Environmental responsibility and sustainability are more important to your customers than ever. Nearly 70% of consumers in the U.S. and Canada place importance on a brand’s environmental impact and sustainability, according to the National Retail Federation.
Making sustainability a top priority means knowing the language and terms of going green. Knowing key terms can help you navigate and lead conversations around the C-suite — as well as with investors, employees and other stakeholders.
Why do so many sustainability reports include ESG ratings? Do you know what the Sustainability Accounting Standards Board is? What does it mean to accuse a company of greenwashing? These are some of the questions you’ll be able to answer with our vocabulary list.
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Glossary of Terms
Alternative energy source — Any energy source outside of fossil fuels, like oil and gas. Wind and solar energy are common examples.
Biofuel — Transportation fuel derived from plant, algae or animal waste. It’s considered a renewable energy source and an alternative to fossil fuels. Ethanol and biodiesel are the most common biofuels.
Carbon offset — A reduction or removal of carbon in the atmosphere in order to compensate for emissions produced somewhere else. For example, when buying a flight, your airline may provide the option to pay an additional fee for a carbon offset. Money from the purchase is typically used to support forestry projects (planting more trees that can convert carbon dioxide into oxygen) or sustainable investing.
Carbon negative — Producing less than zero carbon emissions. It is achieved by offsetting carbon emissions through carbon capture, carbon sequestration or emission avoidance.
Carbon neutral — Producing net-zero carbon dioxide emissions. Companies achieve carbon neutrality by having a balance between carbon emissions and projects that offset pollutants.
Carbon footprint — Total amount of carbon emissions produced by a company or individual. A company’s carbon footprint is calculated by aggregating the amount of emissions from its operations over 12 months. This typically includes business travel, as well as fuel and energy consumption.
Carbon capture and storage — The process of capturing and storing carbon emissions so they do not enter the atmosphere and contribute to climate change. Carbon capture involves taking emissions from industrial processes (for example manufacturing steel), transporting pollutants from where they were produced and storing them underground. Carbon capture is one way companies can reduce their carbon footprint.
Carbon credit — A permit certified by a government or independent body representing the right to emit one tonne (2,240 pounds) of carbon dioxide. Companies buy, sell and trade carbon credits. Governments maintain registries and track the transfer of ownership of carbon credits. Carbon credit market was estimated to be valued at $1 billion in 2021.
Carbon trade — The buying and selling of carbon credits.
Climate change — The ongoing shift in temperature and weather patterns caused by the emission of greenhouse gasses by humans over two centuries. Consequences of climate change include rising sea levels, longer droughts, unusual weather patterns and more.
ESG — Stands for environmental, social and governance. These are non-financial standards investors use in their decisions. They are often used as a measure of how a company approaches sustainability and are included in sustainability reports.
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ESG rating — Ratings given by independent agencies and used by investors to assess a company’s long-term risks with regard to environmental, social and governance issues. ESG ratings are also used internally to benchmark progress toward sustainability goals. Some ratings agencies are MSCI, RobecoSAM, CDP Global Environmental Information Research Center, FTSE Russell.
EV — Shorthand for electric vehicles, which use an electric battery instead of an internal combustion engine. EVs do not rely on fossil fuels for power.
Greenwashing — Giving off the false impression that a company is taking sustainable actions or portraying products as more environmentally friendly than they actually are. Greenwashing is often a marketing effort that shows misleading claims about a brand or product’s environmental impact.
Greenhouse gas emissions — Gasses that trap heat in the atmosphere, causing climate change. Carbon dioxide is the primary greenhouse gas responsible for climate change. Other greenhouse gasses include methane, nitrous oxide and fluorinated gasses.
Kyoto Protocol — An international agreement adopted by industrialized nations in 1997 to reduce carbon emissions. Countries that adopted the Kyoto Protocol were assigned maximum carbon emission levels for set periods. If a country produced more emissions than its limit, it would receive a lower emissions limit for the following period.
Landfill — Locations where waste or disposal are stored. Landfills for garbage and solid waste are a major source of methane, a greenhouse gas that contributes to climate change.
Paris Agreement — An international agreement adopted in 2015 by countries to limit the expected increase in global temperature to 2 degrees Celsius. Under the agreement, each country must submit an updated climate action plan every five years. The plan must communicate how they plan to reduce greenhouse gas emissions and build resilience to rising global temperatures.
Renewable energy — A natural energy source that cannot be depleted. The sun and the wind are examples of renewable energy sources. Nonrenewable resources include fossil fuels.
Sustainability Accounting Standards Board (SASB) — A nonprofit organization that develops sustainability accounting standards for companies to use in their reporting and disclosures on sustainability or ESG.
Sustainability report — A report that communicates a company’s ESG and sustainability goals, as well as metrics related to those goals. The report includes the company’s progress related to carbon emission reduction, ESG ratings or sustainability initiatives.