The latest lingo of Corporate Sustainability and ESG

As more sustainability and ESG framework topics are finding their way into regulation, certain terminologies are shifting from the obscure or niche into more common use — especially in corporate environments, where sustainability concerns are more pressing than ever.

In this article, Expert Services Manager Paula Galbiatti examines five of the most relevant and impactful terms that have emerged as hot topics for businesses to pay attention to.

1. Climate neutrality

Also referred to as net zero emissions

Defined by the International Panel on Climate Change (IPCC) as human activities resulting in no net effect on the climate system through a balancing of residual emissions with emission removal, in addition to accounting for regional or local bio-geophysical effects of human activities that affect, among others, surface albedo or local climate. The IPCC further clarifies the concept of net zero emissions as “[…] achieved when anthropogenic emissions of greenhouse gases to the atmosphere are balanced by anthropogenic removals over a specified period”.

Climate neutrality is enshrined in the Paris Agreement, which aims to “[…] achieve a balance between anthropogenic emissions by sources and removals by sinks of greenhouse gases in the second half of this century […] “. As measurements of GHG emissions are usually accounted as their equivalent to carbon dioxide (CO2) emissions (CO,2 equivalent emissions), climate neutrality is often used interchangeably with carbon neutrality.

2. Double materiality

Defined in the Commission Delegated Regulation (EU) 2023/2772 adopting the European Sustainability Reporting Standards (ESRS) as having both impact materiality and financial materiality, meaning “a sustainability matter meets the criterion of double materiality if it is material from the impact perspective or the financial perspective or both.”

ESRS 1 General requirements mandate companies under the scope of the European Corporate Sustainability Reporting Directive (CSRD) to report on sustainability matters based on the double materiality principle.

3. Free, prior, and informed consent (FPIC)

Refers to a specific right granted to Indigenous peoples to self-determine their political, economic, social and cultural development. FPIC allows them to provide or withhold/withdraw consent in projects affecting them or their territories and engage in negotiations concerning such projects.

The consent must be free (given voluntarily and without coercion, intimidation, or manipulation), prior (consent must be sought sufficiently in advance), and informed (Indigenous people must be provided with information and engagement prior to seeking consent).

FPIC is recognized under international human rights law, notably the United Nations Declaration on the Rights of Indigenous Peoples (UNDRIP) and International Labour Organization (ILO) Indigenous and Tribal People’s Convention (C169).

4. Stakeholder engagement

Defined by the Organisation for Economic Co-operation and Development (OECD), Due Diligence Guidance for Responsible Business Conduct as “characterized by two-way communication. It involves the timely sharing of the relevant information needed for stakeholders to make informed decisions in a format that they can understand and access.”

Within this concept, OECD clarifies that such engagement must be meaningful and involving good faith of all parties: “Meaningful engagement with relevant stakeholders is important throughout the due diligence process. In particular, when the enterprise may cause or contribute to, or has caused or contributed to an adverse impact, engagement with impacted or potentially impacted stakeholders and rightsholders will be important.”

Similarly, Commission Delegated Regulation (EU) 2023/2772 adopting the European Sustainability Reporting Standards (ESRS) defines stakeholder engagement as “an ongoing process of interaction and dialogue between the undertaking and its stakeholders that enables the undertaking to hear, understand and respond to their interests and concerns.”

5. Work-life balance

Defined in Commission Delegated Regulation (EU) 2023/2772 adopting the European Sustainability Reporting Standards (ESRS) as a “satisfactory state of equilibrium between an individual’s work and private life. Work–life balance in a broader sense encompasses not only the balance between work and private life given family or care responsibilities, but also time allocation between time spent at work and in private life beyond family responsibilities.”

The Indian National Guidelines on Responsible Business Conduct (NGRBC) state that it is a “broad concept including proper balancing of ‘work’ (career and ambition) on one hand and ‘life’ (pleasure, leisure, family, and spiritual development) on the other. Related, though broader, terms include ‘lifestyle balance’ and ‘life balance’.”