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Let’s break down these key concepts in a simple and clear way so that next time you hear them, you’ll know exactly what they mean!
Environmental terms: The carbon & climate puzzle
Carbon Neutral vs. Net Zero
Carbon Neutral means balancing CO₂ emissions through offsets like carbon credits or reforestation, without necessarily reducing emissions at the source. A company can continue emitting but compensate for it elsewhere.
Net Zero is a more ambitious goal requiring deep emission reductions across all greenhouse gases (CO₂, methane, nitrous oxide, etc.), with offsets used only for unavoidable emissions. The focus is on cutting emissions first, not just compensating for them.
Carbon Offsetting vs. Carbon Insetting
Carbon Offsetting: Paying for projects elsewhere (like tree planting) to balance your emissions.
Carbon Insetting: Reducing emissions within your own supply chain (e.g., switching to renewable energy in your factories).
Green Bond vs. Sustainability-Linked Bond
Green Bonds: Used only for green projects (e.g., renewable energy, energy-efficient buildings).
Sustainability-Linked Bonds: General financing, but interest rates depend on ESG performance (e.g., lower emissions → better interest rate).
Carbon Footprint vs. Ecological Footprint
Carbon Footprint: Measures greenhouse gas emissions from an individual, company, or product.
Ecological Footprint: Measures total resource consumption (land, water, materials) vs. Earth’s ability to regenerate them.
Climate Neutral vs. Carbon Neutral
Climate Neutral: Addresses all greenhouse gases (not just CO₂) and other environmental impacts (e.g., pollution, biodiversity).
Carbon Neutral: Focuses only on CO₂ emissions balance through reduction and offsets.
Climate Mitigation vs. Climate Adaptation
Climate Mitigation: Actions that reduce or prevent emissions (e.g., renewable energy, energy efficiency).
Climate Adaptation: Adjusting to existing climate change impacts (e.g., building flood defenses, drought-resistant crops).
Green Hydrogen vs. Blue Hydrogen
Green Hydrogen: Produced using renewable energy with zero emissions.
Blue Hydrogen: Produced from natural gas but with carbon capture to reduce emissions.
Bio-based vs. Biodegradable vs. Compostable
Bio-based: Made from renewable biological sources but not necessarily biodegradable.
Biodegradable: Breaks down naturally over time but may leave microplastics.
Compostable: Breaks down completely into organic matter under specific conditions.
Greenwashing vs. Bluewashing
Greenwashing: When companies mislead people about their environmental impact (e.g., "100% eco-friendly" with no proof).
Bluewashing: When companies exaggerate their social responsibility efforts (e.g., claiming to support fair labor but having poor working conditions).
Social terms: Fairness & ethical business
Just Transition vs. Climate Justice
Just Transition: Helping workers and industries shift to green jobs without job loss or economic harm.
Climate Justice: Ensuring climate policies don’t disproportionately harm marginalized communities (e.g., ensuring poor communities aren’t left behind in decarbonization efforts).
DEI vs. Social Equity
DEI (Diversity, Equity & Inclusion): Making workplaces diverse, fair, and inclusive.
Social Equity: A broader concept that ensures fairness in society beyond just workplaces (e.g., fair access to healthcare, education, and opportunities).
Fair Trade vs. Ethical Sourcing
Fair Trade: A certification ensuring workers are paid fairly and treated ethically (e.g., coffee, cocoa, textiles).
Ethical Sourcing: A company’s commitment to responsible supply chains, but without a certification.
Green HR vs. ESG Employee Engagement
Green HR: HR policies that support sustainability (e.g., remote work to cut emissions, eco-friendly offices).
ESG Employee Engagement: Employees actively participating in sustainability initiatives (e.g., volunteering for environmental projects, green training programs).
Human Rights Due Diligence vs. Modern Slavery Compliance
Human Rights Due Diligence: Companies assessing and managing risks of human rights violations (e.g., poor working conditions).
Modern Slavery Compliance: A stricter legal requirement to prevent forced labor and child labor in supply chains.
Living Wage vs. Minimum Wage
Living Wage: The amount needed for a decent standard of living (food, housing, healthcare).
Minimum Wage: The legal lowest hourly wage, which is often not enough for a good quality of life.
ESG Materiality vs. Double Materiality
ESG Materiality: What ESG issues impact a company’s financial performance.
Double Materiality: Looks at both financial impact and societal impact (how a company affects the environment and people).
Governance terms: Corporate sustainability rules
ESG Disclosure vs. ESG Reporting
ESG Disclosure: Sharing raw data on ESG performance (e.g., carbon emissions, gender diversity).
ESG Reporting: A structured report that puts ESG data into context (trends, goals, comparisons).
ESG Risk vs. ESG Impact
ESG Risk: How external ESG factors affect a company’s financial performance.
ESG Impact: How a company’s own operations affect people, the planet, and society.
ESG vs. CSR vs. SDGs
ESG (Environmental, Social, Governance): A framework used for investors to evaluate a company’s non-financial performance.
CSR (Corporate Social Responsibility): A company’s voluntary efforts to improve social and environmental impact.
SDGs (Sustainable Development Goals): Global goals set by the UN to tackle sustainability challenges.
ESG Ratings vs. ESG Scores
ESG Ratings: Third-party agencies (like MSCI, Sustainalytics) give companies a ranking based on ESG performance.
ESG Scores: Individual companies or investors calculate their own ESG performance metrics.
Stakeholder vs. Shareholder Capitalism
Shareholder Capitalism: A company’s main focus is profit for investors.
Stakeholder Capitalism: A company balances profits with social and environmental impact (e.g., caring about employees, customers, and the planet, not just investors).
Green Taxonomy vs. ESG Regulation
Green Taxonomy: A classification system for what is truly green (EU Green Taxonomy sets rules for which projects are eco-friendly).
ESG Regulation: Legal rules for how companies must report and manage ESG risks (e.g., CSRD in the EU).