ESG boudoirs have been lately buzzing with talks about the new EU regulation - what it is, whom it concerns, when it is to come into force, what it will require, … And there is one specific abbreviation popping up frequently - ESRS. This term refers to the European Sustainability Reporting Standards, which we introduced in our article Everything You Need to Know About CSRD.
Did you already have a chance to carefully read through the ESRS guidelines? We did and we must admit… It is a lot to take in! If you went through the disclosure requirements as published by EFRAG, perhaps you paused at several words that are often repeated but can turn out to be somewhat confusing. For that specific reason, we have put together a short glossary including terms which might be unclear. Hopefully, this overview will help you get your head around what kinds of indicators should be reported and what documentation needs to accompany your ESG report.
In case you have further questions, please feel free to reach out!
Climate transition plan
Climate transition plan outlines how an organisation will adapt as we move towards a low-carbon economy. The transition plan has a specific deadline and shows how the organisation's existing assets, operations and the entire business model will be adjusted to achieve climate neutrality by 2050. It should describe goals to reduce or avoid the emission of greenhouse gasses, interim milestones, as well as processes, policies and activities that will help the organisation meet those high-level goals (for example, linking bonuses to these goals).
Biodiversity transition plan
As part of an organisation's climate transition plan, companies need to outline how they will deliver 'nature-positive' outcomes and protect, enhance and restore nature both on land and underwater. The plan should outline a high-level end goal with respect to nature and show how the organisation will align business activities, financing and operations in line with that goal. Moreover, the plan provides information on specific activities that will help meet the goal and nature-related, measurable targets and metrics (KPIs) as outlined in the EU Biodiversity Strategy for 2030.
Policy
A system of guidelines, principles and frameworks designed by an organisation to guide decisions in order to achieve long-term goals outlined in the transition plans.
Actions (a.k.a. Activities)
Activities and action plans (including transition plans) are concrete steps which organisations take to achieve short and long-term goals in line with the objective of achieving climate neutrality by 2050. This also includes investment into financial, human or technological resources that will support the ultimate objective - the climate neutrality.
Targets (a.k.a. Goals)
Targets are measurable, outcome-oriented goals that an organisation is planning to achieve in relation to material impacts, risks or opportunities.
Metrics (a.k.a. KPIs)
Qualitative and quantitative measures that show a company’s progress in delivering on its sustainability-related policies and goals, related to the affected people, the environment and the company's conduct.
Engagement process
An organisation uses the engagement process to engage relevant stakeholders with a clear purpose of achieving agreed goals and KPIs. It requires the organisation to report, explain and answer to stakeholders for its decisions, actions, and performance. Stakeholders are involved in identifying, understanding and responding to sustainability issues and concerns.
Affected community
Any people or communities located in an organisation's (or its value chain's) geographical proximity who are subjected to actual or potential direct risks and/or adverse impacts related to the organisation’s operations or the operations of its value chain.
ESG risk
Risks are the negative influences that might affect the business success of a company. They can include e.g. new regulatory changes, high financial expenses tied to climate adaptation, costs to manage working and safety conditions, employee strikes, consumer concerns regarding human rights, corruption, legal compliance etc.
ESG impact
Impacts are the non-financial effects of your business activities on the planet and society. They can be either positive or negative. They can include everything from implementing net-zero policies, decarbonizing supply chains, introducing diversity regulations, supporting local charities,... as well as disregarding safety measures, trading with environment-damaging partners, giving in to corruption etc.
(Introduction image by azerbaijan_stockers on Freepik)