Key ESG Terms You Should Know
ESG can feel overwhelming, with countless terms, standards, and frameworks to navigate. This glossary cuts through the complexity, providing clear definitions to help you build confidence and clarity in your sustainability journey. Here’s your ultimate list of key ESG terms to know:
A
Absolute Zero Target
A climate objective aiming to fully eliminate greenhouse gas emissions without using any offset mechanisms. For example, a company achieving absolute zero would not rely on carbon offsetting at all.
B
B Corp
A certification by B Lab awarded to businesses meeting strong standards for environmental and social practices, accounting for their impact on employees, communities, and the environment.
Biodiversity
The range of different living species, including plants and animals, within a habitat or ecosystem, supporting natural balance and resilience. A key consideration in ESG reporting, especially in industries like agriculture, forestry, and infrastructure.
C
Carbon Footprint
The total amount of greenhouse gas emissions produced by the activities of a person, organization, or product.
Carbon Offset
A method for balancing emissions by funding projects that capture or reduce greenhouse gases elsewhere.
CDP
A nonprofit organization managing a disclosure system that helps organizations measure and report their environmental data to stakeholders.
Circular Economy
A system of production and consumption that reduces waste and extends the use of materials through reuse, repair, and recycling.
Clean Energy
Energy produced from renewable sources such as wind, solar, or hydro, with minimal climate impacts compared to fossil fuels.
Closed-Loop Supply Chain
A supply chain approach in which products and materials are reused, recycled, or remanufactured to minimize waste and reduce resource extraction.
CSDDD:
Corporate Sustainability Due Diligence Directive, an EU law requiring large companies to identify, prevent, and address human rights and environmental risks across their operations and supply chains.
CSR
Corporate Social Responsibility, a business’s voluntary integration of environmental and social considerations into its policies and operations.
CSRD
Corporate Sustainability Reporting Directive, an EU regulation requiring companies to report standardized and transparent information about their ESG activities.
D
Decarbonization
The process of reducing carbon emissions across industries by using cleaner energy sources and improving efficiency.
DEI
Diversity, Equity, and Inclusion, referring to fair opportunities and representation for all individuals in a workplace or organization.
Double Materiality
A principle that considers both how sustainability issues affect a company’s financial performance and how the company affects society and the environment.
Double Materiality Assessment
A process that helps organizations identify and prioritize ESG topics by considering both how sustainability issues affect financial performance (financial materiality) and how the organization impacts society and the environment (impact materiality).
E
EHS
Environmental Health and Safety, describing practices and systems that protect people and the environment in work environments.
Emissions
The release of greenhouse gases or pollutants into the atmosphere from sources such as transportation, energy use, or industry.
ESG
Environmental, Social, and Governance, a framework for evaluating how an organization manages its environmental impacts, social responsibilities, and governance practices.
ESRS
The European Sustainability Reporting Standards, which guide companies on how to disclose ESG information under CSRD.
EPR
Extended Producer Responsibility, a policy holding producers accountable for managing the environmental impacts of their products through their full life cycle.
F
Financial Risks
The potential financial effects on a business related to environmental, social, or governance challenges, including legal or market changes.
G
Greenhouse Gas Emissions
Gases that trap heat in the atmosphere, including carbon dioxide, methane, and nitrous oxide, contributing to climate change.
Green Supply Chain Management
Applying environmental considerations to supply chain activities to limit resource use and reduce emissions.
Greenwashing
Communicating misleading or exaggerated claims about the sustainability of products, services, or company practices.
GRI
Global Reporting Initiative, an international organization providing a reporting framework for companies to communicate ESG performance in a clear and comparable way.
I
Impact Assessment
An evaluation of the likely environmental and social consequences of a project, program, or policy.
Impact Investing
Investment strategies intended to produce measurable social and environmental benefits along with financial returns.
IRO
Impact, Risk, and Opportunity, a method to analyze how ESG factors might affect a business positively or negatively.
L
Life Cycle Assessment
An analysis of a product or service’s environmental impact throughout its entire life, from raw materials to disposal.
M
Materiality
The relevance of ESG information when evaluating performance or making decisions.
Materiality Assessment
A process to identify which ESG issues are most significant to a company and its stakeholders.
N
Net Zero
Achieving a balance between greenhouse gases released and those removed or captured, resulting in no net increase of emissions.
O
Offset
A way to compensate for emissions by investing in projects that remove or lower greenhouse gases elsewhere.
A European Commission proposal aimed at simplifying and streamlining EU sustainability regulations, including the Corporate Sustainability Reporting Directive (CSRD), the Corporate Sustainability Due Diligence Directive (CSDDD), and the Carbon Border Adjustment Mechanism (CBAM). The goal is to reduce the administrative burden on businesses, particularly small and medium-sized enterprises (SMEs), while maintaining environmental and social responsibility standards.
P
Paris Agreement
A legally binding global treaty to limit global temperature rise to below 2°C, with efforts to stay closer to 1.5°C, compared to pre-industrial levels.
PAS 2060
A standard for demonstrating and verifying carbon neutrality.
Product Responsibility
The obligation of companies to make sure their products are safe, ethically made, and minimize negative environmental or social impacts.
R
Raw Materials Usage
The extraction and consumption of natural resources for production, which may affect ecosystems and emissions.
Regulatory Compliance
Following applicable laws and regulations, supporting legal, ethical, and responsible business conduct.
Renewable Energy
Energy generated from natural sources that replenish over time, such as wind, sunlight, or water, reducing dependence on fossil fuels.
Responsible Sourcing
Choosing suppliers and materials based on their social and environmental performance to support ethical production.
S
Science Based Targets Initiative
A collaboration that supports companies in setting greenhouse gas reduction targets in line with climate science.
Scope 1 Emissions
Direct greenhouse gas emissions from sources owned or controlled by an organization.
Scope 2 Emissions
Indirect emissions from the generation of purchased electricity, heating, or cooling consumed by an organization.
Scope 3 Emissions
Greenhouse gas emissions that result from activities across an organization’s value chain, including suppliers, transport, and product disposal.
SDGs
Sustainable Development Goals, seventeen goals created by the United Nations to promote social, economic, and environmental progress globally by 2030.
Social Impact
The consequences, positive or negative, that an organization’s activities have on people and communities.
Stakeholder Engagement
A process where a company interacts with and listens to groups such as employees, customers, investors, and communities to address their priorities.
Supply Chain Management
The coordination of sourcing, production, and distribution to maintain fair, safe, and sustainable practices.
Supply Chain Transparency
Visibility into suppliers’ practices and conditions, helping to support responsible and ethical sourcing.
Sustainability
The ability to meet current needs without harming future generations’ capacity to meet theirs, maintaining ecological and social balance.
Sustainable Development
Development practices that support today’s society while protecting resources and opportunities for the future.
T
Transparency
Sharing honest and clear information about operations, governance, and results, promoting trust and accountability.
V
Value Chain
All steps involved in designing, producing, delivering, and supporting a product or service across its entire life cycle.
Still navigating the complexity of ESG terms and reporting requirements? The Terra ESG Platform helps organizations simplify and streamline ESG data collection, reporting, and compliance—from CSRD to Scope 3 emissions.
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