ESG Explained
What is ESG?
ESG stands for Environmental, Social and Governance. ESG is a framework that helps stakeholders understand how an organization is managing risks and opportunities related to environmental, social, and governance factors. ESG takes the holistic view that sustainability extends beyond just environmental issues.
Environmental Factors The factors relating to the natural world e.g. the use of sustainable resources, renewable resources, biodiversity, waste disposal practices
Social Factors The factors impacting the lives of humans e.g. how a company manages its employees, suppliers, customers and communities that it operates in. Diversity and inclusion, product safety and labour practices.
Governance Factors A company's leadership structure, management processes, executive pay and internal controls.
| Word | Description |
|---|---|
| Strategic Oversight | Strategic oversight relates to the business function that will assist in tracking progress and setting strategies regarding climate risk and opportunities. The oversight body will not manage the subject matter, but rather oversee the functionality thereof. |
| Greenhouse Gases (GHG) | Greenhouse gases (GHGs) as gases that trap heat in the atmosphere, contributing to the greenhouse effect. The primary GHGs covered by the GHG Protocol include carbon dioxide, methane, nitrous oxide and hydrofluorocarbons. |
| Greenhouse Effect | The greenhouse effect is the process by which greenhouse gases trap heat in the Earth's atmosphere, leading to an increase in global temperatures and contributing to climate change. |
| Generalist E&S | Generalist E&S staff have broader, more general understanding of E&S issues and are responsible for addressing a wide spectrum of concerns. |
| Specialist E&S | Specialized E&S staff possess deep expertise in specific E&S areas, allowing them to tackle complex challenges in their specialized field. |
| Public Policy Engagement | This involves participating effectively in the policy-making process and aspirations regarding how to have a positive impact on the lives of people in different societies and/or countries. |
| Transition Risk | Transition risks are a specific category of climate risk facing the business community. Transition risks result from the relative uncertainty created by the global shift towards a more sustainable, net-zero economy. |
| Physical Risk | Physical risks, such as extreme weather events and natural disasters, can disrupt supply chains, damage assets and infrastructure, and lead to increased operational costs for regular businesses. |
| Acute Physical Risks | Acute physical risks are defined as those that arise from short-term, extreme weather events such as cyclones, hurricanes, floods, and heatwaves. These risks can cause immediate and severe impacts on assets, operations, and supply chains. |
| Chronic Physical Risks | Chronic physical risks as those that arise from long-term changes in climate patterns, such as sustained higher temperatures, sea level rise, and changes in precipitation patterns. |
| Scope 1 emissions | Scope 1 emissions are direct greenhouse gas emissions that occur from sources that are owned or controlled by the company, such as company-owned vehicles and onsite fuel combustion. |
| Scope 2 emissions | Scope 2 emissions are indirect greenhouse gas emissions associated with purchased electricity, heating, and cooling. For example, emissions from purchased electricity used to power operations are categorized as Scope 2 emissions. |
| Scope 3 emissions | Scope 3 emissions encompass all other indirect emissions in a company's value chain, including those from purchased goods and services, business travel, and product disposal like emissions from the transportation of goods purchased by the company. |
| Carbon Footprint | The carbon footprint of a company is a measure of it's impact on the environment. It represents an indirect indicator of the consumption of energy, products, and services. |