Glossary of sustainability terms
This glossary is here as a resource for you to browse and dive into sustainability terms whenever you need. If you notice a term that’s missing or find something that could be clearer, feel free to contact us—we’re always happy to update and improve.
CBAM
Carbon Border Adjustment Mechanism
CBAM is a European Union policy aimed at placing a carbon price on imports of goods to ensure that foreign companies meet the same environmental standards as European firms and to prevent carbon leakage, where companies might move production to countries with less stringent climate policies.
CBAM is in a transitional phase as of October 1, 2023, and will move to its definitive phase in January 2026. As of 2026, importers will start paying for CBAM certificates, which are linked to the carbon price under the EU Emissions Trading System (ETS). The cost of these certificates will mirror the price of EU ETS allowances, which fluctuate based on the carbon market. In 2023, this price has varied but has generally ranged around €80-100 per ton of CO2. However, the exact financial burden will depend on both market prices and the carbon footprint of imported goods.
For companies in sectors like steel, cement, or aluminium, this could significantly impact the cost of doing business in the EU, especially if they source products from countries with no carbon pricing or lower environmental standards. This mechanism will gradually phase in, giving companies some time to adapt their supply chains and carbon management practices
Source: European Commission (taxation-customs.ec.europa.eu)
CDP
Carbon Disclosure Project
CDP is a non-profit that provides a global platform for companies, cities, and governments to disclose environmental data, offering detailed insights into their climate-related risks, opportunities, and overall environmental performance.
CDP operates a rating system that scores companies from A to D-, based on how comprehensively they disclose their environmental impact and manage risks related to climate change, water security, and deforestation. Companies that earn an A rating demonstrate leadership in transparency and action, while those receiving lower scores are seen as needing improvement in managing their environmental impact
For businesses, a strong CDP score can enhance their reputation with investors and help meet growing demands for environmental accountability from both regulators and the market.
Source: CDP Official Website
CE
Circular Economy
CE is a sustainability-focused economic model that aims to minimize waste and make the most of resources by keeping products, materials, and energy in use for as long as possible. Unlike the traditional linear economy (take, make, dispose), the circular economy emphasizes reusability, repairability, recycling, and remanufacturing of products, with the goal of extending their lifecycle and reducing environmental impact.
Key elements include designing out waste, keeping materials in circulation, and supporting regenerative systems. Regulations like the Eco-Design regulations and ESPR (Eco-Design for Sustainable Products Regulation) help drive the shift toward a circular economy by setting sustainability requirements for product durability, repairability, and recyclability.
Source: Ellen MacArthur Foundation
Circular solutions,
circularity &
closing the loops
Circular Solutions, Implementing Circularity, Closing the Loops are terms refer to strategies aimed at integrating circular economy principles into business operations, aiming to minimize waste and keep resources in use for as long as possible.
Source: Ellen MacArthur Foundation
CSRD
Corporate Sustainability Reporting Directive
CSRD is a European Union directive that requires companies to report on their ESG (environmental, social and governance) performance. It sets the legal obligation for companies to provide detailed sustainability information.
The CSRD is closely linked with the ESRS (European Sustainability Reporting Standards), which provide the specific guidelines on how companies should report their ESG performance in compliance with the directive.
CSRD applies to a broad range of companies, including:
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All large companies in the EU, which are defined as those meeting two out of three criteria: more than 250 employees, over €40 million in turnover, or more than €20 million in total assets.
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Listed companies, including those on regulated markets within the EU, regardless of size.
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Non-EU companies with substantial operations in the EU (generating more than €150 million in revenue from EU-based activities).
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Small and medium-sized enterprises (SMEs) that are publicly listed are also included, though they will have simpler reporting requirements and more time to comply.
The directive expands the number of companies required to report sustainability data compared to previous regulations, making it essential for businesses to align their practices with these standards.
Source: European Union Official Journal
DMA
Double Materiality Assessment
DMA is a process used by companies to evaluate both the financial impact of environmental, social, and governance (ESG) issues and how the company itself affects these areas.It is called "double" materiality because it considers two dimensions: financial materiality (how ESG factors impact the company’s financial performance) and impact materiality (how the company’s activities affect external stakeholders and the environment).
For companies, a DMA can help identify material impacts, risks and opportunities (IROs), making it a useful tool for long-term business planning and compliance with CSRD.
Source: European Financial Reporting Advisory Group (EFRAG)
Eco-Design regulations
Eco-Design regulations are European Union regulations that set minimum requirements for the environmental performance of energy-related products, focusing on reducing their overall environmental impact throughout their lifecycle. They are part of the Energy-related Products Directive (ErP Directive), which ensure that products sold in the EU meet specific criteria for energy efficiency, recyclability, repairability, and durability.
The Eco-Design Regulation aims to extend the lifespan of products, reduce energy consumption, and limit waste by encouraging the design of more sustainable products. This framework covers a wide range of products, including household appliances, lighting, and industrial equipment, and is continuously evolving to include more sectors and stricter standards. For example, products must now increasingly be designed to be easier to disassemble for recycling or repair, which helps reduce waste and supports the circular economy.
In addition to improving energy efficiency, these standards are gradually expanding to cover other sustainability aspects, such as the use of sustainable materials and reducing the overall carbon footprint of products.
The next phase of these regulations will be enhanced by the upcoming ESPR (Eco-Design for Sustainable Products Regulation).
Source: European Commission
ESG
Environmental, Social & Governance
ESG is a set of criteria used to evaluate a company's performance the areas environmental, social, and governance, influencing investment and operational strategies. ESG is often seen in connection with CSRD and ESRS, as these frameworks require companies to report on their ESG performance in a structured way.
Source: Global Reporting Initiative
ESPR
Ecodesign for Sustainable Products Regulation
ESPR is an upcoming regulation by the European Union that is set to expand the scope of existing Eco-Design regulations to cover more product categories and to focus more deeply on circular economy principles, such as promoting durability, reparability, reusability, and recycling. This regulation will impose even stricter requirements, ensuring that products are designed with sustainability at the forefront, and it will help reduce waste and improve resource efficiency across the EU market.
Source: European Parliament and Council
ESRS
European Sustainability Reporting Standards
ESRS are standards developed under the CSRD to guide companies in how to report their environmental, social, and governance (ESG) performance in a consistent and transparent manner. The ESRS are divided into several key categories:
Cross-Cutting Standards:
These provide the general principles for sustainability reporting, including how to apply double materiality (as discussed under DMA) and how to ensure data quality and consistency across ESG areas. This section helps companies align sustainability with their broader financial reporting.
Environmental Standards
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Climate Change: Including the company’s greenhouse gas (GHG) emissions, covering Scope 1, Scope 2, and Scope 3 emissions.
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Pollution: Reporting on pollution caused by company activities and products.
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Water and Marine Resources: Reporting impacts related to water use and marine ecosystems.
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Biodiversity and Ecosystems: Assessing the company’s effect on biodiversity and land use.
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Circular Economy: Reporting on resource use, waste management, and product lifecycle considerations (linking to Eco-Design and Cradle2Cradle).
Social Standards
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Working Conditions: Fair wages, work-life balance, health and safety, etc.
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Equal Opportunities: Diversity, equity, and inclusion initiatives.
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Human Rights: Ensuring that company activities respect international human rights.
Governance Standards
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Business Conduct: Anti-corruption, ethical practices, and tax transparency.
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Board Oversight: How the company’s governance structure oversees ESG risks and opportunities.
Source: European Financial Reporting Advisory Group (EFRAG)
EU Taxonomy
The EU Taxonomy is a classification system established by the European Union that defines which economic activities can be considered environmentally sustainable. The EU Taxonomy provides clear criteria for identifying environmentally beneficial activities, aiming to drive sustainable investments. It is designed to help companies, investors, and policymakers navigate the transition to a low-carbon economy by focusing on six environmental objectives, including climate change mitigation and adaptation, water and marine resources, and biodiversity.
When an activity is eligible under the EU Taxonomy, it means that the activity falls within a sector or category that can potentially be considered environmentally sustainable. However, to be fully aligned with the Taxonomy, the activity must meet specific technical screening criteria and avoid significant harm to other environmental objectives. Being eligible is the first step, but full alignment is required for a company to label the activity as sustainable, which can have implications for attracting investment, meeting regulatory standards, and reporting under frameworks like the CSRD.
Source: European Commission
GHG
Greenhouse Gases
GHG are gases like carbon dioxide and methane that trap heat in the atmosphere, contributing to global warming and climate change. Under the CSRD, companies are required to report their GHG emissions in compliance with the ESRS standards. The ESRS specifically outlines how companies should report Scope 1, Scope 2, and Scope 3 emissions, ensuring consistency and transparency in their environmental disclosures
Source: Intergovernmental Panel on Climate Change
IROs
Impact, Risk & Opportunities
IROs are defined under the CSRD framework, IROs refer to the assessment of a company’s impact on sustainability issues, the risks it faces due to environmental, social, and governance (ESG) factors, and the opportunities that arise from addressing these factors. The IRO concept helps companies integrate ESG considerations into their overall risk management and business strategy, focusing not only on compliance but also on leveraging sustainability for competitive advantage.
Source: Intergovernmental Panel on Climate Change
LCA
Life Cycle Assessment
LCA is a method used to evaluate the environmental impact of a product or service across its entire lifecycle, from raw material extraction to disposal. LCA provides a holistic view of a product’s total environmental footprint, covering multiple impact categories such as GHG emissions, water use, resource depletion, and pollution. LCA allow businesses to identify the most significant areas for improvement—insights that are often difficult to estimate accurately without this form of quantification.
LCA requires collecting detailed data from multiple stages of the supply chain, which can involve numerous suppliers, transportation modes, and waste management processes. Setting clear system boundaries—deciding which phases of the product lifecycle to include—is crucial to ensuring meaningful results.
Source: ISO 14040 and 14044 (International Organization for Standardization)
Net Zero
Net Zero is a concept that refers to achieving a balance between the greenhouse gas emissions produced and those removed from the atmosphere, but with a strong focus on reducing emissions as much as possible first. It requires companies to cut their emissions across their entire value chain (Scope 1, 2, and 3) to the lowest feasible level before considering any form of carbon removal. Unlike carbon neutrality, Net Zero emphasizes the reduction of emissions at the source rather than relying on carbon offsetting, which is seen as a last resort.
Source: Oxford Net Zero Initiative
Product Carbon Footprint
The total amount of greenhouse gases (GHG) emitted during the entire lifecycle of a product, from production to disposal, measured in carbon dioxide equivalents. It focuses on the climate impact of a product, expressed in CO2 equivalents. While narrower than LCA, which assesses various environmental impacts, the product carbon footprint is a valuable tool for companies aiming to quantify and reduce their carbon emissions. It provides clear insights that can help businesses meet carbon reduction goals and align with sustainability initiatives like SBT and CDP, making it a crucial component in managing and improving environmental performance.
Source: Greenhouse Gas Protocol
REACH
Registration, Evaluation, Authorisation, and Restriction of Chemicals
REACH is a European Union regulation ensuring the safety of chemical substances by requiring companies to register and assess the risks posed by chemicals.
Companies affected by REACH must submit information about hazardous substances in their products, such as lead or mercury. For example, in heat pumps, substances like fluorinated gases (F-gases) used in refrigerants must be carefully managed and reported, as they contribute to global warming.
Compliance with REACH is critical for companies operating in the EU, particularly those handling hazardous substances like SVHC.
Source: European Chemicals Agency (ECHA)
SBT / SBTi
Science Based Targets (initiative)
SBTi An initiative that helps companies set emission reduction targets aligned with climate science to limit global warming to below 1.5°C. This initiative is a partnership between several prominent non-governmental organizations: CDP, the United Nations Global Compact, the World Resources Institute (WRI), and the World Wide Fund for Nature (WWF).
The SBTi has a target validation process, where companies submit their emissions reduction targets for approval. The process involves assessing whether the targets are ambitious enough to meet global climate goals and are consistent with the Paris Agreement. Once validated, companies can publicly communicate their commitment, which helps build credibility with stakeholders.
Source: SBTi Official Website
SCIP Database
Substances of Concern in Products Database
A database managed by the European Chemicals Agency (ECHA), which gathers information on hazardous substances found in products and helps ensure safer chemicals use. Ensuring compliance with SCIP submissions is crucial for staying in line with EU regulations and avoiding penalties.
Source: European Chemicals Agency (ECHA)
Scope 1 emissions
Scope 1 emissions are direct greenhouse gas emissions from sources that a company owns or controls. This includes emissions from activities like on-site fuel combustion, company vehicles, and industrial processes. For example, emissions from a company’s own manufacturing facility or fleet of vehicles would fall under Scope 1.
Source: Greenhouse Gas Protocol
Scope 2 emissions
Scope 2 emissions are indirect greenhouse gas emissions resulting from the consumption of purchased energy, such as electricity, steam, heating, or cooling. While the company does not directly produce these emissions, they occur at the energy supplier’s facilities.
Source: Greenhouse Gas Protocol
Scope 3 emissions
Indirect greenhouse gas emissions that occur in a company’s value chain, including those from suppliers, product use, and waste disposal. Scope 3 emissions are often the largest part of a company’s carbon footprint, and they can be challenging to track and reduce. For example Scope 3 emissions could include:
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Upstream emissions: From the extraction and processing of raw materials, transportation, and emissions from suppliers.
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Downstream emissions: From the use of the product (such as the energy consumed by the heat pump during its lifetime) and the end-of-life treatment (recycling or disposal of the unit).
Compared to Scope 1 (direct emissions from owned or controlled sources) and Scope 2 (indirect emissions from purchased energy), Scope 3 is the most complex to calculate because it involves the entire value chain. Estimating these emissions often requires assumptions and the establishment of clear system boundaries—defining what parts of the value chain are included or excluded. Companies need to use reliable data from suppliers and make estimates where exact figures are unavailable, which makes the process both resource-intensive and data-driven.
Source: Greenhouse Gas Protocol
SVHC
Substances of Very High Concern
SVHC are substances of very high concern identified under REACH that can pose serious health or environmental risks, subject to strict regulations in Europe.
Examples of SVHCs include phthalates, used in plastic components, and bisphenol A (BPA), which is found in certain plastics and coatings. In heat pumps, some flame retardants or specific refrigerants may also fall under the SVHC category, requiring companies to monitor and potentially substitute these substances to ensure compliance and reduce health risks.
Source: European Chemicals Agency (ECHA)