Resources
Concise definitions of the most important ESG and sustainability terms - from CBAM to VSME, from Scope 1 to Net Zero.
The EU's carbon border adjustment mechanism levies a charge on imported emissions-intensive goods (e.g. steel, cement, aluminium) equivalent to the EU ETS price. The aim is to prevent carbon leakage and create a level playing field for producers inside and outside the EU.
The corporate carbon footprint measures all greenhouse gas emissions of a company across all scopes and expresses them in CO2 equivalents. It forms the basis for climate strategies, reduction targets and CSRD reporting.
CO2e is the unit that puts the climate impact of different greenhouse gases (e.g. methane, nitrous oxide) on a common scale, using CO2 as the reference gas. One kilogram of methane, for example, equals approximately 28 kg CO2e.
The EU directive on mandatory sustainability reporting replaces the NFRD and significantly expands the circle of companies required to report. Reports must be prepared under the ESRS, integrated into the management report and externally audited.
The EU supply chain directive requires large companies to exercise human rights and environmental due diligence throughout the entire value chain. It complements the CSRD with binding obligations to act - not merely to report.
The CSRD concept under which companies must assess both their impacts on people and the environment (impact materiality) and the sustainability risks and opportunities that have financial implications (financial materiality). Both perspectives together determine which topics must be covered in the sustainability report.
The European Single Electronic Format (ESEF) is the mandatory digital format for the annual report of listed companies in the EU. Sustainability data is tagged with XBRL to enable machine-readable comparability.
ESG refers to the three dimensions along which companies are assessed for sustainability: environment (e.g. CO2 emissions, biodiversity), social (e.g. working conditions, human rights) and governance (e.g. compliance, transparency). ESG criteria underpin regulation, investor decisions and reporting.
The ESRS are the standards developed by EFRAG and adopted by the European Commission under which CSRD-obligated companies must report. They comprise two cross-cutting standards and ten topical standards covering environment, social and governance.
The European Commission's flagship policy programme aimed at making Europe climate-neutral by 2050. The CSRD, EU Taxonomy, CBAM and numerous other ESG regulations all derive from the Green Deal.
The EU classification system defines which economic activities qualify as environmentally sustainable, based on six environmental objectives and the 'Do No Significant Harm' principle. Under the CSRD, companies must disclose what share of their revenue, capital expenditure and operating expenditure is taxonomy-aligned.
The Greenhouse Gas Protocol is the internationally recognised standard for measuring and reporting greenhouse gas emissions. It defines the three scopes and provides the methodological foundation for the CCF, PCF and ESRS climate standards.
Greenwashing refers to the misleading presentation of products, services or companies as more environmentally friendly or sustainable than they actually are. EU regulations such as the Green Claims Directive aim to sanction greenwashing and ensure the credibility of sustainability claims.
IROs are the central output of the double materiality assessment under ESRS: companies identify their actual and potential impacts on people and the environment as well as the associated financial risks and opportunities. The material IROs determine the scope of the report.
Germany's Supply Chain Due Diligence Act requires companies above a certain size to exercise human rights and environmental due diligence along their supply chains and to report on it. It is regarded as the national forerunner to the EU-wide CSDDD.
Limited assurance is the level of audit assurance initially required by the CSRD for the sustainability report. The auditor states that nothing has come to their attention suggesting material misstatement - a lower level of certainty than the 'reasonable assurance' of the financial statements.
Net Zero refers to the goal of reducing net greenhouse gas emissions to zero by balancing any remaining residual emissions through removal from the atmosphere. The Paris Agreement targets global net zero by 2050; for companies, SBTi standards define the scientifically recognised pathway.
The product carbon footprint measures the greenhouse gas emissions of a product across its entire life cycle (from raw material extraction to disposal) in CO2 equivalents. It underpins environmental product declarations and is increasingly a subject of supplier requirements.
The SBTi is an international initiative that helps companies set science-based climate targets. Validated SBTi targets are considered the industry standard for credible net-zero strategies and are referenced in ESRS climate reporting.
The GHG Protocol divides emissions into three categories: Scope 1 (direct emissions from owned sources), Scope 2 (indirect emissions from purchased energy) and Scope 3 (all other upstream and downstream emissions along the value chain, e.g. suppliers, employee travel, product use). Scope 3 represents the largest share for most companies.
The voluntary standard developed by EFRAG enables small and medium-sized enterprises to produce structured, comparable sustainability reports outside the CSRD obligation. It is frequently used at the request of banks, large customers or investors.
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