ESG, carbon footprint, carbon neutrality, CSRD, CBAM, LCA, and more...

Carbon neutrality is a state in which organizations, individuals, or countries balance the amount of greenhouse gases they emit into the atmosphere by removing an equivalent amount of greenhouse gases or investing in projects that reduce emissions. The goal is to achieve zero (net) carbon emissions, which is a key step toward stopping global warming and mitigating climate change.

Carbon neutrality can be achieved through various measures, such as improving energy efficiency, switching to renewable energy sources, reforestation, or investing in carbon removal projects.

Achieving carbon neutrality is often part of broader sustainability goals that contribute to global efforts to combat climate change and can positively impact a company’s reputation.

Life Cycle Assessment is a methodology used to measure the overall impact of a product or service on the environment throughout its entire life cycle – from production to final disposal. LCA provides a comprehensive view of environmental impacts by analyzing energy and material consumption, greenhouse gas emissions, water consumption, water pollution, and other factors in various phases of the product life cycle.

Standardized measurement of the amount of greenhouse gas emissions produced by a company (including carbon dioxide and other gases listed under the Kyoto Protocol) expressed as a carbon dioxide equivalent (CO2e).

CBAM is a mechanism that the European Union is considering introducing to prevent carbon leakage across borders while supporting global efforts to reduce greenhouse gas emissions. This mechanism is intended to ensure that imports from countries with less stringent emission standards are subject to a carbon price to ensure fairness and keep European companies competitive in the global market. CBAM is part of the EU’s broader goal of achieving carbon neutrality by 2050. It is also one of the tools to help achieve this goal by increasing the cost of goods and services with a high carbon footprint, thereby encouraging the transition to cleaner technologies.

Double materiality is a concept that recognizes which environmental, social, and governance (ESG) factors can significantly impact both an organization’s financial performance and the wider society and environment. This approach emphasizes the importance of assessing and managing an organization’s external impacts and how these ESG factors can affect its ability to create value. Double materiality helps organizations and investors better understand and manage the overall risks and opportunities associated with sustainability. Companies can evaluate which indicators are relevant to them and which have little significant impact.

Corporate Social Responsibility (CSR) encompasses a company’s ethical practices that lead to a positive impact on society and the environment. The principle of incorporating social and environmental considerations into a company’s strategy is known as the Triple Bottom Line. The Triple Bottom Line is divided into three components: economic (e.g., transparency of financial transactions, rejection of corruption), social (e.g., respect for human rights), and environmental (e.g., sustainable production, protection of utilized natural resources). This term illustrates how companies can voluntarily contribute to the common good.

ESG criteria (Environmental, Social, and Governance Criteria) are factors that investors and companies use to assess the sustainability and ethical aspects of investments and business decisions.

These criteria serve to measure the impact of investments on the environment, social aspects, and the quality of corporate governance. Investors and businesses are increasingly focusing on ESG criteria because they understand that considering these factors can lead to more sustainable and responsible business practices in the long term.

Companies that effectively integrate ESG into their strategy can generate not only higher financial returns but also deliver social and environmental value.

Offset, or emission compensation, means balancing greenhouse gas emissions from one source (company or individual) by investing in projects or measures that reduce or remove emissions from other entities.

Offsets should not be used as a substitute for actual emission reduction measures but rather as a complement to these efforts. The ideal approach is a combination of reducing one’s own emissions and carbon compensation.

In 2024, a new CSRD (Corporate Sustainability Reporting Directive) on non-financial reporting is expected to come into effect. Companies in the Czech Republic, especially those with 250 or more employees, will be required to submit non-financial reports similar to financial statements. Particularly for companies seeking investments or loans, this directive will be of significant importance. Those that demonstrate social responsibility may gain advantages in obtaining capital.

EU Taxonomy is a classification system for economic activities introduced by the European Union (EU) to provide a uniform framework for assessing the sustainability of investments. It is part of the Action Plan for Financing Sustainable Growth adopted by the EU in 2018.

The EU Taxonomy identifies economic activities that contribute to a green and sustainable economy based on six specified criteria:

1. Climate Change Mitigation
2. Climate Change Adaptation
3. Use and Protection of Water and Marine Resources
4. Transition to a Circular Economy
5. Pollution Prevention and Control
6. Protection and Restoration of Biodiversity

Within each category, technical criteria and sustainability requirements are established that must be met for an activity to be considered environmentally sustainable. This taxonomy is intended to help investors, companies, and institutions better assess, monitor, and report on the sustainability of their activities.