If you work in sustainability, you probably often hear, “Nice, you are doing something for the environment!” or “so you are taking care of recycling in your company?”. The term “sustainability” is often associated with environmental topics although it covers many more areas. And even though it is finally not a niche topic anymore, there are many frameworks and acronyms behind it, that you might have never heard about.
As a growing number of companies is moving towards a sustainable path to adopt the increasing demand from customers, employees and investors, or simply to refine the purpose of their company, sustainability managers are hired externally as well as internally. No matter if you are new to the topic and want to introduce it within your company or you are an expert in the field of sustainability and you aim to make your colleagues and management to understand your language: this guide will help you shed light on the different terms, standards and abbreviations connected to the topic.
Let’s start with the basics: Sustainability is not just about the environment. Even though it derives from forestry, it means meeting the needs of the present without compromising the ability of future generations to meet their needs. In business it is often integrated applying the concept of the triple-bottom-line – a phrase introduced by John Elkington in 1994. It describes the financial, social and environmental ‘bottom lines’ of companies. In principle it is designed for companies to value their social and environmental profits and losses, as well as the financial ones: Companies that define their purpose beyond making financial profits, but also profiting society and the planet. This leads us to the first concept.
Ranging from voluntary activities to a comprehensive sustainability strategy, corporate social responsibility includes the measures introduced by a company to take responsibility for society in general. There is no official standard or requirement connected to the term, it is rather a business concept. However, CSR efforts often describe rather add-on activities next to the core business, while an integrated sustainability strategy drives the core business values and activities and is therefore more holistic.
ESG is the abbreviation for environmental, social, and governance. It provides criteria, especially for investors, to help find companies with values that match their own and to include not only the economic performance but also environmental and social performance into the investment decision. Environmental criteria may include the energy use of a company, the amount of waste and pollution, natural resource conservation, and their carbon emissions. Social criteria focus on the working conditions, for example, equal opportunities, health and safety at work. Criteria for governance can include business ethics, compliance, independence of the Supervisory Board, salaries, and shareholder structure.
The term is not connected to a specific standard. It rather helps organisations to cluster their impact and activities into the three relevant areas. Not a single company will pass every test in every category, so the investors need to decide what their priority is. ESG investing is sometimes referred to as sustainable investing, responsible investing, impact investing, or socially responsible investing.
To differentiate between the two terms: While CSR (corporate social responsibility) is a businesses self-regulated way of contributing to societal goals, ESG (environmental, social and governance), on the other hand measures a company’s activities to assess its precise actions.
There are enough reasons for every company – SMEs and corporates – to engage in sustainability activities and talk about them. However, for corporates from 500 employees upwards, the EU has introduced a Directive to report on so-called “public-interest-entities”, which include ESG criteria and are encouraged to align the reporting with recognized standards. There are a few organisations that provide standards and support with the structure and scope of your CSR report. Some smaller companies, who are not obliged to report by the EU, but have a truly purpose-driven mindset voluntarily publish a so-called impact report.
Global Reporting Initiative – GRI
One of the providers of CSR reporting standards is the Global Reporting Initiative. Founded in 1997, the GRI provides the most comprehensive and transparent standardization for CSR activities. The standard helps companies to report about all their impact-driven indicators such as diversity, human-rights, pollution and carbon emissions. The latter can be measured through Planetly’s services, which are aligned with the GHG Protocol – the international standard for carbon calculations, which is explained further below.
UN Global Compact – COP
“Transparency builds trust” is the slogan by the UN Global Compact – A United Nations initiative for companies on sustainable business activities. Their reporting standard “Communication of Progress (COP)”, not to be confused with the annual climate conference COP (Conference of the parties), guides and supports companies to report on their sustainability progress towards external stakeholders.
Deutscher Nachhaltigkeitskodex – DNK
German companies also have access to an additional cross-sector standard for reporting corporate activities in the field of sustainability: The “Deutsche Nachhaltigkeitskodex (DNK)” provides a reporting framework for all companies, regardless of their size and legal form. In order to meet the requirements of the DNK, companies must report on 20 criteria, each with up to two performance indicators relating to environmental and social aspects and corporate governance. The performance indicators are selected from the Global Reporting Initiative (GRI) and European Federation of Financial Analysts Societies (EFFAS).
CDP (formerly the Carbon Disclosure Project) is a UK-based non-profit organization that discloses the environmental footprint for investors, companies, cities or states and therefore focuses on climate specific reporting. The organization collects the environmental performance on climate change, water treatment and deforestation of their members through a standardized process on a yearly basis. The information can be transferred into e.g. the GRI report or reports based on ESG criteria.
Looking through the reporting standard landscape is one thing, in addition to that, there are many organisations providing tools and standards for measurement and communication of sustainability KPIs. At Planetly we have developed a technical software for carbon analysis that is in line with GHG Protocol.
Greenhouse Gas Protocol – GHG Protocol
The GHG-Protocol is another global standardized framework that provides detailed guidelines on how to measure GHG emissions from private and public sector operations, value chains, and mitigation actions. The framework divides emissions in three scopes ranging from on-site emissions of a production site to detailed measurements of emissions occurring along the value chain of a company.
Science Based Target Initiative – SBT
Knowing an organisation’s footprint and reporting the outcome is not enough to tackle the climate crises, therefore most companies have set reduction targets and partly align them with the science-based-targets. The term differs from regular corporate targets because SBTs are based on scientific calculations and findings and are designed to achieve the target of either 1.5°C or a maximum of 2°C warming. The limit is set by climate scientists and the UNFCCC (United Nations Framework Convention on Climate Change) to avoid significant and potentially catastrophic changes to the earth’s ecosystem.
Sustainable Development Goals – SDGs
Lastly, zooming back to the overall sustainable development vision, you might regulary stumble over the SDGs. The sustainable development goals, also global goals, designed by the United Nations, are common targets defined and signed by all member states in 2015. The 17 SDGs aim to combat various global challenges, including the goal of ending poverty, protecting nature and ensuring equal rights for all. The UN strongly encourages organizations to work with the goals in streamlining their sustainability activities and communicate them through the goals.