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We have compiled a list of various acronyms and terms related to sustainability for your use. Use this information package to your advantage!
Looking for the terms and acronyms in Finnish? Read the glossary in Finnish here.
Biodiversity refers to the diversity and variety of living nature: the genetic variation within species, the abundance of species, and the diversity of their habitats.
Read more about biodiversity on the Finnish Ministry of the Environment’s website.
Corporate Sustainability Due Diligence Directive is an EU directive aimed at promoting sustainable and responsible business practices throughout the entire value chain. The directive requires companies to identify, prevent, mitigate, and end harmful human rights and environmental impacts.
The CSDDD introduces a new level of responsibility for companies and also offers an opportunity to build a more reliable and transparent business model.
The directive targets the largest companies operating within the EU and, in certain cases, large companies that operate in the EU market but are based outside the EU. The companies affected by the directive can be divided into two main categories:
The CSDDD requires companies to implement several concrete measures to minimise harmful impacts on human rights and the environment. Key requirements include:
Due diligence process: Companies must implement an ongoing due diligence process to identify and assess human rights and environmental risks at different stages of their value chain.
Risk management and prevention: For identified risks, companies must take action to prevent, mitigate, and remedy possible impacts.
Reporting: Companies must publicly report on their actions and progress in meeting their due diligence obligations.
Grievance mechanism: Companies must provide stakeholders with a channel for reporting misconduct and risks.
Alignment of business strategy with the Paris Agreement: The largest companies must ensure that their business strategies align with the objectives of climate change mitigation.
The implementation of the CSDDD includes a transition period. Specific dates will depend on the national legislation of EU member states, as member states are required to incorporate the directive into national law. The first requirements are expected to take effect between 2025 and 2026, giving companies some time to prepare.
The directive also includes an enforcement mechanism to ensure compliance. Penalties for non-compliance may include:
Fines and financial penalties: National authorities can impose fines on companies that do not meet the requirements. The size of the penalties will be determined by national laws but should correspond to the severity and duration of the violation.
Liability for damages: Companies may be liable for any harm their operations have caused, especially if they have not taken the required preventive or mitigating actions.
Reputational harm: Companies failing to meet the directive’s requirements may also face reputational damage, which could impact their customer and investor relations.
Read more: European Commission – Corporate Sustainability Due Diligence
Corporate Social Responsibility refers to a company’s voluntary actions to account for the social, economic, and environmental impacts of its activities. The goal of CSR is to promote responsible and sustainable business that benefits both the company and society.
Read more: European Commission – Corporate Social Responsibility (CSR)
This directive requires companies to report on their activities from a sustainability perspective. Practically, companies must report on social and environmental risks and how their activities impact people and the environment.
Read more: European Commission – Corporate Sustainability Reporting Directive (CSRD)
Greenhouse gases converted to match the warming potential of carbon dioxide.
Read more and see also other gases and their respective conversion factors (Climatepartner.com).
Financial and regulatory decisions can be based on the so-called DNSH criteria. The principle means that activities must not cause significant harm to the environment or the goals of sustainable development. The principle originates from the EU Taxonomy Regulation, where it is defined as part of the criteria used to assess the environmental impact of investments and projects.
Read more: EU Taxonomy Regulation – Do No Significant Harm (DNSH) Criteria
Double materiality is closely related to sustainability reporting under the CSRD directive. For reporting, a company must identify the relevant sustainability themes that guide the perspectives and data points selected for reporting. The principle of double materiality drives the materiality analysis process.
In double materiality, the focus is twofold: on the one hand, the company’s impacts on the surrounding world, and on the other hand, the risks, opportunities, and financial impacts that changes in society or the environment can bring to the company now or in the future. Double materiality includes both impact materiality and financial materiality. Impact materiality considers the company’s impacts on people and the environment from a sustainability perspective, recognizing what is significant for stakeholders and how the company can reduce negative impacts and enhance positive ones. From a financial materiality perspective, the key is to assess how identified risks and opportunities can affect the company’s financial position, cash flow, access to financing, and cost of capital.
The inside-out principle examines how a company’s activities impact the environment, people, and society. This includes both environmental and social impacts.
The outside-in principle looks at how external environmental, social, and governance factors affect the company. It considers, for example, how environmental changes, social shifts (such as legislation, social pressure, or consumer expectations), or governance changes (such as regulations) can influence the company’s business, risks, and financial opportunities.
The European Green Deal is a set of political initiatives aimed at advancing the EU towards a green transition, with the ultimate goal of achieving climate neutrality by 2050. It supports the transformation of the EU into a fair and prosperous society with a modern and competitive economy. The initiatives focus on climate, environment, energy, transport, industry, agriculture, and sustainable finance, and they are closely interconnected. For example, the Fit for 55 and Farm to Fork strategies are part of the Green Deal.
Read more: European Commission – European Green Deal
EU Taxonomy is a classification system that helps companies and investors identify “environmentally sustainable” economic activities to support sustainable investment decisions. Its aim is to guide investments toward the green transition and support the EU’s climate goals, particularly achieving climate neutrality by 2050. The taxonomy covers six environmental objectives, including climate change mitigation, climate change adaptation, water and marine resource protection, circular economy, pollution prevention, and biodiversity protection.
The taxonomy is not yet fully complete, and its development is ongoing. For example, additions related to social responsibility dimensions and other sector-specific definitions are still expected. Companies are required to report the extent to which their activities align with the taxonomy, helping investors make responsible investment decisions and guiding companies toward more sustainable practices.
Read more: European Commission – EU Taxonomy for Sustainable Activities
EU Eco-design Regulation expands environmental requirements to cover a broader range of products and ensures the reduction of environmental impacts throughout their life cycles. The regulation includes criteria for energy efficiency, durability, reparability, and recyclability. This improves consumers’ ability to choose sustainable products, reduces the need for frequent replacements, and supports the circular economy by imposing requirements on manufacturers at the design stage.
This EU directive focuses on enhancing consumers’ rights in the green transition. Its aim is to protect consumers from misleading marketing practices and improve access to information, enabling them to make more informed and sustainable consumption choices. It is a sister directive to the Green Claims directive, which prohibits vague and false environmental claims entirely.
These are the pillars of sustainability. ESG refers to the environmental, social, and governance factors considered in decision-making processes by companies and investors.
Read more: PRI – What are the Principles for Responsible Investment?
European Sustainability Reporting Standards refer to the sustainability reporting standards developed by the European Union that companies must use when reporting on their actions related to environmental, social, and governance (ESG) matters. These standards are part of the EU’s new corporate sustainability legislation, known as the Corporate Sustainability Reporting Directive (CSRD).
The ESRS standards specify how companies should present information, for example, on climate impacts, human rights, workers’ rights, and environmental impacts. The ESRS framework includes several categories, such as environmental standards, social standards, and governance and financial standards.
Read more: European Financial Reporting Advisory Group – ESRS
EU legislation aimed at preventing deforestation and forest degradation caused by the production of products entering the EU market. According to the regulation, companies must ensure that products such as soy, palm oil, coffee, and wood do not originate from areas where deforestation or forest degradation has occurred. The regulation requires greater transparency in supply chains back to the source.
Farm to Fork Strategy is a central part of the EU’s Green Deal. Its goal is to accelerate the transition to sustainable food systems that are also fair and healthy. The strategy includes both regulatory measures and other initiatives.
Read more: European Commission – Farm to Fork Strategy
Fit for 55 is a legislative package by the European Union that is part of the EU’s Green Deal. Its goal is to reduce greenhouse gas emissions by at least 55% by 2030 compared to 1990 levels. This target is a step towards the EU’s objective of achieving climate neutrality by 2050.
The Greenhouse Gas Protocol is the most widely used international framework for measuring and managing greenhouse gas (GHG) emissions. It provides standards, guidelines, tools, and training. The classification and definitions for different types of greenhouse gas emissions (Scope 1, 2, and 3) follow the standards set by the GHG Protocol.
Read more: Greenhouse Gas Protocol
The EU directive on environmental claims aims to improve the reliability and verifiability of environmental claims. Companies must be able to substantiate their claims using scientific methods and verification by an independent third party.
Read more: European Commission – Green Claims
Global Reporting Initiative is an international organization that develops and provides guidelines for sustainability reporting to companies and other organizations. GRI standards are among the most widely used reporting standards globally, helping organizations report their economic, environmental, and social impacts.
Read more: Global Reporting Initiative (GRI)
A term used in carbon accounting. The value for carbon dioxide is 1, while methane has a value of 25–28, and other gases have higher values. The highest include Hydrofluorocarbons (HFCs), which can have a value of up to 14,800. It is related to the term CO2e.
Human Rights Due Diligence Directive refers to a responsibility process for companies, which requires them to follow due diligence regarding human rights. The UN Guiding Principles on Business and Human Rights provide guidance for states and companies on which this due diligence is based. This process includes a commitment to respecting human rights, analyzing value chains, identifying human rights risks, and recognizing the company’s role in addressing those risks. It also includes actions aimed at avoiding and mitigating risks. HRDD emphasizes the responsibility of companies to identify and address human rights risks in all areas of their operations.
Due diligence has served as a framework for EU sustainable development legislation. In connection with the CSRD (Corporate Sustainability Reporting Directive) and CSDDD (Corporate Sustainability Due Diligence Directive), companies are required to report on human rights as part of their sustainability reporting.
Read more about due diligence and its process in the Finnwatch article.
Life Cycle Assessment is a method for evaluating the environmental impacts of a product throughout its entire life cycle, from “cradle to grave.” This means considering all stages of a product’s life cycle, including raw material acquisition, production, use, and disposal. A narrower version of this is “cradle to gate,” which evaluates only the stages from raw material production to the finished product, excluding use and disposal. The method focuses specifically on environmental impacts and typically does not cover economic or social aspects.
Read more: European Commission – Life Cycle Assessment
The old directive for non-financial reporting. It has been replaced by the CSRD.
Read more: European Commission – NFRD
Paris Agreement, signed in 2015, is an international and legally binding climate agreement with the main objective of limiting global warming to well below 2°C, and aiming to limit it to 1.5°C above pre-industrial levels. Nearly all countries in the world, including major economies such as the European Union, the United States, China, and India, have committed to the agreement.
The Paris Agreement also sets targets for reducing greenhouse gas emissions and requires countries to commit to concrete national climate actions (Nationally Determined Contributions, NDC), which are reviewed and strengthened regularly every five years.
Read more: United Nations – Paris Agreement
Planetary boundaries are scientific thresholds that define safe operational limits for human activities to ensure the stability of Earth’s ecosystems. When these boundaries are exceeded, the planet’s resilience weakens, increasing the risks of environmental changes such as climate change, ecosystem collapse, and loss of biodiversity. An example is the concentration of carbon dioxide in the atmosphere, where exceeding this boundary has led to global warming and associated severe consequences like extreme weather events and the melting of glaciers. There are a total of nine planetary boundaries, including freshwater use and chemical pollution, and managing these boundaries is crucial for sustainable development.
Read more: Stockholm Resilience Centre – Planetary Boundaries
EU Repair Directive promotes product reparability and longevity, thereby reducing waste and conserving natural resources. The directive establishes consumers’ right to request product repairs after the warranty period and requires manufacturers to provide spare parts and repair services for a minimum period after the product enters the market. The aim is to mitigate the effects of planned obsolescence and extend product lifespans to encourage more sustainable consumption habits.
Sustainable Finance Disclosure Regulation is a part of the European Union’s sustainable finance legislation. Its goal is to increase transparency and comparability of sustainability-related information in the financial markets.
Science Based Targets are climate science-based emissions reduction targets that help companies reduce their greenhouse gas emissions in line with the goals of the Paris Agreement. The Science Based Targets initiative (SBTi) provides companies and organizations with specific guidelines on how to set science-based emissions reduction targets that support the global goal of limiting temperature rise. For example, a company can commit to reducing its direct emissions (Scope 1), emissions from energy consumption (Scope 2), as well as indirect emissions related to its value chain (Scope 3), based on scientific models.
For companies with significant land-use sector emissions in their value chains, it is also necessary to consider the FLAG guidance (Forest, Land, and Agriculture) in their targets and calculations. The FLAG guidelines enable more specific emissions reduction targets and the planning of more effective measures, particularly concerning land use. The FLAG guidance applies, for example, to companies in agriculture, food and beverage industry, retail, and forest and paper industries.
Read more: Science Based Targets Initiative (SBTi)
Science Based Targets initiative (SBTi) is a collaboration between CDP, the UN Global Compact, the World Resources Institute, and WWF. It provides companies with a clearly defined pathway for reducing greenhouse gas emissions in line with the goals of the Paris Agreement. Its mission is to support climate change mitigation by helping companies set ambitious emissions reduction targets. SBTi also offers companies the methods and tools needed to define and monitor their targets, helping them remain competitive at the same time.
Read more: Science Based Targets Initiative (SBTi)
TCFD is an international task force established by the Financial Stability Board (FSB) of the G20 countries in 2015. TCFD has developed a framework that enables publicly listed companies and other organizations to more effectively disclose climate-related risks and opportunities through their existing reporting processes.
Read more: TCFD – Official Website
Companies that are not subject to CSRD sustainability reporting requirements can report their sustainability information in accordance with ESRS standards by following the VSME ESRS standard. Voluntary reporting under the CSRD framework is also possible.
Read more: EFRAG – Voluntary Sustainability Reporting Standards for SMEs