The Essential ESG Glossary: 25 Terms Explained Simply
Every article on this site eventually runs into the same wall: a term gets used before it’s been explained, because explaining it properly takes a whole article of its own. This glossary is the fix. Twenty-five terms, plain English, one real example each, grouped so related ideas sit near each other rather than scattered alphabetically. Where this site has already covered a term in real depth, this entry says so, so this page can work as a map back to the rest of the series rather than a dead end.
The Foundations
1. ESG: Shorthand for Environmental, Social, and Governance, the three categories most sustainability reporting is organized around. It’s a reporting lens, not a certification or a score by itself.
Example: a company’s ESG program might cover its factory emissions (E), how it treats warehouse workers (S), and whether its board is independent from management (G), all under one umbrella term.
2. Sustainability: A broader idea than ESG. ESG is mainly a disclosure and risk framework; sustainability is the underlying goal, running a business in a way that holds up over the long term without depleting the resources or communities it depends on. Example: Nestlé’s “Road to Net Zero” programme is a sustainability strategy; the metrics it reports against GRI and ESRS are the ESG layer sitting on top of it.
3. Materiality: The test that decides which topics actually make it into a report. Not every possible issue is “material” to every company. Example: covered in full depth, including its legal origin in US securities law, in the dedicated materiality article on this site.
4. Double Materiality: A requirement, specifically under CSRD and ESRS, to assess a topic from two angles at once: does it affect the company financially, and does the company affect the world through it. A topic qualifies for disclosure if it clears either bar. Example: Allianz discloses biodiversity as material because its investments affect ecosystems and because biodiversity loss creates real financial risk to its insurance and asset management business, both true at once.
5. Stakeholder vs. Shareholder: A dividing line between reporting standards. Stakeholder-focused standards ask how a company affects the world; shareholder-focused standards ask how the world affects the company’s finances.
Example: GRI is built around stakeholders; SASB and ISSB are built around shareholders and investors, as covered in the alphabet soup article on this site.
Standards and Regulation
6. GRI: The Global Reporting Initiative, the oldest and most widely used voluntary sustainability standard, built around stakeholder impact rather than investor risk. Example: KPMG Germany maps its material topics against GRI-style categories in its own Impact Report.
7. SASB: The Sustainability Accounting Standards Board, an investor-focused standard that sorts companies into 77 industry-specific disclosure templates. Now absorbed into the IFRS Foundation.
Example: publishing group RELX reports against the SASB standard written specifically for professional and commercial services.
8. TCFD: The Task Force on Climate-related Financial Disclosures, a four-pillar climate risk framework, governance, strategy, risk management, and metrics and targets. Formally disbanded in 2023 and folded entirely into IFRS S2.
Example: companies still label disclosures “TCFD-aligned” as shorthand, even though the task force itself no longer exists.
9. ISSB / IFRS S1 and S2: The International Sustainability Standards Board’s global investor-facing baseline, created by consolidating TCFD and SASB’s investor-focused work into two standards.
Example: Amphenol Corporation cites ISSB recommendations directly in its SEC filings.
10. CSRD: The EU’s Corporate Sustainability Reporting Directive, binding law requiring large EU companies to report under ESRS with independent assurance.
Example: covered across multiple articles on this site, most directly in the CSRD explainer using Siemens, Allianz, BASF, Deutsche Telekom, and Ørsted as real cases.
11. ESRS: The European Sustainability Reporting Standards, the detailed rulebook that gives CSRD its actual content requirements, developed by EFRAG. CSRD is the law; ESRS is what the law requires a company to actually disclose.
Example: a company’s material topics under ESRS are never fixed by the standard itself, they’re the output of that company’s own double materiality assessment.
12. EU Taxonomy: A separate EU classification system that defines which specific economic activities count as environmentally sustainable, used to calculate what share of a company’s revenue is “green.”
Example: Siemens Mobility reports 87 percent EU Taxonomy alignment for its revenue, reflecting how much of its rail business meets the Taxonomy’s strict environmental criteria.
13. CSDDD: The Corporate Sustainability Due Diligence Directive, a separate EU law requiring large companies to identify and address human rights and environmental risks in their own operations and supply chains. Narrowed in 2026 to companies above 5,000 employees and €1.5 billion in turnover.
Example: a company subject to CSDDD has to investigate conditions at its suppliers, not just report on its own factories.
Emissions and Climate
14. Scope 1, 2, and 3 Emissions: The GHG Protocol’s three-part structure for corporate emissions: Scope 1 is direct emissions a company controls, Scope 2 is emissions from purchased energy, Scope 3 is everything else across the value chain.
Example: covered in full, including real divergent profiles from an airline, a food company, and a bank, in the dedicated Scope 1, 2, 3 article on this site.
15. Net Zero: A state where a company’s remaining greenhouse gas emissions are balanced by an equivalent amount removed from the atmosphere, not simply “very low emissions.”
Example: Siemens targets net-zero greenhouse gas emissions across its entire value chain by 2050, with a 90 percent absolute reduction plus neutralization of what’s left.
16. Science Based Targets (SBTi): Emissions reduction targets independently assessed against what climate science says is needed to limit warming in line with the Paris Agreement, rather than a target a company simply invents itself.
Example: Siemens holds an SBTi-validated Net-Zero commitment covering its Scope 1, 2, and 3 emissions targets.
17. Carbon Offset / Carbon Credit: A tradable unit representing one tonne of CO2e either avoided or removed elsewhere, used to compensate for emissions a company can’t yet eliminate directly.
Example: Siemens plans to use high-quality, independently verified carbon credits to compensate for residual Scope 1 and 2 emissions it can’t eliminate by 2030.
18. Transition Plan: A company’s documented roadmap for how its business model and strategy will actually change to align with climate goals, not just a target number with no mechanism behind it.
Example: how much credit a transition plan deserves is genuinely contested, as shown by TotalEnergies scoring very differently across rating agencies depending on how much weight each one gives to its renewable transition versus its continued fossil fuel production, covered in the ESG ratings article on this site.
19. Just Transition: The principle that the shift to a low-carbon economy should not come at the expense of workers and communities dependent on the industries being phased out. Example: a coal-region workforce retraining program tied to a utility’s decarbonization plan is a just transition measure, not just a climate measure.
Assurance and Trust
20. Assurance (Limited vs. Reasonable): Independent, third-party checking of a company’s disclosed data. Limited assurance is a lighter-touch review; reasonable assurance involves deeper testing, closer to a financial audit.
Example: covered in full, using five real 2025 assurance statements, in the dedicated assurance article on this site.
21. Greenwashing: Making a sustainability claim that’s misleading, exaggerated, or unsupported by the underlying data, whether or not it’s intentional.
Example: a company advertising a product as “carbon neutral” based only on offsets, without disclosing that its own operational emissions actually rose that year, is a classic pattern regulators and journalists look for.
22. Greenhushing: The opposite problem: deliberately staying quiet about real sustainability work, or scaling back public reporting, specifically to avoid political or investor scrutiny. Example: nearly 300 companies that published a sustainability report in 2024 didn’t publish one in 2025, a pattern several analysts have linked to rising political backlash against ESG in some markets rather than any actual change in underlying performance.
Ratings and Finance
23. ESG Rating (MSCI, Sustainalytics, CDP): Third-party scores meant to summarize a company’s ESG performance, produced by independent providers using their own, frequently very different, methodologies.
Example: covered in full, including why the same company can score well with one provider and poorly with another, in the dedicated ESG ratings article on this site.
24. Sustainability-Linked Loan / Bond: A financing instrument where the interest rate a company pays actually moves, up or down, depending on whether it hits specific, predefined ESG performance targets.
Example: a company that misses its agreed emissions-reduction target under a sustainability-linked loan pays a higher interest rate as a contractual penalty, not just a reputational one.
25. Biodiversity / TNFD: Biodiversity refers to the variety of life in an ecosystem; TNFD, the Taskforce on Nature-related Financial Disclosures, is the emerging framework, modeled directly on TCFD’s structure, for reporting how a company’s operations depend on and affect nature. Example: Allianz runs a dedicated biodiversity pilot assessment across its investment asset classes, treating nature risk as a financial materiality issue for an insurer and asset manager, not just an environmental one.
Using This Glossary
None of these 25 terms exist in isolation, and that’s really the point of putting them on one page. Materiality decides what a company reports; Scope 1, 2, and 3 decide how its emissions specifically get counted; CSRD and ESRS decide whether any of it is legally mandatory; assurance decides whether it can be trusted; and ESG ratings decide how the outside world scores the result, often disagreeing with each other in the process. Read this page as the connective layer underneath every other article on this site, and come back to it whenever a term shows up somewhere else without a full explanation attached.
References
Greenhouse Gas Protocol, A Corporate Accounting and Reporting Standard, ghgprotocol.org
Global Reporting Initiative, GRI Standards, globalreporting.org
IFRS Foundation, IFRS S1 and IFRS S2, ifrs.org
EFRAG, European Sustainability Reporting Standards (ESRS), efrag.org
Regulation (EU) 2020/852, the EU Taxonomy Regulation
Directive (EU) 2022/2464, the Corporate Sustainability Reporting Directive
Science Based Targets initiative (SBTi), Net-Zero Standard, sciencebasedtargets.org
Taskforce on Nature-related Financial Disclosures (TNFD), Recommendations, tnfd.global
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