The ESG Jargon Buster

Do you know your DMAs from your LCAs? Struggling to remember the difference between the ISBB and the IPCC?

The ESG Jargon Buster is here to provide a quick and easy guide to some of the more confusing acronyms and phrases when it comes to sustainability reporting. Bookmark this page to refer back to, next time you can't figure out if you should be calculating GHGs or TPTs.

CO2e

AKA: Carbon dioxide equivalents

Definition: Carbon dioxide equivalents are a measure of the effect of different greenhouse gases on the climate. By converting different emissions to the equivalent amount of carbon dioxide, their impacts can be compared - simplifying the process of carbon accounting.

Why are they important? When quantifying a carbon footprint, it's common to show the total amount of emissions as CO2e to reflect that not only carbon dioxide is being emitted. Another use of CO2e is carbon credits, which are issued to quantify the impact of climate projects.

CSRD

AKA: Corporate Sustainability Reporting Directive

Definition: The CSRD is an EU regulation that mandates extensive sustainability reporting requirements, aiming to improve transparency on environmental, social, and governance (ESG) issues.

Why is it important? While the CSRD is an EU regulation, it will apply to almost 50,000 companies globally, including non-EU companies which have subsidiaries within the EU or are listed on EU regulated markets.

DMA

AKA: Double Materiality Assessment

Definition: Double materiality is a concept where companies must evaluate both how their actions impact people and the planet, as well as how sustainability issues can influence their financial well-being. Essentially, it involves considering the broader picture from two different perspectives.

Why is it important? Carrying out a double materiality assessment is the first step to comply with CSRD, as it enables in-scope companies to identify which disclosure requirements listed in the ESRS are relevant to them. The double materiality assessment ensures that the company's sustainability reports focus on the topics that are truly relevant for them.

ESG

AKA: Environmental, Social and Governance

Definition: ESG is all about the standards for how a company treats the planet and its people. Environmental criteria look at how well a company takes care of the environment. Social criteria focus on how a company deals with its employees, suppliers, customers, and the communities it works in. Governance covers the rules, best practices, and processes that guide how a company is run and controlled.

Why is it important? Investors now understand that environmental, social, and governance criteria go beyond ethical concerns. With a robust ESG strategy, companies can avoid practices that involve risk.

ESRS

AKA: European Sustainability Reporting Standards

Definition: The rules and requirements for companies to report on sustainability-related impacts, opportunities and risks under the CSRD. They serve as the foundation for CSRD compliance.

GHG

AKA: Greenhouse Gas/es

Definition: Greenhouse gases are the gases in the atmosphere that raise the surface temperature of planets such as the Earth. What distinguishes them from other gases is that they absorb the wavelengths of radiation that a planet emits, resulting in the greenhouse effect.

See also: CO2e

Greenwashing

Definition: Greenwashing involves making an unsubstantiated claim to deceive consumers into believing that a company’s products are environmentally friendly or have a greater positive environmental impact than they actually do.

Why is it important? The FCA have launched new regulations to combat greenwashing in the financial services sector - see UK SDR.

IFRS SDS

AKA: International Financial Reporting Standards Sustainability Disclosure Standards

Definition: IFRS S1 requires an entity to disclose information about all sustainability-related risks and opportunities that could reasonably be expected to affect the entity’s cash flows, its access to finance or cost of capital over the short, medium or long term.

IFRS S2 requires an entity to disclose information about climate-related risks and opportunities that could reasonably be expected to affect the entity’s cash flows, its access to finance or cost of capital over the short, medium or long term.

Why is it important? Following the publication of the inaugural ISSB Standards—IFRS S1 and IFRS S2—the IFRS Foundation took over the monitoring of the progress on companies’ climate-related disclosures from the TCFD. Many countries around the world (including the UK) are adopting the IFRS SDS framework to form their own mandatory disclosure standards. The UK-endorsed version of the framework is due to be published in Q1 2025.

IPCC

AKA: Intergovernmental Panel on Climate Change

Definition: An intergovernmental body of the United Nations, its job is to advance scientific knowledge about climate change caused by human activities.

ISSB

AKA: International Sustainability Standards Board

Definition: The ISSB is responsible for developing a global baseline for sustainability-related financial disclosures. The ISSB has international support and is backed by G7, G20 and Financial Stability Board (FSB) and International Organization of Securities Commissions (IOSCO) to name just a few.

Why is it important: The ISSB is working to support effective implementation of IFRS S1 and IFRS S2, with the IFRS Foundation taking over responsibility for these standards from the TCFD.

LCAs

AKA: Life Cycle Assessments

Definition: LCAs evaluate and measure the environmental impacts associated with products, services, processes, or activities, from the extraction of raw materials to the end of the lifecycle.

Why is it important: Life Cycle Assessment (LCA) is a key part of the CSRD and other sustainability reporting. By including LCAs in their reporting, companies can supply the full picture of their environmental impact, and identify key areas where improvements can be made. This not only helps in meeting CSRD requirements but also in strategic decision-making for sustainable development.

Net Zero

Definition: Net zero is a target of completely negating the amount of greenhouse gases produced by human activity, to be achieved by reducing emissions and implementing methods of absorbing carbon dioxide from the atmosphere.

Why is it important: The UK government's net zero target refers to their commitment to ensure the UK reduces its greenhouse gas emissions by 100% from 1990 levels by 2050.

NFRD

AKA: Non-financial Reporting Directive

Definition: Adopted in 2014 by the EU, the NFRD requires certain companies to provide non-financial disclosure documents along with their annual reports, sometimes known as sustainability reports.

Scope 1, 2, and 3 emissions

AKA: Carbon emission data

Definition: Scope 1 emissions: Covers the Greenhouse Gas (GHG) emissions that a company makes directly — for example, while running its boilers and vehicles.
Scope 2 emissions: The emissions it makes indirectly – like when the electricity or energy it buys for heating and cooling buildings, is being produced on its behalf.
Scope 3 emissions: All the emissions associated, not with the company itself, but that the organisation is indirectly responsible for, up and down its value chain. For example, from buying products from its suppliers, and from its products when customers use them. Emissions-wise, Scope 3 is nearly always the big one.

Why is it important: Most sustainability reporting standards require companies to provide Scope 1 & 2 emissions data, with new regulations such as CSRD additionally asking for Scope 3 data - which can be tricky to obtain.

SFDR

AKA: Sustainable Finance Disclosure Regulation

Definition: The Sustainable Finance Disclosure Regulation (SFDR) imposes mandatory ESG disclosure obligations for asset managers and other financial markets participants.

TCFD

AKA: Task Force on Climate-Related Financial Disclosures

Definition: The TCFD was set up to develop recommendations on the types of information that companies should disclose to support investors make informed decisions on climate-related risks and opportunities. In October 2023, the Financial Stability Board (FSB) asked the IFRS to take over the monitoring of the progress of climate-related risk reporting. The recommendations of the TCFD have also been incorporated into the ISSB standard which is due for global roll out in 2024.

Why is it important: While the TCFD has been disbanded, the acronym is still used in relation to the ISSB and IFRS SDS.

Transition plan

AKA: Climate transition plan

Definition: Climate transition plans aim to demonstrate to investors, suppliers, customers and other key stakeholders that an organisation is committed to achieving a 1.5-degree pathway transition, and that its business model will remain relevant (i.e. profitable) in a net-zero carbon economy.

Why is it important: Many of the new sustainability reporting regulations (including CSRD) require companies to provide a detailed transition plan.

UK SDR

AKA: UK Sustainability Disclosure Requirements

Definition: Born from the FCA's Sustainability Disclosure Requirements and Investment Labels Policy Statement, the framework outlines four product labels that can be applied to investment vehicles, along with and product- and entity-level disclosures. An additional key objective of the SDR regulation is to minimise greenwashing through its anti-greenwashing rule.

Why is it important: The regulation applies to issuers of bonds and shares listed on a UK regulated market and UK-based investment managers.

UK SRS

AKA: UK Sustainability Reporting Standards

Definition: Sometimes also referred to as the UK SDS (Sustainability Disclosure Standards), they are reporting standards that the UK government is set to adopt that are based upon IFRS S1 and IFRS S2. 

Why is it important: The UK government aims to make the UK-endorsed ISSB standards available in Q1 2025, and these standards will form part of a wider Sustainability Disclosure Reporting framework led by HM Treasury. 

UK TPT

AKA: UK Transition Plan Taskforce/Framework

Definition: The TPT was launched in April 2022 to establish the gold standard for transition plans. The TPT's Disclosure Framework helps organisations explain how they will meet climate targets and manage climate-related risks, and contribute to the economy-wide climate transition.

Why is it important: Several sustainability reporting regulations (including CSRD, and UK SRS) require companies to provide a credible and robust climate transition plan, as part of a annual reporting on forward business strategy.

Ready to get on the ball with your sustainability reporting strategy? Watch our 'Get ready for UK sustainability reporting' on-demand webinar to learn how to tackle calculating emissions, building a delivery team, and the latest reporting requirements.