Corporate Sustainability Glossary

All the jargon, terms and abbreviations you ever need to know about carbon and ESG management.
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Air Quality Index (AQI)

An Air Quality Index (AQI) communicates how contaminated the air of a specific area or country is or how polluted it is expected to be. It is calculated as a combination of various types of pollution. Different nations have their own AQIs corresponding to other air quality standards.

Air pollution

Air pollution is the contamination of the environment by any physical, chemical, or biological agent that changes the natural characteristics of the atmosphere. Air pollution, and its impact on air quality, are closely linked to our climate and ecosystems.

Many drivers of air pollution, such as burning fossil fuels, are also sources of carbon emissions.

Atmosphere / Air

The atmosphere is the layer of gases that envelopes a planet. Surprisingly, oxygen isn't the most abundant gas in our planet's atmosphere. The atmosphere of Earth is composed of nitrogen (78.1%), oxygen (20.9%), argon (0.93%), carbon dioxide (0.04%), and trace gases (such as neon, helium, methane, and krypton).

Beyond value chain mitigation

Beyond value chain mitigation (BVCM) are measures taken to avoid (prevent), reduce or eliminate greenhouse gas emissions outside of their value chain. Both compensation and neutralisation can be considered BVCM, and should always come as an addition to decarbonisation, rather than its substitute.

Biofuel

Biofuels are fuels derived from biological sources. These include but are not limited to crops, new and used vegetable oils, animal fats, and various forms of waste. Biofuels can complement or replace traditional fossil fuels, although different biofuels' greenhouse gas mitigation potential may vary considerably.

Biomass / Biogas

According to the European Union's Renewable Energy Directive, biomass is the biodegradable part of waste, products, and residues from different industries such as agriculture, forestry, fisheries, and aquaculture.

Biomass can be converted into electricity, burned to create heat, or processed into biofuels. Since biomass is a fuel type, some people use the terms biomass and biofuel interchangeably. Biomass is a renewable organic material.

Plant-, wood-, and other bio-waste are the most common types of biomass used for energy. Biomass is a solid material which can be converted to biogas (main methane) with the use of microorganisms in the absence of oxygen (a.k.a. Anaerobic Digestion).

Capital goods emissions (Scope 3 Category 2)

Capital goods emissions, classified under Scope 3 Category 2 of the Greenhouse Gas (GHG) Protocol, refer to the indirect emissions associated with the lifecycle of capital goods acquired or disposed of by a reporting company. Capital goods are long-term assets such as buildings, machinery, and equipment used to produce goods and services. Unlike purchased goods and services consumed within the operational year, capital goods have a lifespan extending over several years.

Carbon Border Adjustment Mechanism (CBAM)

The Carbon Border Adjustment Mechanism (CBAM) is a system that places a carbon price on imports of products from countries with less ambitious national policies around climate change. The system is designed to prevent the risk of carbon leakage and was proposed by the European Commission in 2021.

It is currently being legislated as part of the European Green Deal and is expected to take effect in 2026, with reporting starting in 2023.

Carbon Insetting

Carbon insetting is a strategy used by companies to reduce their emissions and carbon footprint within their supply chain or industry. This approach involves investing in nature-based solutions such as reforestation, agroforestry, renewable energy, and regenerative agriculture. These solutions are aimed not only at sequestering carbon but also at creating positive impacts for communities, landscapes, and ecosystems associated with the company's value chain.

Carbon accounting

Carbon accounting, or "greenhouse gas accounting", refers to the systematic methodologies, measurement, and monitoring used to evaluate and quantify how much carbon dioxide equivalents (CO2e) an entity or activity emits. Carbon accounting measures emissions of all greenhouse gases and includes CO2, methane, nitrous oxide, and fluorinated gases. Gases other than carbon are expressed in terms of carbon equivalents.  

Carbon budget

The carbon budget is the amount of greenhouse gases that humanity can emit into the atmosphere by the end of this century and still limit the global temperature increase compared to the pre-industrial levels (1850-1900). According to the IPCC, the atmosphere can absorb, calculated from the beginning of 2020, no more than 400 gigatonnes (Gt) of CO2 if we are to stay below the 1.5°C thresholds. 

Annual emissions of CO2 – from burning fossil fuels, industrial processes and land-use change – are estimated to be 42.2 Gt per year, the equivalent of 1,337 tonnes per second. At current emissions rates, the budget for staying below the 2°C thresholds would be exhausted in about 25 years. The concept of the carbon budget is based on an almost linear relationship between cumulative emissions and temperature rise. Nevertheless, this does not mean that the Earth would be 1.5⁰C warmer precisely when the remaining carbon budget for staying below the 1.5⁰C threshold is exhausted.

Carbon capture and storage (CCS)

Carbon capture is the process of capturing carbon dioxide from chemical or biomass power plants and storing it underground to prevent the release of carbon dioxide. Carbon capture technologies range from forestry to air-filtering machinery capable of capturing airborne CO2. Innovative compensation efforts often include carbon capture and storage mechanisms.

Carbon credit

The carbon credit system provides an incentive to reduce the emissions of one's own company. First, a company sets an emission cap, which is then reduced periodically. If a company exceeds this limit, it will receive a fine. Unused certificates can be sold to other companies. The certificates provide a market-oriented mechanism for reducing greenhouse gas emissions. The number of overall available credits is reduced over time to reduce global greenhouse gases.

Carbon dioxide (CO2)

Carbon dioxide (or CO2) is a colourless, odourless gas consisting of one part carbon and two parts oxygen. CO2 is a natural component of our planet's atmosphere and is one of the most common greenhouse gases. It is released through human activities such as burning fossil fuels and deforestation, but also by natural processes.

Because humanity releases more carbon dioxide –primarily through burning fossil fuels like coal and oil– into the atmosphere than current biological processes can remove, the amount and concentration of carbon dioxide in the atmosphere and ocean increases yearly.

There are other greenhouse gases beyond carbon dioxide, such as methane (CH4), nitrous oxide (N2O), or fluorinated gases (F-gases).

Carbon dioxide equivalent (CO2e)

Carbon dioxide equivalent (CO2e) is a single unit metric used to harmonise emissions from many different greenhouse gases based on their Global Warming Potential (GWP). In greenhouse gas accounting, CO2e is more accurate than CO2 alone because it covers the GWPs of all greenhouse gases that capture heat and warm our planet's atmosphere. For example, in a 100-year-period, methane traps 28 times more heat than CO2, giving it a GWP of 28 CO2e.

Carbon emissions

Carbon emissions –also known as greenhouse gas emissions– release carbon into the atmosphere. Carbon dioxide is the primary greenhouse gas emitted through human activities.

Carbon footprint

A carbon footprint is the total amount of carbon dioxide released into the atmosphere due to the activities of an individual, project, organisation, or nation-state.

Carbon leakage

Carbon leakage refers to a company relocating its activities to countries with weaker carbon and sustainability legislation. This relocation can cause the company's carbon footprint to rise due to a more extensive licence to pollute and the environmental costs of transportation. In addition, relocating to less regulated countries often results in inaccurate carbon measurement and skews the carbon emissions mapping and attribution. The risk of carbon leakage may be higher in energy-intensive industries.

Carbon market

A carbon market is a voluntary or legally operated system to enable the trade of carbon credits between private and public entities.

The first carbon market was defined by the Kyoto Protocol which created three market mechanisms to achieve these emissions reductions: the International Emissions Trading (IET), the Joint Implementation, and the Clean Development Mechanism (see Clean Development Mechanism).

The goal of a carbon market is to create an economic incentive for companies to reduce their emissions, as they can sell any unused emissions allowances to other companies that need them. Carbon markets can take many forms, such as cap-and-trade systems or carbon taxes, but the basic principle is the same: to use the power of the market to reduce greenhouse gas emissions and mitigate the effects of climate change.

The carbon market's goal is to create a carbon price and transform carbon into a valuable commodity, incentivising emitters to use this resource cautiously and even as a revenue generating activity in some cases.

Carbon negative

Carbon negative is achieved when an organisation's activities go beyond achieving net-zero carbon emissions to create an environmental benefit by removing additional carbon dioxide from the atmosphere.

Carbon neutrality / carbon-neutral

Carbon neutrality means that any CO2 released into the atmosphere from a company's activities are balanced by the equivalent amount being compensated or removed. Companies can achieve carbon neutrality by buying carbon credits to offset their emissions. Plan A aims to take companies to net-zero rather than carbon neutrality as it embeds the notion of decarbonisation into the process.

Carbon positive

Carbon positive, or climate positive, is a term often used by companies to announce that they have moved beyond carbon neutrality by reducing/removing more greenhouse gas emissions than they are generating.

Clean Development Mechanism (CDM)

The Clean Development Mechanism (CDM) is a UN initiative that allows emission reduction projects in developing countries to earn certified emission reduction (CER) credits. Each of these credits is equivalent to one tonne of CO2e. These certified emission reduction credits can be traded, bought, and sold. Industrialised countries use them to help meet their emission compensation targets under the Kyoto Protocol.

Climate

Climate describes the average weather in a specific geographical region over a period of time. This period, the so-called standard period, generally lasts for 30 years. If the statistical mean values for temperature, wind, or rain change over a more extended period (decades or longer), it demonstrates climate change.

Climate change

According to the United Nations, climate change refers to the shifts in temperature and weather patterns over an extended period.

Some of these shifts may be natural, although, since 1800, human activities have been the main driver of climate change – primarily through burning fossil fuels such as coal, oil, and gas, which adds greenhouse gases to the atmosphere and oceans above what a natural cycle can cope with. This, in turn, causes shifts and accelerated changes in the local and global climates.

As emissions continue to rise, our planet is now 1.1°C warmer than it was in the late 1800s on average. Although climate change is equated to warmer temperatures, its consequences go beyond temperatures. Examples of climate change effects are intense droughts, water scarcity, severe fires, flooding, storms, and a decline in biodiversity.

Compensation

Compensation, also known as (carbon) offsetting, is the voluntary or mandatory purchase of carbon credits to balance the emissions caused by an entity. The price for a carbon credit used for compensation is the benchmark when comparing an investment for direct internal reductions.

Some greenhouse gas emissions are impossible to avoid, and compensation through carbon credits helps to achieve climate neutrality and net-zero objectives. Compensation includes investments in renewables, energy efficiency, reforestation, carbon capture, and other highly quantifiable carbon mitigation activities.

Corporate Carbon Footprint

Corporate Carbon Footprint (CCF) represents a reporting company's direct and indirect carbon dioxide equivalent emissions within a defined time period (usually a single year). Plan A's carbon accounting methodology for calculating a company's CCF is based on the GHG Protocol Corporate Standard and has been certified by TÜV Rheinland.

Corporate Sustainability Due Diligence

At the beginning of 2022, The European Commission proposed a directive on Corporate Sustainability Due Diligence. It aims to foster "sustainable and responsible corporate behaviour and to anchor human rights and environmental considerations in companies' operations and corporate governance".

Benefits of the new rules – which are categorised by benefits for citizens, benefits for companies and benefits for developing countries – are far-reaching. A few examples include:

  • Better protection for human rights.
  • Improved access to justice for victims.
  • A harmonised legal framework for companies in the European Union.
  • Better access to finance.
  • Improved living conditions.

Corporate Sustainability Reporting Directive (CSRD)

The Corporate Sustainability Reporting Directive (CSRD) is an EU legislation requiring all large companies (any two above 250 employees, turnover above €40M or €20M in assets) to publish regular reports on their environmental and social impact activities.

The policy helps investors, consumers, policymakers, and other stakeholders evaluate large companies' non-financial performance. The first companies will have to start reporting in 2025 for the financial year 2024.

Decarbonisation

Decarbonisation is the removal or reduction of all human-made carbon emissions into the atmosphere. Decarbonisation is achieved through cross-cutting measures to reduce or eliminate carbon emissions from an organisation's or individual's activities. Decarbonisation differs from climate neutrality because it seeks to reduce absolute carbon emissions and intensity. Climate neutrality does not necessarily include decarbonisation actions, as climate neutrality can be achieved through solely buying carbon credits.

Direct emissions

Direct (greenhouse gas) emissions are produced from sources owned, produced, and controlled by a company. They are referred to as "Scope 1 emissions" in the context of the Greenhouse Gas Protocol.

The difference between direct and indirect emissions is that indirect (greenhouse gas) emissions are a consequence of the activities of the reporting organisation but are controlled or produced by another company, for instance, a cloud storage provider or a taxi ride.

EU Taxonomy

The EU Taxonomy is a classification that sets criteria to determine whether an economic activity significantly contributes to the six environmental objectives as defined in the regulation:

The Taxonomy Regulation establishes six environmental objectives, directly related to sustainability principles:

1. Climate change mitigation

2. Climate change adaptation

3. The sustainable use and protection of water and marine resources

4. The transition to a circular economy

5. Pollution prevention and control

6. The protection and restoration of biodiversity and ecosystems

The objective of this regulation is to provide a common framework to assess the sustainability of economic activities. As such, large companies and financial market participants are now required to disclose the environmental impact of their capital spending against these pillars to allow consumers and government to integrate non-financial performance into their buying decisions.

Emissions

Emissions (to air) are defined as all of the gases and substances released into the atmosphere. Since the industrialisation era, human activities have significantly altered the chemical composition of our atmosphere through the release of substances and greenhouse gases.

Emissions trading

Emissions trading, also known as cap-and-trade, is a market-based system for reducing greenhouse gas emissions. Under an emissions trading system, a government sets a limit or "cap" on the total amount of emissions that can be produced by a particular sector or region. This cap is then divided into a certain number of allowances, each of which represents the right to emit a certain amount of greenhouse gases. These allowances can be bought and sold on a market, allowing companies that can reduce their emissions at a lower cost to sell their excess allowances to companies that find it more expensive to reduce their emissions.

The goal of emissions trading is to create an economic incentive for companies to reduce their emissions, as they can sell any unused emissions allowances to other companies that need them. This allows for the most cost-effective emissions reductions to take place, as companies will naturally reduce their emissions where it is cheapest to do so. Emissions trading systems can be used to regulate emissions from specific sectors, such as power plants or factories, or from an entire country or region.

Environment, Social, Governance (ESG)

ESG is an acronym that stands for Environmental, Social, and Governance. It is a framework used to measure a business's non-financial performance in environmental, social and governance categories. It is used as a basis for various regulations such as the NFRD, CSRD and the SFDR.

The growing interest in measuring and ranking ESG by investors and businesses reflects the perspective that environmental, social, and governance dimensions should be factored in when considering business success.

Environmental factors include company policies around climate change, such as their decarbonisation action, natural resources, pollution and waste, and other factors.

Social criteria include human rights, labour standards across the supply chain, integration to local communities, and other social dimensions.

Governance includes business ethics, compliance, accurate accounting methods, salaries, structure for shareholders, and whether or not a company pursues integrity and diversity when selecting its leadership.

Fossil fuels

Fossil fuels are materials formed naturally in the Earth's crust from the remains of dead plants and animals over millennia. They are extracted and used chiefly for fuelling purposes.

According to the United Nations, over 80% of the CO2 generated by humans comes from burning fossil fuels. Their extraction, combustion and consequent emissions-to-air negatively affect the carbon cycle, which in balanced states allows for climate stability and a functioning biosphere. Fossil fuels include but are not limited to petroleum, coal, and natural gas.

Fuel and energy-related activities (Scope 3 Category 3)

Fuel and energy-related activities (FERA), classified under Scope 3 Category 3 in the Greenhouse Gas (GHG) Protocol, encompass the indirect emissions associated with the production, transmission, and delivery of fuels and energy purchased by a company, which are not accounted for in Scope 2 emissions

These emissions are consequential to the company's energy use but occur outside its organisational boundaries, including:

  1. Extraction, production, and transportation: Emissions arising from the extraction, refining, and transportation of fuels (e.g., oil, gas, coal) that the company uses for its operations but does not directly emit from its owned or controlled sources (Scope 1) or include in its purchased electricity, heating, cooling, and steam consumption (Scope 2).
  2. Transmission and distribution losses: Emissions from losses that occur during the transmission and distribution (T&D) of electricity or heating/cooling energy from generation to the point of use. These losses are inherent in energy distribution networks and vary by region and efficiency of the T&D system.
  3. Waste and wastewater treatment: Emissions associated with the treatment and disposal of waste and wastewater generated from fuel and energy production processes, which are not directly emitted by the company's operations.

Global Surface Temperature

In earth science, the global surface temperature is calculated by averaging the temperature at the surface of the sea and air temperature over land. In technical writing, scientists call long-term changes in GST global cooling or global warming. Periods of both have happened regularly throughout earth's history. The global average temperature has warmed by 1.09°C (range: 0.95 to 1.20°C) from 1850–1900 to 2011–2020.

Global Warming Potential (GWP)

All greenhouse gases have different chemical compositions and properties, leading to different strengths and timescales contributing to the greenhouse effect.

The Global Warming Potential (GWP) index is used to measure the relative warming effects of these gases, using CO2 as the baseline. To calculate the relative impact of these gases, the Global Warming Potential (GWP) index is used, using CO2 as the baseline and harmonising all gases as carbon dioxide equivalents.

Due to the different lifetime effects of other gases (e.g. methane dissipates more quickly than carbon dioxide), choosing the appropriate time horizon is crucial. As recommended by the Intergovernmental Panel on Climate Change (IPCC), the time horizon of 100 years is used across the Plan A Sustainability Platform.

Global warming

Global warming is the long-term heating of Earth's surface observed since the pre-industrial period (between 1850 and 1900) due to human activities, primarily fossil fuel burning, which increases heat-trapping greenhouse gas levels in the Earth's atmosphere. Climate change includes both warming and side effects of warming, such as melting glaciers and more frequent droughts.

Green bonds

Green bonds are issued to raise financing for sustainability or climate related investments. These bonds are similar to traditional bonds in that they pay interest to investors, but the proceeds from the sale of green bonds are specifically earmarked for projects that have a positive environmental impact.

Green bonds are typically issued with the same credit rating as the issuer's traditional bonds, and the maturity, coupon, and other terms are similar to those of other bonds. However, they may have additional features, such as a use of proceeds, to ensure that the funds are used for a specific environmental project. Green bonds are also subject to independent review and certification to ensure that the proceeds are being used for eligible green projects.

The demand for green bonds has been growing in recent years as investors become more interested in environmentally friendly investments. Green bonds help to finance renewable energy, energy efficiency, sustainable transportation and water treatment plants, among others. They also help to raise awareness and encourage investment in environmental projects and it is a way to align financial markets with the Paris Agreement goals.

Note: The World Bank has issued over 150 green bonds since 2008, with a combined value of almost $15 billion.

Greenhouse Gas (GHG) Protocol

The Greenhouse Gas Protocol (GHG Protocol) is a globally recognised standard for measuring and managing greenhouse gas emissions. The GHG Protocol was established in 1990 out of the need for a consistent framework for greenhouse gas reporting. Today, it collaborates with governments, industry associations, NGOs, corporations and other organisations to provide the world's most widely used emission calculation guidelines.

Countries and companies committed to the Paris Agreement must reduce their GHG emissions. They must account for, report, and mitigate emissions by following standards such as the GHG Protocol. The GHG Protocol has enabled decarbonisation across operations in the public and private sectors by providing a unified framework for emission management. Plan A's Sustainability Platform follows the GHG Protocol.

Greenhouse effect

The greenhouse effect occurs when greenhouse gases (GHGs) accumulate in the Earth's atmosphere. These naturally occurring gases include carbon dioxide (CO₂), methane (CH4), nitrogen oxide (N2O), and fluorinated gases (HFCs), chlorofluorocarbons (CFCs).

Greenhouse gases trap the sun's heat as it reflects from the Earth's surface. This process warms the planet and leads to rising global temperatures. Without the natural greenhouse effect, the global mean temperature would be -18°C and therefore uninhabitable for humans. Humans amplify the natural greenhouse effect by releasing greenhouse gases when burning fossil fuels such as coal, oil, and natural gas.

Greenhouse gases (GHGs)

Greenhouse gases (GHGs) are gases in the atmosphere that contribute to the greenhouse effect and warm the planet.

Carbon dioxide (CO2), ozone (O3), methane (CH4), and nitrous oxide (N2O) are the significant gases driving the atmospheric temperature increase. According to the IPCC report, an estimated 59 billion tonnes of GHG were emitted in 2019, with a large part being carbon dioxide.

Hydrogen

Hydrogen is the most abundant element that exists in the universe. Both the sun and the stars are composed mainly of hydrogen. It is a very light gas that is colourless, odourless, and tasteless. It can be used as a source of energy.

In Europe, it makes up less than 2% of our current energy consumption and is mostly used for the development of complex chemical products. Hydrogen is a fuel that produces only water and is an important element of the EU's strategy for energy system integration.

Indirect emissions

As described by the Greenhouse Gas Protocol, indirect emissions are made up of Scope 2 and Scope 3 emissions. These are emissions which are a consequence of a company's or organisation's activities but are owned or controlled by another entity. Examples of indirect emissions include but are not limited to: purchased electricity, waste disposal, and business travel.

Intergovernmental Panel on Climate Change (IPCC)

The Intergovernmental Panel on Climate Change (IPCC) is an intergovernmental body of the United Nations responsible for advancing knowledge on human-induced climate change. The IPCC compiles comprehensive Assessment Reports regarding the state of "scientific, technical, and socio-economic knowledge on climate change."

The IPCC, composed of 195 member states, was established in 1988 and headquartered in Geneva, Switzerland. The IPCC compiles comprehensive Assessment Reports regarding the state of "scientific, technical, and socio-economic knowledge on climate change."

The body is responsible for furthering our knowledge related to human-induced climate change. Each of these Assessment Reports has directly powered international policymaking around climate change.

In 2007, the IPCC and US Vice-President Al Gore were jointly given the Nobel Peace Prize “for their efforts to build up and disseminate greater knowledge about man-made climate change, and to lay the foundations for the measures that are needed to counteract such change”.

Internal carbon pricing

Internal carbon pricing is a corporate financial strategy where a company assigns a monetary value to its carbon emissions, typically in the form of a price per ton of carbon dioxide emitted. This internal price is used to guide decision-making across the organisation, encouraging investment in cleaner, more efficient technologies and practices.

Internal carbon pricing serves as a tool for companies to internalise the external costs of their carbon emissions, aligning business operations with broader sustainability goals and regulatory environments. This approach facilitates the reduction of a company's carbon footprint and incentivizes innovation in low-carbon technologies.


Kyoto Protocol

The Kyoto Protocol was the first treaty that committed the 87 partaking nations to reduce their greenhouse gas emissions based on scientific consensus. The treaty was adopted in Kyoto, Japan, in 1997 and was implemented eight years later in 2005.

The primary goal of the Kyoto Protocol was to control emissions of the main human-caused greenhouse gases. The Kyoto Protocol's first commitment period ended in 2012 when a second commitment period was agreed to, known as the Doha Amendment. The Protocol set a precedent for countries to act on the climate urgency.

Long-term science-based targets

Long-term science-based targets are achieved when decarbonisation reaches over 90% as compared to baseline emissions, to achieve net-zero by 2050, with residual targets addressed with neutralisation.

Methane (CH4)

Methane (CH4), a primary constituent of natural gas, is a greenhouse gas, and its presence in the atmosphere affects our climate system and the Earth's temperature.

Although CO2 has a longer-lasting effect on our climate, methane has a much higher Global Warming Potential (GWP) than carbon dioxide.

According to the Environmental Defence Fund, methane accounts for at least 25% of today's global warming. Agriculture (primarily through manure and gastroenteric releases, but also through rice cultivation) is responsible for around a quarter of the methane emissions, followed by the energy sector.

Mitigation

Climate change mitigation describes the efforts to minimise or avoid the emission of greenhouse gases. Climate change mitigation differs from climate adaptation, which entails actions to adjust our lives or infrastructure to a new reality. Some examples of mitigation could be switching to renewable energy or making older equipment more energy efficient to limit the effects of climate change.

Mitigation hierarchy

Mitigation Hierarchy means that decarbonisation should always come before "beyond value chain mitigation (BVCM)": compensation and neutralisation. Net-zero can only be achieved by deep emission cuts of at least 90% by 2050, after which residual emissions are addressed with neutralisation.

Near-term science-based targets

Near-term science-based targets are defined by targets for the next five to ten years, halving emissions as compared to a baseline year. A first reality check on a company’s journey to net-zero 2050.

Net-zero

Net-zero means cutting greenhouse gas emissions to as close to zero as possible, with any remaining emissions re-absorbed from the atmosphere by oceans and forests, for instance. Net-zero is reached when a business has eliminated all the carbon emissions it could and then compensated the remaining emissions with beyond value chain mitigation.

The net-zero process starts with calculating emissions across Scope 1, 2, and 3, setting science-based targets, developing decarbonisation pathways until 2030, and gradually moving towards long-term carbon capture, storage, and sequestration for those emissions which cannot be reduced.

Neutralisation

Neutralisation corresponds to the removal of carbon from the atmosphere and its permanent storage. It can also be referred to as Carbon Dioxide Removal (CDR). Projects include inter alia Direct Air Capture (DAC) and Bioenergy with carbon capture and storage (BECCS).

Nitrous oxide (N2O)

Nitrous oxide (N2O), also known as laughing gas, contributes to the greenhouse effect.

In addition to natural sources, agriculture and fertilisers produce nitrous oxide. Around 40% of the total N2O emissions globally come from human activities. The IPCC has calculated that nitrous oxide comprises about 6% of all greenhouse gas emissions, and its emissions rose 30% in the past forty years.

Non-Financial Reporting Directive

The Non-Financial Reporting Directive, also called the Directive 2014/95/EU of the European Parliament, lays out the regulation around the disclosure of non-financial and diversity information for larger companies.

This directive helps investors, consumers, policymakers, and other stakeholders gauge a company's non-financial performance.

Offsetting

Offsetting is a process that entails the reduction or removal of emissions of carbon dioxide or other greenhouse gases to compensate for emissions made elsewhere. Carbon offset projects allow companies and individuals to invest in quantifiable environmental projects to balance their carbon emissions.

Offsetting technologies include reforestation, cleaner cooking stoves, and carbon capture. It is part of any corporate sustainability strategy that aims to reach net-zero when it complements a decarbonisation strategy.

Ozone (O3)

Ozone (O3) is a pale blue gas constituted of three oxygen atoms that is present in different layers of our atmosphere.

Usually, O3 is not emitted into the air directly but is developed at ground level through a chemical reaction. Ozone layer depletion does not cause global warming, but it can be damaging to human health. It is one of the planetary boundaries defined by the Stockholm Resilience Center.

According to NASA, negative shifts in the ozone layer are offset by positive changes in human behaviour, which allows the ozone layer to reform.

Paris Climate Agreement

The Paris Climate Agreement aims to limit global warming to "well below 2°C, and preferably below 1.5°C." It is an international treaty adopted by 196 nations at COP21 in Paris in 2015 and came into force a year later in 2016.

The Paris Agreement has requested participating countries to formulate actions they plan to take to reduce greenhouse gas emissions. The commitments are known as Nationally Determined Contributions (NDCs). Within the agreement, countries developed an enhanced transparency framework (ETF) to report transparently and track progress on the actions taken.

The Paris Climate Agreement covers climate change mitigation, adaptation, and finance.

Purchased goods and services emissions (Scope 3 Category 1)

Purchased goods and services emissions, categorised under Scope 3 Category 1 of the Greenhouse Gas (GHG) Protocol, represent the indirect emissions arising from a reporting company's acquisition of goods and services. 

Unlike Scope 1 and 2 emissions, which account for direct emissions from owned or controlled sources and indirect emissions from the generation of purchased energy, respectively, Scope 3 emissions encompass all other indirect emissions that occur within a company's value chain. This includes upstream and downstream emissions, with purchased goods and services emissions forming a significant part of the upstream emissions.

Science-Based Targets Initiative

The Science Based Targets initiative (SBTi) promotes best practices and well-defined guidelines to reduce emissions and provides target-setting methods based on climate science. The initiative helps businesses set carbon reduction goals compliant with the Paris Agreement Targets.

Science-Based Targets (SBTs) focus on the number of emissions that needs to be decreased to comply with the targets set out in the Paris Climate Agreement.

Scope 1 emissions

Scope 1 emissions are direct emissions from company-owned and controlled resources. In other words, they are emissions released into the atmosphere directly resulting from a set of activities.

Examples can be on-site combustion, organisation-owned fossil-fuel power plants, or the emissions from the company fleet.

Scope 2 emissions

Scope 2 emissions are indirect emissions from the generation of purchased energy from a utility provider. They include all GHG emissions released into the atmosphere from the consumption of purchased electricity, steam, heat, and cooling.

Scope 3 emissions

Scope 3 emissions, also known as value chain emissions, are all indirect emissions that occur in the reporting company's upstream and downstream supply chain. As defined by the GHG Protocol, Scope 3 emissions are separated into 15 different categories, including business travel, waste disposal, and purchased goods and services.

Scope 4 emissions

Scope 4 emissions, commonly referred to as "avoided emissions," are defined as the reductions in greenhouse gas emissions that occur outside of a product's life cycle or value chain but as a direct result of using that product. This concept, introduced by the World Resources Institute in 2013, extends the scope of carbon accounting beyond the direct and indirect emissions associated with a company's operations (covered under Scope 1, 2, and 3 emissions) to include the positive impact of its products and services in reducing emissions elsewhere.

For instance, if a company produces an energy-efficient appliance, the emissions saved by consumers using this appliance instead of a less efficient model would fall under Scope 4 emissions.

Streamlined Energy & Carbon Reporting (SECR)

The SECR requires 11,900 UK companies to disclose their energy and carbon emissions. The reporting framework encourages the implementation of energy efficiency measures with economic and environmental benefits to support companies in cutting costs and improving productivity while reducing carbon emissions. The reporting requirement has been in place since April 2019.

Sustainable Development Goals (SDGs)

The Sustainable Development Goals (SDGs), developed by The United Nations General Assembly (UN-GA), provide a "blueprint for peace and prosperity both for people and for the planet". They are an urgent call for action by all United Nations Member States.

The Sustainable Development Goals were set up in 2015 and are intended to be accomplished by 2030.

There are 17 SGDs:

  1. No poverty
  2. Zero hunger
  3. Good health and well-being
  4. Quality education
  5. Gender equality
  6. Clean water and sanitisation
  7. Affordable and clean energy
  8. Decent work and economic growth
  9. Industry innovation and infrastructure
  10. Reduced inequalities
  11. Sustainable cities and communities
  12. Responsible consumption and production
  13. Climate action
  14. Life below water
  15. Life on land
  16. Peace, justice and strong institutions
  17. Partnerships for the goals.

Sustainable Finance Disclosure Regulation (SFDR)

The Sustainable Finance Disclosure Regulation (SFDR) is a European regulation that came into effect in March 2021 to increase the transparency on sustainability among financial institutions and market participants.

The SFDR applies to financial institutions such as banks, insurers, and asset managers operating in the European Union and has three main goals:

1. To improve disclosures so asset owners and retail clients can understand and compare financial products' sustainability characteristics.

2. To ensure a level playing field within the European Union so that European companies will not receive unfair competition from companies outside the European Union.

3. To counter greenwashing.

Task Force on Climate-related Financial Disclosures (TCFD)

The Financial Stability Board created the Task Force on Climate-related Financial Disclosures (TCFD) to improve and increase the reporting on a company's climate-related risks and opportunities as well as their financial impact on the business.

The TCFD is an organisation of 32 members and has established a framework helping public companies and other organisations to disclose climate-related risks and opportunities through their existing reporting processes.

Tipping point

A climate tipping point occurs when a slight change in forcing triggers a strongly nonlinear response in the internal dynamics of part of the climate system, qualitatively changing its future state. Human-induced climate change could push several large-scale ‘tipping elements’ past their respective tipping points. These elements include the Atlantic thermohaline circulation (THC), West Antarctic ice sheet, Greenland ice sheet, Amazon rainforest, boreal forests, West African monsoon, Indian summer monsoon, and El Niño/Southern Oscillation (ENSO).

Two-degree limit / Two-degree target

The Paris Agreement's goal is to limit global warming to well below 2°C, preferably to 1.5 degrees Celsius, compared to pre-industrial levels. To achieve this long-term temperature goal, countries aim to reach the global peaking of greenhouse gas emissions as soon as possible to achieve a climate-neutral world by mid-century.

UN Framework Convention on Climate Change (UNFCCC)

The UN Framework Convention on Climate Change (UNFCCC) created an international environmental treaty to combat "dangerous human interference with the climate system" partially through stabilising greenhouse gases in the atmosphere.

One hundred fifty-four nations signed the treaty in 1992 during UNCED, informally known as the Earth Summit, and entered into force in 1994. The Kyoto Protocol was the first implementation of measures under the UNFCCC. This protocol was substituted by the Paris Agreement, which came into force in 2016.

Upstream transportation and distribution (Scope 3 Category 4)

Scope 3 Category 4, as defined by the Greenhouse Gas Protocol, encompasses emissions from the transportation and distribution of products purchased by a company within the reporting year from its tier 1 suppliers to its operations, excluding those owned or operated by the company. This includes emissions from third-party logistics and distribution services, covering both inbound and outbound logistics, as well as transportation between the company's facilities.

It captures emissions from various modes of transport—air, rail, road, and marine—as well as storage emissions in warehouses and distribution centres. These emissions are considered upstream as they arise from purchased services and products before reaching the company, differentiating them from direct emissions (Scope 1) and indirect emissions from purchased energy (Scope 2).

Value chain emissions

Value chain emissions, also known as Scope 3 emissions, account for the most significant part of many organisations' total Corporate Carbon Footprint (CCF).

According to the GHG Protocol, value chain emissions are divided into 15 different categories, although not every category is relevant to each type of company or organisation. The categories include business travel, waste disposal, and purchased goods and services.

Voluntary Emission Reductions (VER)

Voluntary Emission Reductions (VER) are emission reductions made voluntarily and not mandated by any regulation or legislation. They usually originate from the will of an organisation to take proactive climate action.

The voluntary market functions outside of the compliance market. Businesses, organisations, and individuals that wish to offset with no regulatory obligation can use Voluntary Emission Reductions. The carbon credits generated under the VER cannot be used in meeting governmental compliance measures as stated by the Kyoto Protocol.

Weather

Weather is the state of the atmosphere at a particular place during a specific time, including pressure, temperature, wind, humidity, precipitation, and cloud cover. Weather is different from climate, which is all weather conditions for a particular location averaged over about 30 years.

Zero carbon

Zero carbon means a product or service produces no carbon emissions. For example, renewables like wind and solar are referred to as zero carbon, as they do not emit carbon when producing electricity.

Where net-zero refers to cancelling or balancing any carbon a company produces, zero carbon refers to a product or service emitting no CO2e. Further, net-zero carbon emissions mean that an activity releases net-zero carbon emissions into the atmosphere.

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