Glossary of Sustainability and ESG Reporting Terms Explained

All key terminology regarding ESG, VSME, and carbon accounting – clearly explained for small and medium-sized enterprises (SMEs).

All ESG entries

ESRS (European Sustainability Reporting Standards)

ESRS are the mandatory EU sustainability reporting standards for large CSRD-compliant companies, indirectly establishing the framework for SME suppliers in terms of ESG reporting.

Sustainability Report

A sustainability report documents a company's ESG performance and is now frequently a prerequisite for SMEs to secure bank financing and maintain supplier relationships.

ESG

ESG stands for Environmental, Social, and Governance. This framework enables investors, banks, and business partners to evaluate sustainability performance through measurable ESG reporting metrics.

VSME Standard for ESG Reporting

The VSME standard is a simplified reporting framework for small and medium-sized enterprises, developed by EFRAG. It enables SMEs to provide standardised ESG data for ESG reporting and sustainability disclosure.

ESG Strategy and Sustainability Reporting

An ESG strategy systematically integrates environmental, social, and governance factors into the business model, risk management, and corporate objective frameworks to drive sustainability.

ESG reporting requirements

The ESG reporting requirements determine which organisations must disclose their sustainability performance and by when. Under the European CSRD, sustainability reporting is now legally on par with traditional financial reporting.

Scope 1 emissions

Scope 1 emissions encompass all direct greenhouse gas emissions from sources owned or controlled by the company, such as on-site heating systems and the corporate vehicle fleet, serving as a foundational element of ESG reporting.

Scope 2 Emissions

Scope 2 emissions represent indirect greenhouse gas emissions resulting from purchased electricity, steam, heating, and cooling acquired from third-party providers for corporate operations.

Scope 3 emissions

Scope 3 emissions encompass all indirect emissions across the entire value chain, frequently accounting for over 80% of an organisation's carbon footprint and representing a critical focus area for comprehensive ESG reporting and corporate sustainability.

Decarbonisation

Decarbonisation is the strategic process of reducing and ultimately eliminating CO2 and other greenhouse gas emissions to achieve net-zero, serving as a critical pillar of corporate sustainability and ESG reporting.

Sustainability communication and ESG reporting

Sustainability communication refers to the structured reporting of ESG performance to stakeholders, including financial institutions, customers, and employees.

Green Asset Ratio

The Green Asset Ratio is a regulatory KPI for European banks that measures the proportion of environmentally sustainable assets within their total balance sheet, serving as a key metric for ESG reporting and sustainability performance.

Water withdrawal

Water withdrawal refers to the extraction of water for operational use and is a key environmental metric in ESG reporting and supply chain requirements.

B1 Fundamentals of VSME (Voluntary SME ESG Reporting)

B1 is a mandatory reporting section within the VSME standard, defining the methodological and organisational framework for preparing an ESG report.

VSME XBRL

VSME XBRL refers to the structured, machine-readable tagging of sustainability information according to the VSME standard, enabling automated digital data exchange for efficient ESG reporting.

Product Carbon Footprint: ESG Reporting and Sustainability Solutions

The Product Carbon Footprint (PCF) encompasses all greenhouse gas emissions across the entire product lifecycle, measured in CO2 equivalents to ensure robust ESG reporting.

Activity-based carbon footprint calculation

Activity-based emission calculation determines greenhouse gas emissions based on actual physical units of measurement, such as kilowatt-hours or litres, rather than financial values, ensuring accurate data for robust ESG reporting and sustainability management.

Spend-based emission calculation method

The spend-based approach calculates your corporate carbon footprint using financial expenditure data multiplied by industry-specific emission factors. This method is highly efficient for ESG reporting, though less precise than activity-based tracking.