By: Todd Weinstein, President of ESG OWL

Sustainability can be overwhelming with acronyms and terminology. If you’re trying to build a foundation of key sustainability topics and terms, you’re in the right place.

As you review these key terms, you may decide the complexity is too much for your manufacturing company to handle in-house… and that’s where ESG OWL’s Fractional Sustainability can help. Reach out to your IMEC Regional Manager for more information about Fractional Sustainability services.

ESG – Environmental, Social, and Governance. ESG is commonly used as short-hand for Impact Investing, or Sustainability, and it represents the three primary areas of corporate responsibility (sample topics below).

Environmental: climate and greenhouse gas emissions, biodiversity, waste, water, etc.

Social: health and safety, employee benefits, community engagement, human rights, DEI, child labor, etc.

Governance: governance structure and composition, roles and responsibilities, accounting practices, etc.

Carbon Footprint – describes the greenhouse gas emissions caused by a business. May also be referred to as a Greenhouse Gas Inventory, Carbon Accounting, or GHG Emissions. A carbon footprint establishes a baseline of the amount of emission sources generated by an organization in a given year. A carbon footprint should be developed according to the GHGP standards.

GHGP – The Greenhouse Gas Protocol (GHGP) is the internationally recognized not-for-profit that established the Corporate Accounting and Reporting Standard. This guidance is the foundation for defining how to categorize and report carbon emissions for a business.

Scope 1, Scope 2, and Scope 3 Emissions – The GHGP standard defines greenhouse gas emissions to be categorized as either Scope 1, 2, or 3 emissions. Scope 1 emissions are direct emissions that are burned by the company. Scope 1 examples include natural gas to heat buildings, heating a gas-oven, fuel in a company owned truck, or fossil fuels burned by the company. Scope 2 is purchased electricity. Scope 3 is the most difficult category to track and measure and it includes 15 categories of indirect emissions. Common Scope 3 categories for manufacturers include Purchased Goods and Services, Employee Commute, Business Travel, Waste, Upstream Transportation, Downstream Transportation, and more.

Materiality Assessment – A process to determine the most important issues facing a business. The assessment typically consists of stakeholder interviews and survey questionnaires to gather data and multiple perspectives. The result is a Materiality Matrix that shows which topics are most critical to the company and to other stakeholders. The results provide a roadmap to which specific topics receive budget and effort to mitigate potential risks to the business or execute against opportunities.

Raters and Rankers – These entities are a mixture of not for profit and for-profit. Their role is to evaluate company’s ESG disclosures and help others in the market assess if the company is above average, average, or below average. Each rater and ranker has a unique approach in what categories they review, and whether the scored companies are proactive or passive in the review process. Common examples include EcoVadis, CDP, S&P Global ESG, Sustainalytics, and MSCI, etc.

SBTi – Science Based Targets initiative (SBTi) is a leading international framework for setting climate targets that are aligned with the latest science on the pace and amount of GHG reductions required to prevent the worst effects of climate change. Companies submit plans to SBTi for approval which provides a greater set of confidence with trading partners that a business is serious about its climate ambitions.

Renewable Energy – Energy that is provided by a source which is not depleted upon consumption. Examples include solar, wind, geothermal energy, and hydropower. Renewable energy does not contribute to a company’s carbon footprint as these sources are carbon-free.

Climate Target – A specific statement that explains a company’s goal for reducing their impact on the client. A Climate Target should include a baseline year, baseline amount of carbon emissions, target year, target amount of emissions, and % reduction. The most effective climate targets are near-term (I.e. 2030) and are supported by action plans to meet the climate target.

Greenwashing – a business that makes environmental claims that are beyond the reality of what has been implemented. Greenwashing claims may be overly broad, intentionally confusing or misleading, or cannot be substantiated.

Blog written by Todd Weinstein, President of ESG OWL