Sustainability Glossary
From scientific terminologies to political acronyms; this glossary provides insights into the most relevant terms and concepts within the context of sustainability. By unpacking these terms, WifOR aims to support companies in developing a deeper understanding of the issue – the basis for sustainable decision-making.
Atmosphere
The atmosphere is a gas envelope that surrounds the Earth. It is made up of elements including nitrogen, oxygen, argon, carbon dioxide, and trace gases. The atmosphere plays a central role in life on Earth by retaining heat, regulating temperatures, and filtering harmful radiation. The Earth’s weather system is in part determined by the atmosphere through its influence on air currents, precipitation, and other meteorological phenomena.
Biodiversity
Biodiversity is defined as the variability among living organisms from all sources, including diversity within species, between species, and of ecosystems. Biodiversity thus includes not only the millions of different species on Earth, it also consists of the specific genetic variations and traits within species (such as different crop varieties), as well as the various types of different ecosystems, marine and terrestrial, in which human societies live and on which they depend, such as coastal areas, forests, wetlands, grasslands, mountains and deserts.
Capitals Coalition
The Capitals Coalition is a global multi-stakeholder collaboration that brings together leading initiatives and organizations. It works to rethink values in business and politics for a more just and sustainable world by establishing “natural, social and human capital” alongside financial capital. The goal is for companies, financial institutions, and governments will integrate these capitals into their decision-making by 2030. To achieve this, the Capitals Coalition provides companies with frameworks for measuring and assessing impacts on capitals through, for example, greenhouse gas emissions and training measures, as well as dependencies between capitals and individual aspects such as biodiversity.
Child Labor
Child labor is defined as work that deprives children of their childhood, their potential and their dignity, and that is harmful to physical and mental development.
CDP
The Carbon Disclosure Project (CDP) is a non-profit organization that provides a global disclosure system for investors, companies, cities, states and regions to manage their environmental impacts and report them. They rate companies’ climate-related data disclosure and transparency and have broadened to incorporate deforestation and water security. The data is collected annually on a voluntary basis.
Circular economy
Circular economy is a model where products and materials are reused, repaired, refurbished, and recycled for as long as possible. In contrast, a linear economy relies on disposable products. The circular economy aims to extend the lifecycle of products and minimize waste. The European Union has introduced measures such as the Circular Economy Action Plan to conserve natural resources, promote more sustainable product design, enforce stricter recycling regulations, and set binding targets for material use and consumption by 2030.
Compensation of Employees
The compensation of employees is defined as the total remuneration payable by an employer to an employee in return for work done by the latter during an accounting period. The compensation includes gross wages and salaries as well as employers’ social contribution
CSR
CSR stands for Corporate Social Responsibility. This is understood to mean voluntary responsible business activity with regard to social and environmental sustainability. Special consideration is given to economic activity in harmony with the interests of stakeholders and beneficiaries.
CSRD
Corporate Sustainability Reporting Directive (CSRD) is a directive presented by the European Commission in April 2021. It aims to significantly expand the scope of companies subject to CSR reporting requirements. Large companies as well as companies listed on EU stock exchanges are subject to reporting requirements, with the exception of micro-entities. In addition, the CRSD sets out in more detail the non-financial information required for reporting.
Direct Effects
Direct effects refer to the direct contribution of a company to the economy. These effects are reflected in the economic output of a company, its value added or the number of employed people.
E-GAAP
The Value Balancing Alliance and the Capitals Coalition have partnered with the World Business Council for Sustainable Development (WBCSD) to develop a set of generally accepted environmental accounting principles, known as Environmentally Generally Accepted Accounting Principles (E-GAAP), on behalf of the European Commission. These are intended to help the private sector transition to a more sustainable financial and economic system. Through a common methodology, the E-GAAP supports the establishment of sustainable business practices in Europe and the rest of the world. Under the Transparent project, the three institutions are developing a standardized method for accounting and valuing natural capital that companies can use in their decision-making and external disclosure. The method will be based on already recognized frameworks such as the Natural Capital Protocol.
EFRAG
On behalf of the EU Commission, the European Financial Reporting Advisory Group (EFRAG) determines the specific financial information that must be disclosed and externally verified. Since 2020, EFRAG has also been working on a uniform reporting standard for sustainability criteria. These draft EU Sustainability Reporting Standards developed by the EFRAG will be adopted in the CSRD.
ESG
ESG stands for Environmental Social Governance and has established itself in the corporate and financial world as a broad umbrella term for indicators of corporate social responsibility. The term covers criteria that can be used to evaluate a company’s corporate social responsibility (CSR). Using ESG criteria, investors are provided with information on whether and to what extent the company behaves sustainably. Accordingly, risks can be better assessed and investment decisions made
European Green Deal
The European Green Deal is an initiative presented by the European Union on December 11, 2019. The aim is to make Europe climate-neutral by 2050.
Fair wages
Fair wages is the remuneration received for a standard workweek by a worker in a particular place sufficient to afford a decent standard of living for the worker and her or his family. Elements of a decent standard of living include food, water, housing, education, health care, transportation, clothing, and other essential needs including provision for unexpected events.
Global Reporting Initiative (GRI)
The Global Reporting Initiative (GRI) is an independent, international organization that supports organizations in taking responsibility for their environmental and social impacts. The GRI provides a universal language for communicating impacts. It is responsible for providing the world’s most widely used sustainability reporting standards: the GRI Standards. Updated regularly, these standards are considered the most comprehensive framework and include balanced social, environmental, and economic factors.
Greenhouse Gas (GHG) Protocol
The Greenhouse gas (GHG) Protocol provides the most widely used methodological standards worldwide for the accounting of corporate greenhouse gas emissions. In addition to direct emissions (occurring directly within an organization) and energy-related emissions, the entire supply chain is also analyzed. This includes the proportional emissions of indirect and direct suppliers and emissions resulting from the transport of goods or product use. Within the GHG Protocol, the basic principles of relevance, completeness, consistency, transparency, and accuracy are established. The standards intend to provide a framework for companies, governments, and other entities to measure and report their GHG emissions in a way that supports their missions and goals.
Gross Value Added (GVA)
Gross value added (GVA) is calculated by subtracting intermediate inputs from production values; thus, it only encompasses the value added created in the production process.
Indirect Effects
The production activities of a company require purchased materials and services. Such purchased materials and services in turn result in increased production among suppliers who also require purchased materials and services for their own production process. The cascading effects that develop as a result (e.g. employment, gross value added) are referred to as the indirect economic effects of the enterprise.
Induced effects
Induced effects refer to those economic effects that result from renewed spending of directly and indirectly generated incomes.
International Financial Reporting Standards (IFRS)
Die International Financial Reporting Standards (IFRS) werden seit 2001 vom International Accounting Standards Board (IASB) fortlaufend entwickelt. Sie dienen als Regelwerk für international vergleichbare Bilanzen von Unternehmen – über nationale Rechnungslegungsvorschriften hinaus. Ihr Hauptziel ist es, fundierte Investitionsentscheidungen auf dem Kapitalmarkt zu ermöglichen.
International Foundation for Valuing Impact (IFVI)
The International Foundation for Valuing Impact (IFVI) was established in 2022 to scale impact weighted accounting. Its purpose is to bridge the gap between economic research on impact monetization and marketplace practice of companies, investors, public sector and data providers. Alongside its partners such as the VBA, the IFVI aims for standardized methods on the translation of environmental and social impact into monetary currency. Based on these methods, companies can include non-financial impacts into their corporate performance and target-setting and investors can take informed decisions. This enables holistic corporate steering and accounting – while at the same time increasing oversight and reducing complexity.
Impact-Weighted Accounts
The Impact-Weighted Accounts Initiative is a Harvard Business School project aimed at integrating societal impacts through employment, products, and environmental aspects into corporate financial accounting. The initiative is developing a framework for pricing such impacts.
Input-Output-Analysis
The Input-Output-Analysis (IO-Analysis) is an economic model that reflects the interdependences between various economic sectors of an economy. It is a recognized and recommended method of supply chain analysis (e.g. by the Scope 3 standards of the GHG Protocol). IO-Analysis can detect environmental and socio-economic hotspots with comparatively low effort. It is often used to estimate the up- and downstream impacts in the supply chain of a company or of an economic sector. The WifOR model is based on several official and scientifically recognized databases covering almost all economies throughout the world.
Intermediate consumption
Intermediate consumption is the value of the goods and services consumed as inputs by a process of production, excluding fixed assets whose consumption is recorded as consumption of fixed capital. The goods or services may be either transformed or used up by the production process.
ISSB
The International Sustainability Standards Board (ISSB) was introduced by the IFRS in 2021. It expands the IFRS’s standards to include sustainability related information into financial statements. The ISSB builds on existing voluntary reporting initiatives but strives to overcome fragmentation and redundancies in reporting. Backed by national and multi-national organizations, the ISSB seeks to reduce complexity in reporting for companies and meet investor demand for holistic environmental, social and governance (ESG) information.
R&D expenditure
Expenditure on R&D is recognized as capital formation of intellectual property. It includes basic research, applied research, and experimental development. The new understanding of R&D as an investment in intellectual property rather than a cost factor is leading to an increase in GDP and other economic aggregates.
R&D intensity
R&D intensity describes the ratio between internal expenditures for research and development and gross value added. The R&D intensity can also be measured in terms of sales or revenue.
Labor Productivity
Labor productivity describes the output that can be produced with a given input of labour. It can be measured in several ways but is commonly measured as Gross Domestic Product at constant prices divided by either total employment or total hours worked.
Life Cycle Assessment
Life Cycle Assessment (LCA) is defined as the systematic analysis and evaluation of the potential environmental impacts of products or services throughout their life cycle.
Modern Slavery or Forced Labor
Modern Slavery or Forced Labor is defined as work forcefully imposed by private agents, including bonded labor, forced domestic work, and work imposed in the context of slavery or vestiges of slavery. Other forms of forced labor – forced sexual exploitation and state-imposed forced labor– are not considered here. Forced labor is a form of modern slavery.
NACE
NACE is a classification providing the framework for collecting and presenting a large range of statistical data according to economic activity in the fields of economic statistics (e.g. production, employment and national accounts) and in other statistical domains developed within the European Statistical System (ESS).
Occupational Safety
Occupational Safety refers to the prevention of health impairments resulting from incidents caused by injuries or diseases that happen during the course of employment.
Scope 3 Emissions
To categorize greenhouse gas (GHG) footprints, emissions are divided into three scopes. Scope 1 refers to self-generated emissions, Scope 2 to emissions caused by energy purchased directly, and Scope 3 describes indirectly caused GHG emissions, such as those generated by suppliers. The GHG Protocol’s standard for accounting and reporting on the value chain (Scope 3) enables companies to assess the impact of the entire value chain in terms of emissions and to determine where they need to focus their emissions reduction activities.
SDGs
In September 2015, the United Nations General Assembly agreed upon the Sustainable Development Goals (SDGs), outlining a new global vision with a total of 17 overarching objectives. The SDGs include ending hunger and poverty, promoting global well-being, and combating climate change. Under the 2030 Agenda, the SDGs provide stimulation for global action before the end of the decade.
SEEA
The System of Environmental Economic Accounting (SEEA) is the central framework for a global statistical standard that quantifies the environment in its relationship to the economy. The primary concept is to frame nature as an asset. SEEA ecosystem accounting is an integral framework to measure and value ecosystem assets and their contributions to economic prosperity and human well-being (e.g., recreation, conservation, CO2 absorption). In March 2021, the United Nations made SEEA the global standard for measuring and accounting for natural capital in national accounts.
System of National Accounts (SNA)
The United Nations‘ System of National Accounts (SNA) offers standards for compiling national macroeconomic accounts. Although voluntary, it has been adopted internationally by countries at all stages of economic development. It provides a consistent basis for macroeconomic statistics, analysis and related policy. Since its inception in 1954 it is been consistent and had an integrated approach for national accounting which been expanded to various domains of national economic activity. The current version (2008) will be updated in 2025.
Value Balancing Alliance (VBA)
The Value Balancing Alliance (VBA) is an association of multinational companies that was formed with the aim of creating a way to measure and compare the value of companies’ contributions to society, the environment, and the economy. The resulting metric is a value that has not previously been reflected in a company’s balance sheet. The special feature of the VBA is that it translates environmental and social impacts into comparable financial data, i.e. monetary values.
Water consumption
Water consumption is the part of water use which is not distributed to other economic units and does not return to the environment (to water resources, sea and ocean) because during use it has been incorporated into products or consumed by households or livestock.
WBCSD
The World Business Council for Sustainable Development (WBCSD) is a global organization of more than 200 companies working together to transform the world toward sustainability. It supports member companies to internalize the concept of sustainable development and adapt their business operations.
Latest articles from WifOR’s Sustainability Research
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Interview with Dr. Richard Scholz
Using Impact Valuation to act responsibly – along the supply chain
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A comparison of German and European supply chain laws
New supply chain laws: What do they mean for companies?
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Nonfinancial Reporting
Net Zero – What does it mean for companies?
