Sustainability Lexicon

Sustainability Lexicon

Key terms for a more conscious world

Sustainability is the central concept of our time. But many of the abbreviations, technical terms and concepts associated with it can be confusing for newcomers. In this blog post, we present a short sustainability lexicon that explains the most important terms in a simple and understandable way.

ESG - Environmental, Social, Governance

ESG stands for Environmental, Social and Governance and is a key concept in the field of sustainability.

• Environmental: This is about the environmental impact of a company, such as CO2 emissions, resource consumption and environmental protection measures.

• Social: This refers to social aspects such as working conditions, diversity, social engagement and relationship with communities.

• Governance (corporate management): Governance concerns the way a company is run, including ethical standards and transparency.

The term ESG originates from the financial industry: in terms of consumer protection, the three categories are intended to represent how sustainable a financial product (e.g. an equity fund) and/or a company is. So far, there is no uniform definition for E,S and G. However, the EU taxonomy at least sets a gold standard at European level to prevent so-called greenwashing. ESG compliance is very often used by fund managers as a selection criterion and is also gaining importance in lending. There are now several agencies that issue ESG ratings.

CSR - Corporate Social Responsibility

CSR (Corporate Social Responsibility) describes the concept whereby companies take ethical and social responsibility for their impact on society and the environment. The following core principles are central to this:

1. Economic responsibility: companies should ethically strive for economic success without harming society or the environment. 

2. Social responsibility: CSR includes ensuring fair working conditions, promoting diversity and inclusion, supporting education and social projects, and respecting human rights. 

3. Environmental responsibility: companies should minimize environmental impacts, increase resource efficiency and promote environmentally friendly practices.

In this regard, it is crucial that companies publish their CSR activities. For some companies, this is already done as part of an annual sustainability report. The European directive (Non-Financial Reporting Directive), which obliges these very companies to prepare a sustainability report, was adopted in 2014.

CSRD - Corporate Sustainability Reporting Directive

The Corporate Sustainability Reporting Directive (CSRD) replaces the NFRD (Non-Financial Reporting Directive). The group of companies affected is thus greatly expanded. The CSRD aims to disclose important non-financial information in the areas of environment, social affairs and employees in the annual report. This includes information on sustainability strategy, sustainability goals, risks, potential negative impacts in the area of products and services, environmental impacts such as the consumption of resources, social components and certain aspects of corporate governance.

Greenwashing

Greenwashing describes marketing measures by which the climate and environmental performance of a product, service or company are portrayed more positively than they actually are.

LkSG - German Supply Chain Act

The German Supply Chain Due Diligence Act (LkSG) requires companies with more than 1,000 employees to ensure social and environmental standards in their own business operations and in their supply chain. The required activities include a regular risk analysis of the supply chain, the appointment of a human rights officer, the establishment of an anonymous complaints office, the taking of remedial action, and an annual report. The aim of the Supply Chain Sourcing Act is to promote transparency, sustainability and accountability in global supply chains and to ensure that companies meet their social and environmental responsibilities.

Scope Emissions - Scope 1, Scope 2, Scope 3.

The international standard for reporting a company's greenhouse gas emissions is the Greenhouse Gas Protocol. According to this, companies should divide their emissions into:

• Scope 1: Direct emissions caused by the company itself, e.g. by burning gas or emissions from the vehicle fleet.
• Scope 2: Indirect emissions, e.g. from the production of purchased electricity.
• Scope 3: Other indirect emissions that occur along the entire value chain, including upstream emissions (e.g. from freight transport of necessary raw materials) and downstream emissions (e.g. the use of a product by the end consumer).

SDGs - Sustainable Development Goals

The SDGs, or Sustainable Development Goals, comprise 17 global goals adopted by the United Nations in 2015 to be achieved by 2030. Unlike ESG and CSR, the SDGs do not focus on private economic actors. Rather, major global goals are formulated (poverty reduction, education, gender equality, clean water, climate protection, access to healthcare, biodiversity) - these serve as guiding principles for governments, companies and civil society to work together towards a better and more sustainable future.

Outlook

It is up to each of us to put this knowledge into practice and make our personal, business and social decisions in line with the principles of sustainability. Whether it's reducing our own environmental footprint, supporting ethical products or advocating for social justice, every contribution counts.