ESG glossary
64 ESG and sustainability reporting terms in plain English, from CSRD and double materiality to Scope 3 and net zero.
A
- Assurance
- Independent checking of reported sustainability data by a third party, to give readers more confidence in it.
- Audit trail
- A record of where each reported number came from, who entered or changed it, and what evidence supports it.
B
- Baseline year
- The reference year against which a company measures its emissions reductions and targets.
- BRSR (Business Responsibility and Sustainability Report)
- India’s mandatory ESG report for the top 1,000 listed companies, set by SEBI.
C
- Carbon credit
- A tradable certificate representing one tonne of carbon dioxide equivalent removed or avoided.
- Carbon footprint
- The total greenhouse gas emissions caused by a company, product, event or person, usually in tonnes of CO2e.
- Carbon intensity
- Emissions divided by a business measure such as revenue, units produced or employees.
- Carbon neutral
- Balancing the emissions you cause with an equal amount of removals or offsets.
- Carbon offset
- A reduction or removal of emissions elsewhere that is used to balance emissions you produce.
- CBAM (Carbon Border Adjustment Mechanism)
- An EU system that puts a carbon price on certain imports so they face the same carbon cost as goods made in the EU.
- CDP
- A non-profit that runs the global environmental disclosure system, scoring companies from A to D- on climate, water and forests.
- Climate scenario analysis
- Testing how a business would perform under different future climate paths, such as 1.5°C and higher-warming scenarios.
- CO2e (carbon dioxide equivalent)
- A unit that converts all greenhouse gases into the amount of carbon dioxide that would warm the planet by the same amount.
- CSDDD (Corporate Sustainability Due Diligence Directive)
- An EU law requiring very large companies to find and address human rights and environmental harm in their operations and supply chains.
- CSRD (Corporate Sustainability Reporting Directive)
- The EU law that requires in-scope companies to publish a sustainability statement using the ESRS, with assurance.
D
- Data owner
- The person responsible for supplying and signing off a piece of sustainability data, such as energy use or headcount.
- Decarbonisation
- Reducing greenhouse gas emissions, usually towards a target such as net zero.
- DNSH (Do No Significant Harm)
- A test in the EU Taxonomy that an activity must pass to count as sustainable: it must not significantly harm the other environmental objectives.
- Double materiality
- Assessing a sustainability topic from two sides: how it affects the company (financial materiality) and how the company affects people and the environment (impact materiality).
E
- Embedded emissions
- The greenhouse gases released while making a product, up to the point it leaves the factory.
- Emission factor
- A number that converts an activity, such as a kilowatt-hour or a litre of fuel, into greenhouse gas emissions.
- ESEF (European Single Electronic Format)
- The EU’s digital format for annual reports: XHTML files tagged with inline XBRL.
- ESG rating
- A score from a rating agency that assesses how well a company manages environmental, social and governance risks.
- ESG report
- A company’s published account of its environmental, social and governance performance.
- ESRS (European Sustainability Reporting Standards)
- The detailed EU standards that companies use to report under the CSRD.
- EU Taxonomy
- The EU’s classification of which economic activities count as environmentally sustainable.
F
- Financial materiality
- A sustainability issue is financially material if it could affect the company’s cash flows, performance or value.
G
- GHG inventory
- A list of a company’s greenhouse gas emissions sources and the amount of emissions from each.
- GHG Protocol (Greenhouse Gas Protocol)
- The most widely used set of standards for measuring greenhouse gas emissions.
- Global warming potential (GWP)
- A measure of how much heat a greenhouse gas traps compared with carbon dioxide, over a set period, usually 100 years.
- Green bond
- A bond whose money is used only for projects with environmental benefits.
- Greenwashing
- Making environmental claims that are misleading, unproven or exaggerated.
- GRI (Global Reporting Initiative)
- An independent standard-setter whose standards are the most widely used for reporting a company’s impacts.
I
- Impact materiality
- A sustainability issue is impact-material if the company has a significant effect on people or the environment through it.
- Internal carbon price
- A price per tonne of CO2e that a company sets for itself to guide investment and planning decisions.
- ISSB (International Sustainability Standards Board)
- The standard-setter that issues IFRS S1 and S2, a global baseline for sustainability disclosure.
- iXBRL (inline XBRL)
- A way of putting machine-readable tags inside a human-readable document such as an annual report.
L
- Limited assurance
- A lower level of independent checking that gives moderate confidence that reported information is not materially wrong.
- Location-based method
- A way to calculate Scope 2 emissions using the average emissions of the local electricity grid.
M
- Market-based method
- A way to calculate Scope 2 emissions using the electricity you chose to buy, such as renewable contracts and certificates.
- Materiality assessment
- A structured process for deciding which sustainability topics matter most and so should be reported and managed.
N
- Net zero
- Cutting greenhouse gas emissions as far as possible and balancing the small remainder with permanent removals.
P
- PAI (Principal Adverse Impacts)
- Indicators of the main negative effects of investments on sustainability factors, reported by financial firms under SFDR.
- Physical climate risk
- The risk of damage from climate hazards such as floods, heat, storms and drought.
R
- Reasonable assurance
- A higher level of independent checking, closer to a financial audit, that gives a high level of confidence.
- Renewable energy certificate (REC)
- A certificate showing that one megawatt-hour of electricity was produced from renewable sources.
S
- SBTi (Science Based Targets initiative)
- An organisation that checks and approves company emissions targets against what climate science says is needed.
- Science-based targets
- Emissions reduction targets that match what scientists say is needed to limit warming, in line with the Paris Agreement.
- Scope 1 emissions
- Direct greenhouse gas emissions from sources a company owns or controls, such as boilers and company vehicles.
- Scope 2 emissions
- Indirect emissions from the electricity, steam, heat or cooling a company buys.
- Scope 3 emissions
- All other indirect emissions in a company’s value chain, from purchased goods and travel to the use of its products.
- SFDR (Sustainable Finance Disclosure Regulation)
- An EU regulation that sets how financial firms disclose sustainability risks and the sustainability claims of their funds.
- Supply chain due diligence
- The process of finding, preventing and fixing human rights and environmental problems in a company’s supply chain.
- Sustainability-linked loan
- A loan whose interest rate depends on the borrower meeting set sustainability targets.
- Sustainability statement
- The part of the annual report where a company reports under the CSRD and ESRS.
T
- Taxonomy alignment
- An activity is aligned with the EU Taxonomy when it makes a substantial contribution to an environmental objective, does no significant harm to the others and meets minimum social safeguards.
- Taxonomy eligibility
- Whether an economic activity is described in the EU Taxonomy, whether or not it meets the technical criteria.
- TCFD (Task Force on Climate-related Financial Disclosures)
- A framework of 11 recommended climate disclosures in four areas: governance, strategy, risk management, and metrics and targets.
- TNFD (Taskforce on Nature-related Financial Disclosures)
- A framework for reporting nature-related risks and opportunities, such as dependence on water, soil and biodiversity.
- Transition plan
- A company’s plan for how it will cut emissions and adapt its business to meet climate targets.
- Transition risk
- The risk that moving to a low-carbon economy hurts a business through new laws, carbon prices, technology or changes in customer demand.
V
- Value chain
- Everything involved in making and delivering a company’s products, from suppliers to customers and the use and disposal of products.
- VSME (Voluntary SME standard)
- A voluntary EU reporting standard for small and medium-sized companies, developed by EFRAG.
X
- XBRL
- A global standard for tagging business and financial information so computers can read it.
Definitions reviewed 14 October 2026. General information, not legal advice. Dates and thresholds are on each framework page.