Core Sustainability Terms

The certification is awarded by the non-profit B Lab. A company completes the B Impact Assessment, which covers governance, workers, community, environment and customers, and must reach a minimum verified score. It must also commit in its legal documents to consider the interests of all its stakeholders, and it is reassessed periodically to keep the certification.

Gases other than CO2, such as methane and nitrous oxide, are converted into CO2 equivalents (CO2e) according to how strongly they warm the climate, so everything can be added into one number. A footprint can be calculated for a person, a company, a product or an event. For companies it is usually split into Scope 1, 2 and 3 emissions and serves as the baseline for setting reduction targets.

The CSRD replaced the earlier Non-Financial Reporting Directive. Reports follow the European Sustainability Reporting Standards (ESRS), are based on a double materiality assessment, are placed in the management report and are checked by an independent assurance provider. Which companies are covered and from when has been revised more than once, so the current scope and timeline should always be checked.

Financial materiality looks from the outside in: which sustainability risks and opportunities can affect the company’s value. Impact materiality looks from the inside out: what the company does to people and the planet. A topic has to be reported if it is material under either lens. This differs from the single, financial-only view used in some other frameworks.

Environmental covers topics such as climate, pollution, water and biodiversity. Social covers workforce conditions, human rights, customers and communities. Governance covers board structure, ethics, anti-corruption and transparency. Investors, lenders and rating providers use ESG information to assess risk, and because providers weigh the three pillars differently, scores for the same company can differ between them.

An activity counts as sustainable only if it makes a substantial contribution to at least one of six environmental objectives, does no significant harm to the others and meets minimum social safeguards. The objectives are climate change mitigation, climate change adaptation, water and marine resources, the circular economy, pollution prevention and biodiversity. Companies in scope report how much of their revenue, capital expenditure and operating expenditure is taxonomy-aligned.

Common forms include vague claims such as “eco-friendly” with no evidence, highlighting one small improvement while hiding a larger impact, relying on carbon offsets without cutting emissions, and using self-made labels that look like independent certifications. Regulators and consumer authorities increasingly challenge such claims, and companies can face fines and reputational damage.

Companies usually run a materiality assessment: they list possible sustainability topics, gather the views of stakeholders such as investors, employees and customers, and rank the topics by importance. The result shapes both the strategy and what is reported. Under the CSRD this is extended to double materiality.

NACE is a hierarchical code: letters mark broad sections, such as manufacturing, and two to four digits narrow it down to divisions, groups and classes. A company is assigned a code according to its core business. In the Impakter Index, the NACE classification is used to determine each company’s primary ESG priority.

Net zero is not the same as carbon neutral. Credible net-zero targets, such as those following the Science Based Targets initiative, require deep cuts across the whole value chain, with interim targets on the way. Only the small share of emissions that cannot be avoided is balanced with permanent carbon removal. The goal is aligned with limiting warming to 1.5 °C under the Paris Agreement.

The scopes come from the Greenhouse Gas Protocol. Scope 1 is, for example, fuel burned in company boilers and vehicles. Scope 2 is the emissions created where the purchased energy is generated. Scope 3 includes suppliers, business travel, product use and disposal, and is divided into 15 categories. For many companies it is the largest part of the footprint and also the hardest to measure.

The regulation obliges asset managers and financial advisers to disclose how they handle sustainability risks and negative impacts. Funds are commonly labelled by article: Article 6 products make no sustainability claim, Article 8 products promote environmental or social characteristics, and Article 9 products have a sustainable investment objective. The framework is being reviewed, so current requirements should be checked.

It is often contrasted with shareholder primacy, the view that a company’s main duty is to maximise returns for its owners. The idea gained attention through the World Economic Forum and a 2019 statement by the US Business Roundtable. Critics argue that serving many stakeholders makes it unclear who the company is accountable to and how success should be measured.

The task force was created by the Financial Stability Board and published its recommendations in 2017. They are organised around four areas: governance, strategy, risk management, and metrics and targets. The task force was disbanded in 2023 and its monitoring role passed to the IFRS Foundation. Its recommendations are built into the IFRS S2 climate standard and many national rules.