ESG Glossary: Essential Terms & Definitions

The total amount of greenhouse gases (including carbon dioxide and methane) generated by human actions, typically expressed in equivalent tons of carbon dioxide (CO2e). Organizations measure their carbon footprint across Scope 1, 2, and 3 emissions.

Direct greenhouse gas emissions from sources owned or controlled by an organization, such as emissions from company vehicles, on-site fuel combustion, and manufacturing processes.

Indirect greenhouse gas emissions from the generation of purchased electricity, steam, heating, and cooling consumed by an organization.

All other indirect greenhouse gas emissions in an organization's value chain, including business travel, employee commuting, purchased goods and services, waste disposal, and product use.

The most widely used international framework for sustainability reporting. GRI Standards enable organizations to report on their economic, environmental, and social impacts in a standardized, comparable format.

Industry-specific standards that identify financially material sustainability topics and metrics for 77 industries. SASB standards help companies disclose ESG information to investors.

Framework for companies to disclose climate-related financial risks and opportunities. TCFD recommendations cover governance, strategy, risk management, and metrics related to climate change.

Process of identifying and prioritizing the ESG topics that are most significant to an organization and its stakeholders. Determines which issues should be included in sustainability reporting.

Concept requiring companies to report on how sustainability issues affect their business (financial materiality) and how their business impacts society and the environment (impact materiality). Required under EU CSRD.

EU regulation requiring companies to report detailed information on sustainability matters. CSRD significantly expands the scope and detail of mandatory sustainability reporting in Europe.

Greenhouse gas emission reduction targets aligned with climate science and the Paris Agreement goal of limiting global warming to 1.5°C. Companies commit to targets validated by the Science Based Targets initiative.

Achieving a balance between greenhouse gas emissions produced and emissions removed from the atmosphere. Organizations reach net zero by reducing emissions as much as possible and offsetting remaining emissions.

Economic model focused on eliminating waste and maximizing resource use through reuse, repair, refurbishment, remanufacturing, and recycling. Contrasts with the traditional linear 'take-make-dispose' model.

Organizational practices that promote fair treatment and full participation of all people, particularly groups who have been underrepresented or subject to discrimination. Includes workforce diversity, pay equity, and inclusive culture.

Remuneration sufficient to afford a decent standard of living for workers and their families, including food, water, housing, education, healthcare, transportation, and savings. Goes beyond minimum wage requirements.

Process of involving individuals, groups, or organizations that affect or are affected by a company's activities. Includes employees, customers, suppliers, investors, communities, and regulators.

Measure of how many board directors are independent from company management and major shareholders. Independent directors provide objective oversight and reduce conflicts of interest.

Assessment of a company's environmental, social, and governance performance by specialized rating agencies like MSCI, Sustainalytics, or S&P Global. Used by investors to evaluate ESG risks and opportunities.

Practice of making misleading or unsubstantiated claims about environmental benefits of products, services, or corporate practices. Increasingly subject to regulatory scrutiny and enforcement.

Process of identifying, preventing, and mitigating adverse impacts in a company's supply chain, particularly regarding human rights, labor practices, and environmental issues. Increasingly required by law.

Variety of life on Earth at all levels, from genes to ecosystems. Companies assess and manage their impacts on biodiversity, including habitat destruction, pollution, and resource extraction.

Responsible use of water resources that is socially equitable, environmentally sustainable, and economically beneficial. Includes water efficiency, quality protection, and watershed management.

Framework ensuring that the shift to a low-carbon economy is fair and inclusive, supporting workers and communities dependent on fossil fuel industries through retraining, economic diversification, and social protection.

Investments made with the intention of generating positive, measurable social and environmental impact alongside financial returns. Differs from traditional investing by explicitly targeting beneficial outcomes.

Independent verification of sustainability reports and ESG data by third-party auditors. Provides credibility and confidence in reported information, similar to financial audit.