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Glossary of Terms relating to ESG and Sustainability

Glossary of Terms relating to ESG and Sustainability;

Biodiversity: The variety of life forms, including species, ecosystems, and genetic diversity, in a given area.

Carbon Footprint: The total amount of greenhouse gases, primarily carbon dioxide, emitted directly or indirectly by an individual, organization, event, or product.

Carbon Neutrality: Balancing carbon emissions with an equivalent amount of carbon removal or offsetting, resulting in a net-zero carbon footprint.

Carbon Offset: A reduction in greenhouse gas emissions to compensate for emissions produced elsewhere, often through investments in renewable energy or reforestation.

Circular Economy: An economic model that aims to minimize waste and make the most of resources by promoting recycling, reusing, and reducing consumption.

CSR (Corporate Social Responsibility): A company’s commitment to operate ethically, contribute to economic development, and improve the quality of life of its workforce and local community.

Diversity and Inclusion: Aims to create a workplace or community that respects and values individuals regardless of differences, including race, gender, age, and more.

Ecological Footprint: A measure of human demand on the Earth’s ecosystems, comparing human consumption of natural resources to the planet’s capacity to regenerate them.

Emissions Trading: A market-based approach to controlling pollution by giving companies a financial incentive to reduce their greenhouse gas emissions.

ESG (Environmental, Social, Governance): A framework used to assess a company’s performance and impact in the areas of environmental sustainability, social responsibility, and corporate governance.

ESG Integration: The inclusion of ESG factors in investment decision-making processes to better manage risks and identify opportunities.

ESG Ratings: Scores or rankings assigned to companies based on their performance in the areas of environmental, social, and governance practices.

Ethical Sourcing: The practice of ensuring that products are produced and sourced in a way that meets certain ethical and environmental standards.

Fair Trade: A trading partnership that seeks greater equity in international trade by ensuring fair wages and working conditions for producers in developing countries.

Greenwashing: Misleading or deceptive practices by companies that claim to be environmentally friendly but do not take meaningful steps to improve sustainability.

Impact Investing: Investments made with the intention to generate positive, measurable social or environmental impact alongside financial returns.

Life Cycle Assessment: A technique used to evaluate the environmental impacts of a product or service throughout its entire life cycle, from raw material extraction to disposal.

Materiality Assessment: A process used to identify and prioritize the most relevant ESG issues for a company based on their potential impact on business and stakeholders.

Paris Agreement: The Paris Agreement is a legally binding international treaty on climate change adopted by 196 Parties at the UN Climate Change Conference (COP21) in Paris, France, on 12 December 2015. It entered into force on 4 November 2016.

Its overarching goal is to hold “the increase in the global average temperature to well below 2°C above pre-industrial levels” and pursue efforts “to limit the temperature increase to 1.5°C above pre-industrial levels.” This is because the UN’s Intergovernmental Panel on Climate Change indicates that crossing the 1.5°C threshold risks unleashing far more severe climate change impacts, including more frequent and severe droughts, heatwaves and rainfall.

In order to limit global warming to 1.5°C, greenhouse gas emissions must peak before 2025 at the latest and decline 43% by 2030.

Renewable Energy: Energy derived from sources that are naturally replenished, such as solar, wind, hydro, and geothermal power.

Organic Farming: Agricultural practices that avoid the use of synthetic pesticides and fertilizers, focusing on sustainable soil management and biodiversity.

Paris Agreement: The Paris Agreement is a legally binding international treaty on climate change. It was adopted by 196 Parties at the UN Climate Change Conference (COP21) in Paris, France, on 12 December 2015. It entered into force on 4 November 2016.

Its goal is to keep global warming to no more than 1.5°C.  

Resilience: The ability of a system or community to adapt and recover from shocks or disturbances, such as natural disasters or economic changes.

Scope 1, Scope 2, and Scope 3 Emissions: These are categories used to classify greenhouse gas emissions based on their sources and impacts. These categories are defined by the Greenhouse Gas Protocol, a widely used accounting tool for measuring and managing greenhouse gas emissions.

Scope 1 Emissions: These are direct emissions from sources that are directly owned or controlled by the reporting entity. Examples include emissions from on-site combustion of fossil fuels in vehicles and equipment, as well as emissions from industrial processes.

Scope 2 Emissions: These are indirect emissions associated with the consumption of purchased energy. They occur when an organization uses electricity, heat, or steam produced off-site. Scope 2 emissions are often easier to measure and manage since they are tied to energy consumption.

Scope 3 Emissions: These are a broader category of indirect emissions that result from activities related to the reporting entity but occur from sources not owned or controlled by the organization. They can be the most challenging to track and manage due to their complexity and the involvement of external parties.

In essence, the scopes help organizations take a comprehensive approach to understanding and addressing their greenhouse gas emissions. While Scope 1 and Scope 2 emissions are more direct and easier to manage, Scope 3 emissions provide a holistic view of an organization’s entire carbon footprint, considering impacts across its entire value chain.

SRI (Socially Responsible Investing): Investment strategies that consider both financial return and positive social or environmental impact.

Sustainability: The practice of meeting present needs without compromising the ability of future generations to meet their own needs, often applied to environmental and social contexts.

Sustainable Development Goals (SDGs): 17 global goals set by the United Nations to address various social, economic, and environmental challenges by 2030.

Triple Bottom Line: Evaluating a company’s performance based on three dimensions: social, environmental, and financial.

Upcycling: The process of transforming waste materials into products of higher value or quality.

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