Get It Right, Get It Accurate

It can sometimes seem that the sustainability industry is drowning under the weight of countless acronyms: ESG, CSR, GHG, SDG, IPCC, the list goes on. The best acronyms achieve instant understanding among their core audience. Take BRICs as a term to describe a group of large emerging economies. But in the sustainability world, audiences are broader than the narrow participants who are working in a particular industry and who therefore have a technical understanding of this jargon. Arguably, the audience is everyone – to co-opt our wider society to advance the causes of the sustainability movement, organisations need to try even harder to be crystal clear.

Furthermore, terms are used inaccurately or in the wrong context. What is the difference, for example, between Net Zero and Carbon Neutral? What about naming products ‘green’ or ‘eco-friendly’ – does the consumer understand what these terms mean? Organisations aiming to be authentic and who do not want to be accused of greenwashing in their sustainability communications should take note.

Fundamentally, if a company has something to say in this area, something that matters, it’s critical to make sure it’s being said with the right language in the right way. And that those in the related departments – and especially Marketing – aren’t just treating the effort as another corporate social responsibility initiative. Sustainability terms are not buzzwords to be thrown around lightly – they need to accurately reflect our underlying sustainability strategy.

Starting from the basics – ESG versus Sustainability

ESG stands for Environmental, Social and Governance. It was coined in 2004 by the United Nations Global Compact and was the term that evolved from the era of Socially Responsible Investing in the 1970s. When used in the context of reporting, ESG data is used to evaluate a company’s performance on specific issues. For example carbon emissions per unit of revenue are used to evaluate a businesses’ environmental impact, while employee turnover rates are used to evaluate a company’s labour practices.

Sustainability and ESG are terms that are often used interchangeably. But where sustainability is the broader term, ESG is usually used to refer to the specific criteria that are used to assess the performance of companies.

Sustainability fundamentally involves ensuring the long-term viability of a company’s operations by considering its environmental, social, and economic impacts. It’s a comprehensive approach that examines the interaction between these three dimensions, recognising that a sustainable organisation not only prospers economically but also contributes positively to society and minimizes its environmental footprint.

In contrast, ESG refers to a set of specific criteria used to evaluate a company’s performance and behaviour in three key areas: environmental, social, and governance. The three pillars of ESG offer a structured framework for assessing how effectively a company manages risks and opportunities related to sustainability issues. ESG factors cover a wide range of issues, from a company’s carbon emissions and diversity policies to its board structure and ethical business practices.

It is worth noting that the term ESG has taken on a politically charged connotation in the USA, and ESG has become a ‘dirty word’ on Fox News and among Republicans in Congress, with a growing conservative backlash against corporate, social and environmental initiatives. Data from FactSet shows a significant reduction in the term being used on S&P 500 earnings calls due to the term falling out of favour in company reporting.

What about CSR?

At the beginning of the millennium, Corporate Social Responsibility was a prominent and well understood initiative for most companies, usually marketed to show a company’s social credentials. Going hand in hand with the concept of shareholder value, CSR aimed to promote a softer, caring side of capitalism.

Many companies continue to publish CSR reports, but the criteria used for this can be of their own choosing, with everything from employee welfare programmes to philanthropy efforts included. Today, however, the recognised standard is rather those practices and aims that track efforts in relation to the UN’s 17 Sustainable Development Goals (SDG’s) which are now widely seen as the benchmark against which organisations can effect change.

The tricky issue of Carbon

Carbon Neutrality and Net Zero are two critical terms which must be not only accurately stated but with a clear explanation of how the terms are being measured and against which benchmark. What exactly does the business mean when talking about its carbon emissions, or indeed carbon footprint?

Generally, a carbon footprint is calculated by measuring and/or estimating the quantities and assessing the sources of various greenhouse emissions that can be directly or indirectly attributed to the activities of the underlying business. There are three scopes for these emissions, as classified per the Greenhouse Gas Protocol (GHG) the most widely used accounting standard and guidance for emissions. Companies should declare where they sit on the value chain of the three scopes and report their aims and improvements against them.

Carbon neutral refers to balancing out the total amount of carbon emissions, net-zero carbon means no carbon was emitted from the get-go, so no carbon needs to be captured or offset.

However, when referring to Net Zero, it is crucial to specify net zero carbon or emissions. Net Zero emissions refer to the overall balance of GHG produced and GHG emissions taken out of the atmosphere. While the scientific concept is often applied to countries like the US, China, it can also be used for organisations. In other words, net-zero describes the point in time where humans stop adding to the burden of climate-heating gases in the atmosphere.

In a very recent example, Google has just announced it will no longer pursue carbon neutrality, abandoning buying cheap offsets that helped it make that neutrality claim. The company now aims to reach net-zero carbon by 2030.

Generally, the term is used in the context of the Paris Climate Agreement of 2015, when the United Nations Climate Change Conference (COP21) was able to agree to reduce global greenhouse gas emissions with the aim of limiting global warming to 2°C this century, while pursuing efforts to limit it further to 1.5°C. Its efforts are a key plank of the UN’s SDG’s.

The journey of a thousand miles begins with one step

While all of this can seem technical, opaque, and daunting, it is nevertheless important to emphasise the concept of ‘the journey’ – i.e. that companies should set targets and report against them. Companies can commit to net zero but even if they can’t, they can demonstrate what is relevant for their business and industry and to show improvements against their own, specific targets.

In this journey, every word, every sentence, every target and how each target is measured, by who or what, matters. In sustainability, authenticity is paramount, and using the nomenclature accurately is the foundation of this effort.