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Sustainability Glossary

92 terms covering carbon accounting, climate reporting frameworks, emissions, and ESG.

A

AASB

The Australian Accounting Standards Board (AASB) is a government agency in Australia responsible for developing and maintaining financial reporting standards applicable to entities in both the private and public sectors of the Australian economy. This includes the development of accounting and external reporting standards and guidance related to sustainability-related financial information, which is aligned with principles, caters to external report users' needs, and can be subject to assurance and enforcement.

ACCC

The Australian Competition & Consumer Commission (ACCC) serves as Australia's national regulator overseeing competition, consumer protection, fair trade, and product safety.

Accreditation

Accreditation refers to the procedure through which an official acknowledgment is bestowed upon a certification body or organisation, affirming their competence and ability to carry out certification assessments that are both valid and dependable. Normally, accreditation is provided by an acknowledged accreditation entity that assesses the certification body's procedures, proficiency, and adherence to global standards.

ACCU

Australian Carbon Credit Units (ACCUs) are financial instruments awarded to eligible projects involving energy efficiency, renewable energy generation, and carbon sequestration. Each ACCU represents the avoidance or removal of one tonne of carbon dioxide equivalent (tCO2-e) GHG emissions. ACCUs are traded or sold on the national environmental commodity market through carbon market agents, allowing organisations to offset their carbon footprint or fulfil emissions reduction obligations.

Activity-based method

Activity data specifies the quantity of a particular product or material a company has purchased, enabling more precise emissions estimates than spend-based data. This method employs emission factors obtained from scientific studies.

Additionality

Additionality is a principle applied to carbon removal projects, signifying that a project is additional if it leads to emissions reductions that would not have occurred otherwise.

ASIC

The Australian Securities and Investments Commission (ASIC) serves as Australia's unified regulator for corporate affairs, financial markets, financial services, and consumer credit.

Assurance

Trust is of paramount importance in any industry. However, there are occasions when changes or questions arise, prompting managers, owners, and other stakeholders to verify the validity of an organization's business processes and adherence to governance standards. To obtain this information, they may request a review from a firm that offers assurance services. Assurance reporting summarises the results of this evaluation, determining whether the organisation has successfully met the assurance objective.

C

Cap and trade

Cap and trade is a market-based approach to lowering GHG emissions, where authorities allocate permits for a limited amount of emissions, enabling trading among companies to meet their emission limits.

Carbon accounting

Carbon accounting involves measuring the carbon dioxide equivalents (CO2e) emitted by an organisation.

Carbon credit

Carbon credits, also known as carbon allowances, function as permits for emissions. When a company acquires a carbon credit, typically from the government, it gains authorisation to emit one tonne of CO2. Carbon credits create a vertical flow of carbon revenue from companies to regulators, although companies with surplus credits can sell them to others.

Carbon dioxide (CO2) emissions

Emissions refer to the discharge of greenhouse gases or their precursors into the atmosphere within a defined region and timeframe. Carbon dioxide emissions, also known as CO2 emissions, arise from the combustion of fossil fuels and cement production. They encompass carbon dioxide released during the use of solid, liquid, and gas fuels, as well as gas flaring.

Carbon dioxide equivalent (CO₂e)

In the context of greenhouse gases, the carbon dioxide equivalent (CO2e) represents the mass of CO2 that would have the same warming effect as the mass of the specific gas. CO2e offers a standardised measure for assessing the climate impact of all greenhouse gases.

Carbon footprint

The total greenhouse gas emissions linked to a particular product or activity, encompassing both direct and indirect emissions.

Carbon neutral

A business achieves carbon neutrality when its primary operations do not result in a net increase in greenhouse gas (GHG) emissions. This implies that a company can attain carbon neutrality without addressing its scope 3 emissions, despite these emissions accounting for the bulk of emissions for most companies. To align with the objectives of the Paris Agreement, companies must surpass carbon neutrality and strive for net-zero emissions.

Carbon offsetting

Carbon offsetting entails aligning a company's carbon emissions with an equivalent removal of carbon from the atmosphere. In principle, this approach is sound. In fact, carbon removal is the essential concluding phase of a company's pursuit of net zero emissions. Nonetheless, in practice, the term "carbon offsetting" has become linked with subpar practices that often prove less effective than what companies expect when they engage in these activities. This situation can inadvertently result in "greenwashing," where companies only partially compensate for their carbon footprint.

Carbon reduction

Carbon reduction involves decreasing a company's GHG emissions, often achieved by transitioning to eco-friendly suppliers or clean energy sources.

Carbon Reduction Target

A carbon target signifies a company's commitment to reduce its GHG emissions by a specified amount before a particular year.

Carbon removal (sequestration)

Carbon removal refers to the process of extracting carbon from the atmosphere and securely storing it to mitigate climate change.

Carbon sink

Carbon storage, also known as a carbon sink, is where captured carbon, once removed from the atmosphere, is safely stored.

Carbon tax

A carbon tax levies charges on the carbon emissions associated with goods and services, incentivising emission reduction efforts and reducing demand for high-emission products.

CDP

CDP, initially founded as the 'Carbon Disclosure Project' in the year 2000, initiated its mission by requesting companies to divulge their climate-related effects. Over time, its purview has expanded to encompass a wider spectrum of environmental disclosures, including matters like deforestation and water security. Concurrently, CDP has extended its outreach to provide assistance to cities, states, and regions in their environmental initiatives.‍Learn more about CDP and how to report here.

CDSB

The Climate Disclosure Standards Board (CDSB) was an international consortium of entities dedicated to aligning the global corporate reporting model by equating natural and social capital with financial capital. The CDSB has now merged into the IFRS Foundation, integrating into the ISSB, with its resources remaining accessible through its legacy website.

Certification scheme

An environmental certification program involves an external evaluation of your company's practices in the context of environmental conservation and sustainability. An evaluator will establish a set of standards and assess how well your business aligns with them. Upon meeting these standards, you receive the evaluator's endorsement and certification, which can serve as a credible endorsement for your brand.

Circular economy

The circular economy model entails sharing, leasing, reusing, repairing, refurbishing, and recycling products and materials to extend their lifecycle.

Clean Energy Regulator

The Clean Energy Regulator, established under the Clean Energy Regulator Act 2011, is a non-corporate Commonwealth entity governed by the Public Governance, Performance and Accountability Act 2013. It oversees Australian Government schemes related to measuring, managing, reducing, or offsetting carbon emissions, and its responsibilities are outlined in climate change legislation.

Climate positive

A business is climate-positive (or carbon-negative) when its activities result in a reduction of carbon in the atmosphere, going beyond achieving net-zero emissions.

Climate-related Financial Disclosure

Climate-related Financial Disclosures aims to enhance and expand the reporting of financial information related to climate change. Investors and markets require clear, comprehensive, and high-quality information about the effects of climate change to make informed decisions about companies' climate-related risks. This includes assessing risks and opportunities arising from rising temperatures, climate policies, and emerging technologies in a changing world.

COP

COP (Conference of the Parties) is an annual UN climate change conference where leaders from almost every country review emissions progress and ensure climate targets are met.

Corporate Standard

The GHG Protocol Corporate Accounting and Reporting Standard establishes criteria and guidance for entities, including companies, engaged in the preparation of a greenhouse gas (GHG) emissions inventory. Its creation was driven by the following key objectives:1. Facilitating the creation of a GHG inventory that faithfully represents a precise account of emissions by employing standardised methodologies and principles.2. Streamlining and lowering the expenses associated with compiling a GHG inventory.3. Supplying enterprises with data that can be leveraged for constructing an efficient strategy for GHG emission management and reduction.4. Enhancing uniformity and transparency in GHG accounting and reporting across various companies and GHG programs. This standard predominantly addresses the needs of businesses undertaking the development of a GHG inventory.

CSR

Corporate Social Responsibility (CSR) comprises policies implemented by a company to positively impact the world.

CSRD

In November 2022, the European Commission introduced the Corporate Sustainability Reporting Directive (CSRD). This directive imposes annual reporting obligations on all large corporations, compelling them to issue reports detailing their environmental and social impact activities.Similar to its predecessor, the Non-Financial Reporting Directive (NFRD), the CSRD serves a dual purpose: firstly, it facilitates routine reporting, enabling stakeholders such as investors, financial market participants, consumers, policymakers, and others to assess the non-financial performance of large enterprises. Consequently, this fosters the adoption of more robust environmental and social management practices by these companies.Companies subject to the CSRD must submit their initial reports in accordance with CSRD requirements by January 2025.The CSRD shares many commonalities with the NFRD, but it additionally mandates companies to disclose information regarding their sustainability risks and their impact on the environment and society. Consequently, the CSRD builds upon the foundation laid by the NFRD, both aiming to enhance transparency within the corporate sector, with the CSRD incorporating more extensive requirements than its predecessor.

CSRD

In April 2021, the European Union introduced a proposal for the Corporate Sustainability Reporting Directive (CSRD), which is now in its advanced stages of development. This proposal, designed to replace the Non-Financial Reporting Directive (NFRD), aims to enhance and standardise the disclosure of sustainability information by companies. The CSRD will lead to the disclosure of consistent and reliable sustainability data from an expanding array of companies, with the objective of raising the quality of sustainability reporting to a level on par with financial reporting.

D

Decarbonisation

Decarbonisation, also called carbon reduction, involves reducing a company's GHG emissions, typically through the adoption of eco-friendly suppliers or clean energy providers.

Direct emissions

Direct emissions encompass those generated by a company's operational activities, such as electricity generation, material processing, waste management, and fleet transportation (scope 1 emissions).

Disclosure standards

Standards for carbon accounting disclosure encompass the guidelines, frameworks, and reporting requisites followed by organisations to transparently and consistently report their greenhouse gas emissions and other climate-related information. Several standards include the GHG Protocol, Carbon Disclosure Project (CDP), Task Force on Climate-related Financial Disclosures (TCFD), Global Reporting Initiative (GRI), and Science-Based Targets (SBTs).

Double materiality

The concept of double materiality pertains to how information disclosed by a company can hold significance on two levels: first, in terms of its implications for the company's financial value, and second, in its broader impact on the global community. This concept encompasses various aspects, including climate change, environmental effects, as well as social and human capital considerations.

Downstream emissions

Downstream emissions are emissions that arise after a company has sold its products and services. For example, if your company manufactures machinery, the emissions stemming from the machinery's use by customers are considered downstream emissions. Together with upstream emissions or supply chain emissions, they constitute a company's scope 3 emissions.

E

Eco-friendly

A business is eco-friendly when it is not harmful to the environment, or it is trying to help the environment

Emissions boundary

To provide accurate GHG emissions reports, an organisation must initially delineate its emissions boundary. This boundary pertains to the structure of the organisation and the areas of its operations it directly manages. It transparently defines the demarcation between activities under the organisation's control and those beyond its purview.

Emissions reduction strategy

An emissions reduction strategy outlines how an individual, organisation, or nation intends to diminish its greenhouse gas emissions. It establishes objectives, targets, measures, and reporting mechanisms while charting a course of action.

Environmental claim

Environmental claims, also known as "green claims," are statements made by companies regarding the environmentally beneficial attributes or qualities of their products and services. These claims can pertain to the manner in which products are produced, packaged, distributed, used, consumed, and disposed of.

ESG

ESG, which stands for "environmental, social, and governance", represents a stakeholder-focused approach to business. It operates on the principle that sustainability encompasses more than just environmental considerations. As ESG gains prominence among directors, it's vital to consider the unique global factors that influence regional priorities. Companies adhering to ESG standards commit to ethical conduct in these three areas and can leverage a variety of strategies, tactics, and ESG solutions.

ESG Reporting

An ESG report is a document released by a company detailing its impact on environmental, social, and governance aspects.

ESRS

The European Sustainability Reporting Standards (ESRS) comprise a set of regulations that delineate the guidelines and disclosure requirements for companies, banks, and insurance companies within the scope of the Corporate Sustainability Reporting Directive (CSRD). Unlike its predecessor, the NFRD, which necessitated separate sustainability reports, the CSRD mandates companies to include sustainability information in a distinct and identifiable section of their management reports. This shift reflects the European Commission's progressive transition to a digitised reporting framework aimed at enhancing data accessibility and facilitating the integration of financial and sustainable information.

EU Taxonomy

The EU taxonomy classifies economic activities aligned with a net-zero trajectory by 2050 and broader environmental goals, aiding sustainable finance transparency.

Extended External Reporting (EER) Assurance

Extended External Reporting (EER) Assurance refers to engagements that provide assurance on various forms of non-financial reporting, including integrated reporting, sustainability reporting, and non-financial reporting concerning environmental, social, and governance matters.

I

IASB

The International Accounting Standards Board (IASB) functions as the autonomous body responsible for setting accounting standards within the framework of the IFRS Foundation. The IASB comprises a group of independent experts with a balanced blend of recent practical experience in crafting accounting standards, engaging in financial report preparation, auditing, or utilising financial reports, as well as possessing a background in accounting education. The duties of IASB members encompass the development and publication of IFRS Accounting Standards, including the IFRS for SMEs Accounting Standard. Additionally, the IASB holds the authority to sanction Interpretations of IFRS Accounting Standards as formulated by the IFRS Interpretations Committee (previously known as IFRIC).

IFRS

The IFRS Foundation is a non-profit, public interest organisation established to create high-quality, understandable, enforceable, and globally accepted accounting and sustainability disclosure standards. These standards are developed by two standard-setting bodies, the International Accounting Standards Board (IASB) and the International Sustainability Standards Board (ISSB).

IFRS S1

The primary objective of IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information is to mandate entities to provide information concerning their sustainability-related risks and opportunities. This information should be valuable to the primary users of general-purpose financial reports when making decisions related to allocating resources to the entity.IFRS S1 establishes fundamental criteria for the content and presentation of sustainability-related information, particularly when adhering to IFRS sustainability disclosure standards. These provisions aim to assist primary users in making financial decisions that pertain to the entity. It's worth noting that IFRS S1 can also be applied when financial statements are prepared in accordance with generally accepted accounting principles (GAAP).Countries such as Australia have developed their Mandatory Climate Reporting legislation through IFRS guidance and companies have to disclose in line with AASB S2 and ASSB S1 .The essential components of this Standard include:Conceptual Foundation: The effectiveness of sustainability-related financial information is enhanced when it possesses qualities such as comparability, verifiability, timeliness, and understandability. These attributes are fundamental characteristics of quantitative information.Core Content: This comprises four key elements—governance, strategy, risk management, and metrics and targets.While identifying sustainability-related risks and opportunities that could impact the entity's prospects, report preparers are obligated to consider both IFRS sustainability-related disclosure standards and the disclosure topics outlined in the Sustainability Accounting Standards Board (SASB) standards, which are categorised by industry. In cases involving water and biodiversity matters, the CDSB Framework Application Guidance may also be applicable. Additionally, organisations may utilise standards from other standard-setting bodies (such as GRI) and industry-standard guidance. It is crucial that all sources of guidance are disclosed and clearly identified.

IFRS S2

The primary aim of IFRS S2 Climate-related Disclosures is to compel an organisation to provide information concerning its climate-related risks and opportunities. This information should prove valuable to the primary users of general-purpose financial reports when deciding how to allocate resources to the entity.IFRS S2 focuses specifically on climate-related physical and transition risks, along with climate-related opportunities. The disclosure requirement pertains only to those climate risks and opportunities that have a direct impact on the entity's future outlook.The Core Content of IFRS S2 closely aligns with the four key topics found in IFRS S1. However, it necessitates additional depth and detail to adhere to the Standard's reporting requirements.Countries such as Australia have developed their Mandatory Climate Reporting legislation through IFRS guidance and companies have to disclose in line with AASB S2 and ASSB S1 .

IFRS Sustainability Disclosure Standards

In June 2023, the International Sustainability Standards Board (ISSB) issued its inaugural pair of IFRS® Sustainability Disclosure Standards: IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 Climate-related Disclosures. These standards are applicable for annual reporting periods commencing on or after January 1, 2024. Companies are mandated to apply both IFRS S1 and IFRS S2 together to demonstrate compliance with IFRS Sustainability Disclosure Standards. Nevertheless, the ISSB offers transitional relief for some requirements during the first year of application of IFRS S1 and IFRS S2.

IIRC

The Integrated Reporting Framework (IIRC) facilitates the linkage between financial statements and sustainability-related financial disclosures. These frameworks, along with Integrated Thinking Principles, continue under the auspices of the IFRS Foundation.

Indirect emissions

Indirect emissions consist of emissions from purchased energy (scope 2 emissions) and the value chain (scope 3 emissions) of a company.

IRF

The International Integrated Reporting Framework (IRF) aims to expedite the global adoption of integrated reporting, enhancing the quality of information accessible to financial capital providers. It seeks to enable a more efficient allocation of capital, foster a unified approach to corporate reporting, promote accountability for various capital types, and encourage integrated thinking, decision-making and actions.

ISO 20400

ISO 20400 is an internationally recognised standard that assists companies in integrating sustainability into their business models, encompassing environmental, economic, and social sustainability. Any organisation aiming to enhance its sustainability efforts can benefit from the sustainability guidelines provided by ISO 20400.

ISSB

The Trustees of the IFRS Foundation announced the establishment of the International Sustainability Standards Board (ISSB) on November 3, 2021, during COP26 in Glasgow. This move was prompted by strong market demand. The ISSB is dedicated to developing high-quality, comprehensive global standards for sustainability disclosures, with a primary focus on meeting the needs of investors and financial markets.

N

Net zero

Net zero represents a condition where the emission of greenhouse gases into the atmosphere is offset by an equivalent removal of greenhouse gases. In a system that has achieved net zero, the overall quantity of greenhouse gases (GHG) in the atmosphere remains steady. In practical terms, discussions about net zero predominantly revolve around companies and countries, as they establish net zero targets to direct their efforts in reducing GHG emissions. However, the aspiration to attain net zero can extend to individual persons, specific industries, geographical areas, or even the entire planet.

NFRD

Adopted by the European Union in 2014, the Non-Financial Reporting Directive (NFRD) requires specific companies to furnish non-financial disclosure documents alongside their annual reports, commonly referred to as "sustainability reports." By 2018, all 28 EU member states had incorporated the NFRD directive into their national legislation, imposing compliance obligations on companies operating within their territories with a workforce exceeding 500 employees. This directive is applicable to public-interest companies with over 500 employees in the EU, encompassing approximately 6,000 companies and groups, including listed companies, banks, insurance firms, and other entities of public interest. The directive recommends adhering to international standards such as the UN Global Compact, OECD Guidelines, ISO 2600, or the Global Reporting Initiative (GRI). Furthermore, this directive amends the accounting directive 2013/34/EU.

S

SASB

Founded by Jean Rogers in 2011, the Sustainability Accounting Standards Board (SASB) operates as a nonprofit organization with the primary goal of formulating sustainability accounting standards. The IFRS Foundation's International Sustainability Standards Board (ISSB) encourages continued utilization of the SASB Standards. As of August 2022, the ISSB, under the IFRS Foundation, has assumed responsibility for the SASB Standards.

SBTi

The Science-Based Targets initiative (SBTi) encourages companies to establish targets aligned with scientific principles outlined in the Paris Agreement. They offer both general and industry-specific guidance for achieving these objectives.

Science-based target

An emissions reduction goal is deemed science-based when it aligns with the scientific consensus of the Paris Agreement's objectives: namely, the ambition to restrict global warming to under 2°C above pre-industrial levels, with a more rigorous pursuit of a 1.5°C target.

Scope 1 emissions

Scope 1 emissions encompass direct greenhouse gas (GHG) emissions generated by a company during its core business operations. This includes electricity generation, materials production, waste management, and the use of the company's own vehicle fleet for transportation.

Scope 2 emissions

Scope 2 emissions are indirect emissions resulting from the production of purchased energy.

Scope 3 emissions

"Scope 3 emissions" (also known as value chain emissions) include all indirect emissions occurring within a company's value chain that are not covered by Scope 2 emissions. These emissions arise as a consequence of the company's activities but originate from sources outside the company's ownership or control. Scope 3 emissions encompass:1. Emissions generated in the company's supply chain, including the extraction, production, and transportation of purchased materials and fuels.2. Emissions produced from the use of products and services sold by the company.3. Emissions arising from waste disposal, encompassing the disposal of waste generated in operations, the production of purchased materials and fuels. 4. The disposal of sold products at the end of their lifecycle.

SME Climate Commitment

The SME Climate Hub commits small and medium-sized enterprises to halve emissions by 2030 and attain net-zero emissions by 2050.

SMEs

Small and medium-sized enterprises (SMEs) constitute a category of businesses defined by staff count and annual turnover, with these criteria varying globally.

Spend-based method

The approach of quantifying GHG emissions through spending relies on taking the monetary value of a purchased product or service and multiplying it by an emission factor, representing the emissions generated per unit of currency spent. This process yields an approximation of the emissions generated.However, it's important to note that spend-based methods base their emission factors on industry-average levels of greenhouse gas emissions. Consequently, these calculations might lack precision and specificity. For instance, if you were to purchase a chair, a spend-based approach would merely consider it as a furniture acquisition, without accounting for whether the chair was constructed from iron or wood. In contrast, activity data tends to offer greater reliability in emissions estimation.

Supply chain emissions

Supply chain emissions, also known as upstream emissions, manifest upstream within a company's supply chain during the production of goods or services that the company procures or utilises.

Sustainability reporting

Sustainability reporting is a means for companies to disclose their environmental and social performance. In certain jurisdictions, it is obligatory for companies of a certain size. Nevertheless, even when not mandated, customers, investors, and prospective employees increasingly demand information on a company's actions to reduce greenhouse gas emissions and achieve net-zero emissions by 2050, aligning with the Paris Agreement.

Sustainable Development Goals

The Sustainable Development Goals (SDGs), also referred to as the Global Goals, consist of seventeen interconnected targets crafted to function as a mutual plan for ensuring peace and prosperity for both humanity and the planet, both in the present and in the future.

Sustainable economy

An ideal and sustainable economy seeks to maximise general well-being while minimising resource consumption and environmental harm. Achieving true sustainability requires that the demand for natural resources (ecological footprint) remains below nature's renewable supply (biocapacity).

Sustainable Procurement

Sustainable procurement involves the integration of Corporate Social Responsibility (CSR) principles into a company's procurement processes and decisions, all while meeting stakeholder requirements. It incorporates specifications, requirements, and criteria compatible with environmental and societal well-being. Commitment to sustainable procurement ensures that a company's core sustainability values permeate the entire life cycle of its products and services.

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