the entity has completely balanced out its carbon output by reducing its emissions as much as possible and then offsetting any remaining emissions through investments in carbon reduction or removal projects. However, carbon neutrality typically only accounts for carbon dioxide emissions and may not include other greenhouse gases like methane, nitrous oxide, and fluorinated gases.
The main differences between carbon neutral and net zero are in the scope of emissions being accounted for and the scale of the reduction. Carbon neutrality focuses on balancing carbon emissions across scope 1 and 2, while net zero focuses on balancing all greenhouse gas emissions across the entire value chain (scope 1, 2, and 3).
Additionally, net zero targets the holistic businesses value chain, requiring a much larger scale of reduction, whereas carbon neutral can cover individual business functions, or even specific products and services.
Greenwashing is a marketing tactic deployed by companies to make their products or services appear more environmentally friendly than they actually are. This often involves misleading or exaggerated claims about a product’s environmental benefits or disguising its negative environmental impact.
Companies can unknowingly fall prey to Greenwashing accusations by running poorly planned marketing campaigns, and should instead thoroughly consider all the details for accuracy. To avoid reputational damage from greenwashing accusations, see our top 5 ways to avoid greenwashing.
Greenhushing is the product of the rise of greenwashing. Where greenwashing has companies promoting false claims about the sustainability of their products, greenhushing has companies remaining quiet about their environmental agenda, choosing to sit quietly instead of highlighting their impactful initiatives.
The term has grown in popularity due to companies fear of the reputational damage that can come with accusations of greenwashing (even if unintentionally).
Some companies also greenhush because they feel that only a minority of customers are attracted to businesses because of their sustainability practices (although the data suggests the opposite is true). Others feel that customers may even judge them to be of lower quality if they place an emphasis on sustainability, assuming the focus on overall quality will be degraded.
The circular economy is a model of production and consumption focused on reducing waste and pollution by introducing reusability into the core of a product’s lifecycle.
The stark opposite of a linear economy (also known as a ‘take → make → waste’ economy), in a circular economy resources are kept in use for as long as possible, and waste is minimised through strategies such as reuse, repair, and recycling.
The principles of a circular economy can be applied to many industries and sectors, from manufacturing to agriculture to energy production. By transitioning to a circular economy, businesses, and societies can reduce their environmental impact, conserve resources, and create economic opportunities through the development of new sustainable products and services.
Carbon accounting is the process of measuring and tracking an organisation’s greenhouse gas emissions (GHG). It involves quantifying the emissions of carbon dioxide and other greenhouse gases that are produced as a result of businesses activities, including energy use, transportation, and production processes.
Carbon accounting is an important tool for organisations that want to understand and manage their impact on the environment and climate change. By measuring their carbon footprint, businesses can identify areas where they can reduce emissions, set targets for reductions, and monitor progress towards those targets over time. Carbon accounting can also help organisations comply with emissions reporting regulations and demonstrate their commitment to environmental sustainability to stakeholders, including customers, investors, and employees.
There are several recognised carbon accounting standards and protocols, including the Greenhouse Gas Protocol, ISO 14064, and the Carbon Trust Standard. These standards provide guidelines and methodologies for organisations to measure, report, and verify their carbon emissions in a consistently transparent manner.
While carbon accounting is the process of measuring an organisation’s greenhouse gas output, emission scoping is the categorisation for which these tracked emissions are grouped into.
Emission scoping identifies and defines the scope or boundaries of an organisation’s greenhouse gas emissions, including the sources of emissions and the activities that contribute to them. It is an essential step in measuring an organisation’s carbon footprint and developing strategies to reduce emissions. Emission scoping typically involves assessing the direct and indirect emissions associated with an organisation’s operations, supply chain, and other relevant activities.
There are three emission scopes: Scope 1 covers direct emissions from an organisation’s owned or controlled sources, such as from combustion in owned boilers or vehicles. Scope 2 includes indirect emissions associated with purchased electricity, heat, or steam. Scope 3 encompasses all other indirect emissions that occur in an organisations value chain, such as emissions from the production of purchased materials or the transportation of goods.
ESG stands for Environmental, Social, and Governance. It is a criteria used to evaluate a company’s performance in its environmental impact, social responsibility, and corporate governance practices. ESG has become an increasingly important consideration for investors, as companies that perform well on ESG metrics are considered more sustainable and profitable over the long term.
The “E” in ESG refers to a company’s impact on the environment, including issues such as climate change, pollution, and resource depletion. The “S” refers to a company’s social impact, including issues such as labour practices, diversity and inclusion, and community engagement. The “G” refers to a company’s governance practices, including issues such as executive compensation, board composition, and shareholder rights.
Investors and other stakeholders use ESG data and analysis to make informed decisions about investing, lending, and partnering with companies. ESG criteria can also help companies identify areas for improvement and create more sustainable and responsible business practices.
#CSRD, SFDR, NFRD
CSRD, SFDR, and NFRD are all regulations and directives related to sustainability reporting and disclosure in the European Union.
- NFRD: The Non-Financial Reporting Directive (NFRD) is a directive that required an estimated 11,000 large companies operating in the EU to disclose non-financial information related to their environmental, social, and governance (ESG) performance. The directive was designed to help investors, consumers, and other stakeholders make informed decisions based on a company’s sustainability practices.
- CSRD: The Corporate Sustainability Reporting Directive is a new regulation that requires all large companies operating in the EU to report on their environmental, social, and governance (ESG) performance- including climate change impact, biodiversity, and human rights. The new directive supersedes the existing Non-Financial Reporting Directive (NFRD) and extends its coverage to a broader range of companies, encompassing approximately 49,000 entities.
- SFDR: The Sustainable Finance Disclosure Regulation is a regulation that requires financial market participants and advisers to disclose information on the sustainability of their investments. The SFDR aims to increase transparency and comparability of sustainable investments by requiring financial firms to disclose how they integrate ESG factors into their investment decision-making and how they report on the sustainability of their investment products.
Overall, these regulations and directives are aimed at increasing transparency and accountability in corporate sustainability reporting, promoting more sustainable business practices, and encouraging investment in sustainable businesses and projects.
To learn more, make sure to check out the ESG regulations to be aware of in 2023.
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