Sustainability is increasingly becoming an important part of business strategies, especially in the context of increasing regulatory, social and environmental demands.
If your company is preparing to create a sustainability report or strategy, understanding the key concepts is essential.
Below you will find explanations of the most important terms that may come your way.
The CSDD, or EU Corporate Due Diligence Directive, aims to oblige large companies to identify, prevent and mitigate the negative impacts of their activities on human rights and the environment. The new regulations make companies responsible for monitoring the entire supply chain, which means they must track not only their own actions, but also those of their business partners.
The directive requires more stringent risk management and attention to sustainable development on a global level. This is in response to growing social and regulatory expectations of companies that operate internationally. The regulations are intended to reduce companies’ negative impact on the environment and society and promote more responsible business practices.
The CSRD (Corporate Sustainability Reporting Directive) is a new European Union regulation that aims to introduce more detailed and standardized reporting requirements for ESG (Environmental, Social and Governance) issues. It replaces the earlier NFRD (Non-Financial Reporting Directive) and aims to increase transparency and comparability of corporate sustainability information.
Decarbonization is the process of seeking to reduce carbon dioxide (CO2) and other greenhouse gas emissions into the atmosphere in order to reduce the impact of human activity on climate change. For companies, this means transforming their business models, investing in new technologies and adopting new and creative solutions to reduce their carbon footprint. Many industries, including energy, transportation and manufacturing, face the need to reduce emissions and switch to more sustainable energy sources. As part of global climate commitments and regulations, companies are encouraged to develop long-term decarbonization strategies that range from modernizing production processes to sustainable resource management.
ESG due diligence is understood as an environmental, social and governance due diligence process. It refers to companies’ efforts to identify, assess and manage risks. Companies are required to regularly monitor their impact on these three areas and implement appropriate risk management procedures. The due diligence approach helps companies identify potential risks that may arise from their operations and cooperation with partners. This process not only minimizes risks, but also contributes to building a responsible and sustainable business model. Properly conducted ESG due diligence also increases a company’s transparency and builds trust with stakeholders.
The GRI Standard, or Global Reporting Initiative, is an international sustainability reporting standard that helps companies report transparently on their ESG activities. The standard provides guidelines for reporting on environmental, social and corporate governance issues, allowing companies to provide comparable and reliable information to stakeholders. With GRI Standard, companies can better communicate their sustainability achievements and challenges.
The introduction of the CSRD and ESRS guidelines has significantly affected the use of the GRI standard. It still remains an important tool for reporting companies. However, the ESRS introduces more detailed requirements and clarifies reporting at the European level.
However, the GRI is often seen as a tool that can support companies in meeting CSRD requirements, as the two sets of standards are somewhat compatible in terms of the scope of topics. Companies that already report according to GRI may have an easier time adapting to the ESRS guidelines, as many of the reported indicators overlap.
The EU Taxonomy is a system of uniform criteria for determining which investments and economic activities can be considered environmentally sustainable. It was created to help identify projects and businesses that make a real contribution to the EU’s climate goals, such as achieving climate neutrality by 2050.
In addition, the EU Taxonomy is intended to support the reduction of greenwashing, the practice of misrepresenting products as green. The regulation introduces clear criteria for, among other things, reducing greenhouse gas emissions, conserving natural resources and adapting to climate change.
Zero-emission is a state in which the activities of a company, country or person generate no net greenhouse gas emissions. This means that all emissions are reduced to a minimum, and the remaining emissions are offset by offsetting activities.
Sustainability is a concept that involves balancing economic growth, environmental protection and social well-being. Companies implementing sustainability must consider the impact of their operations on three key areas:
Implementing sustainability not only makes companies more competitive, but also builds their reputations and prepares them for the growing market and regulatory demands associated with responsible business.
