ESG Glossary

ESG

ESG is an investing principle focused on Environmental, Social, and Governance factors. In 2004, the UN Secretary General and UN Global Compact initiated Who Cares Wins in collaboration with the Swiss government. This report was created to support sustainability in the context of capital flows and to enable a better way for capital market stakeholders to integrate ESG factors into their management processes. A summary of the WCW strategic outcomes can be found here.

OWL

The W3C Web Ontology Language (OWL) is a tool used to describe detailed knowledge about things, groups of things, and how they are connected. It is based on computer logic, so programs can use OWL to check if the knowledge is consistent or to find hidden information. OWL documents, called ontologies, can be shared on the web and can link to or be linked from other OWL documents. OWL is part of the W3C’s set of tools for the Semantic Web, which also includes RDF, RDFS, SPARQL, and others.

RDF

The Resource Description Framework (RDF) is a system used to share data on the web. It helps combine data from different sources even if they use different formats, and allows data to change over time without needing to update everything that uses it. RDF works by connecting things using Unique Resource Identifiers (URIs) to show how they are related. These connections are called "triples" because they consist of three parts: the two things being linked and the relationship between them. This system creates a graph where the points (nodes) represent the things, and the lines (edges) show how they are connected.

SDGs

The UN has set 17 Sustainable Development Goals to be completed by 2030. These goals aim to address various global challenges, including poverty, inequality, climate change, environmental degradation, peace, and justice. Each goal has specific targets and indicators to measure progress.

SKOS

SKOS (Simple Knowledge Organization System) is a standard way of sharing and connecting knowledge systems on the web. Many systems like thesauri, taxonomies, and classification schemes have similar structures and are used in similar ways. SKOS highlights these similarities to make it easier to share data and technology across different applications and provides an easy and affordable way to move existing knowledge systems onto the Semantic Web. It also offers a simple and intuitive way to create and share new knowledge systems. You can use SKOS by itself or together with more formal languages like OWL.

SPARQL

RDF is a way of organizing information on the web using a directed, labeled graph. This specification explains the rules for using SPARQL, a query language for RDF data. SPARQL allows you to search through different data sources, whether the data is stored as RDF or shown as RDF through another system. SPARQL can find specific patterns in the data and handle both required and optional ones. It also allows the testing of values as well as the limiting of queries to certain data sources. The results of a SPARQL query can be either a list of results or an RDF graph.

URI

A Uniform Resource Identifier (URI) is a unique string of characters that identifies something, like a webpage, email address, phone number, book, real-world object, or even concepts. URIs are used to identify anything described using RDF (Resource Description Framework). For example, a URI can be used to identify concepts in an ontology (defined by OWL).

CSRD

The Corporate Sustainability Reporting Directive is a European Union directive aimed at improving the consistency and transparency of sustainability reporting by companies. The CSRD expands the scope of the previous Non-Financial Reporting Directive (NFRD) and requires a broader range of companies to disclose information on their ESG impacts. The scope now includes all large companies (those meeting two out of three criteria: more than 250 employees, €40 million turnover, or €20 million total assets) and all listed companies, regardless of size. The CSRD became effective on January 1st, 2025.

ESRS

ESRS, or European Sustainability Reporting Standards, are a set of guidelines established by the European Union to enhance the transparency and comparability of sustainability reporting among companies. These standards are part of the broader framework of the EU's CSRD and focus on various sustainability matters including Circular Economy, social initiatives, climate change, water and marine resources, as well as biodiversity and ecosystems.

GRI

The Global Reporting Initiative is the leading set of standards for companies to report on. These standards are the most widely used framework for sustainability reporting, allowing organizations to measure and communicate their economic, environmental, and social impacts. Organizations are encouraged to adhere to these standards while also complying with tax legislation and stakeholder expectations, particularly regarding tax-related disclosures.

IFRS

The International Financial Reporting Standards Foundation created the International Sustainability Standards Board (ISSB) in order to inform capital market participants about how to make better economic decisions and investments. The standards employed by the ISSB aim to enable companies to disclose useful and comparable information as well as to consolidate voluntary sustainability-reporting initiatives.

NZIA

The Net Zero Industry Act is a legislative framework aimed at accelerating the transition to a net-zero economy within the European Union. It focuses on enhancing the production and deployment of key technologies that are essential for achieving net zero targets, such as renewable energy sources and energy storage solutions.

SA8000

SA8000 is a global standard developed by Social Accountability International (SAI) to enhance working conditions and promote social accountability in the workplace. Rooted in the Universal Declaration of Human Rights, it addresses critical issues such as child labor, slavery, and discrimination while ensuring compliance with international labor standards.

Asset

Assets are resources owned by an individual or entity that have economic value and can provide future benefits. They are a fundamental component of financial statements and can be categorized into different classes. Asset classes include current and non-current assets (cash or inventory versus long-term investments such as property), financial assets (stocks, bonds, and other securities), as well as tangible or non-tangible assets (physical assets such as machinery versus non-physical assets like goodwill, trademarks, or copyright).

Carbon Neutrality

Carbon neutrality, or having a net-zero carbon footprint, means balancing the amount of carbon dioxide released into the atmosphere with an equal amount that is removed or offset. This can be done by reducing emissions, capturing carbon, or purchasing carbon credits to make up for the difference. The term is often used in relation to activities like transportation, energy production, and industrial processes, including the creation of carbon-neutral fuels.

Circular Economy

The circular economy is an economic model aimed at minimizing waste and making the most of resources. It contrasts with the traditional linear economy, which follows a 'take-make-dispose' pattern. The circular economy emphasizes sustainability, resource efficiency, and continual use of materials through various strategies.

Compliance

Regulatory compliance refers to the following of laws, rules, and guidelines that apply to a business. This includes things like competition laws, waste management rules, and other regulations that affect how a company operates. By staying compliant, organizations ensure they follow legal requirements, helping them avoid risks such as fines and damage to their reputation.

Double Materiality

Double Materiality is a concept in sustainability reporting that recognizes two dimensions of materiality: financial materiality, which focuses on how sustainability affects the financial performance of a company by addressing risks and opportunities, and impact materiality, which considers the effects that a company's operations have on the environment and society, regardless of profitability.

European Green Deal

The European Green Deal is a comprehensive policy initiative launched by the EU aimed at making Europe the first climate-neutral continent by 2050. It encompasses a wide range of strategies and regulations designed to address climate change, promote sustainable development, and protect biodiversity.

EU Taxonomy

Being a key component in the European Green Deal, the EU Taxonomy is a classification system established under the EU Taxonomy Regulation aimed at providing a framework for determining whether an economic activity is environmentally sustainable.

Framework

A regulatory framework, often referred to as governance policy, encompasses a set of rules, standards, and guidelines that govern the behavior of individuals, organizations, and governments within a specific context. A regulation is a binding legislative act and must be applied in its entirety across the EU. It is different from a directive, which is a legislative act that sets out a goal that all EU countries must achieve by creating their own individual laws.

Indicators

Perform Compliance Checks for any company of interest: With Recomentor you can perform gap analysis against ESG frameworks and peer organizations. You can analyze your company's compliance using the following calculated indicators:

Users can leverage these indicators to identify improvement opportunities and prioritize ESG initiatives with the highest potential impact.

Knowledge Graph

A Knowledge Graph is a structured representation of information that captures relationships between entities in a way that is understandable both to machines and humans. Both utilize Taxonomies to organize knowledge hierarchically and Ontologies to define the properties and relationships of these entities. Organizations can use knowledge graphs to manage and leverage their knowledge assets effectively.

Knowledge Hub

GraphRAG combines retrieval-augmented generation with graph-based representations—such as knowledge graphs or other structured data—to produce concise, understandable as well as accurate and traceable information. This is critical when it comes to the complex landscape of ESG reporting. Knowledge-hub.eco is a conversational AI demo application based on the ESG Core Knowledge Model which is currently the most comprehensive domain-specific knowledge model available for the ESG domain. The tool uses concepts extracted by the knowledge model to expand the user query, thereby minimizing hallucination in the output generated by the LLM. It then uses GraphRAG for its Main takeaways section.

Market Capitalization

Market capitalization, or market cap, represents the overall value of a publicly listed company's shares held by its stockholders. It is calculated by multiplying the market price per common share with the total number of shares in circulation. Because these shares are traded on public exchanges, market cap can reflect the public's perception of a company's financial worth and is often used in various stock valuation methods.

Ontology

Ontology refers to a structured framework that categorizes and defines the relationships between concepts within a specific domain. For example, in the context of a Knowledge Graph, ontologies represent the relationships and rules governing the concepts within the given domain, often used to enable reasoning and inferencing about the data. Compared to taxonomies, ontologies organize information with more complexity because they add relationships between concepts in a hierarchical structure. Ontologies have their origins in computer science and data science with a focus on data models.

Risk

Risks can be understood as the potential for harm or financial loss, or the chance that the actual outcome or investment's actual gain will be different from the expected outcome. ESG risks can be found in the following areas:

Semantic Web

The Semantic Web is an extension of the World Wide Web that aims to make internet data machine-readable by providing a framework that allows data to be shared and reused across application, enterprise, and community boundaries. It enhances the web by embedding semantic meaning into the data enabling better data integration and interoperability.

Taxonomy

Taxonomies are hierarchical classifications that organize concepts into categories and subcategories, making it easier to navigate complex information. Both ontologies and taxonomies are knowledge organization systems. Although they have different origins, both are commonly integrated in Semantic Web data models and guidelines.

Total Revenue

Total revenue is a financial metric that represents the total income generated by a business from its sales of goods or services over a specific period. It is calculated by multiplying the price at which goods or services are sold by the quantity at which such goods and services are sold.

Turnover

Turnover generally refers to the total revenue generated by a business during a specific period, often a fiscal year. It can encompass various forms of revenue, such as Annual Recurring Revenue (ARR), each reflecting different aspects of a company's financial performance.

Triple

A triple refers to a data structure consisting of three related elements. In the context of semantic web technologies and RDF, a triple is generally used to represent a statement in the form of subject-predicate-object.

Peer Classification

Peer classification, also known as industry classification or industry taxonomy, is a system that organizes companies, organizations, and traders into groups based on similar production processes, products, or behavior in financial markets. Different agencies utilize different industry classification schemes to provide an overview of economic conditions. GICS (Global Industry Classification Standard) and NACE (Statistical Classification of Economic Activities in the European Community) are examples of peer classification systems.