Appendix A
Definitions

Assurance Letter: Typically, an annual signed statement from business executives (often business presidents) to the CEO stating that operations comply; risks and significant issues are identified and being managed; and processes are in place to ensure consistent implementation of corporate policies and values.

Board: Refers to the external Board of Directors (as with all U.S.-based public corporations); the governing body with oversight fiduciary responsibility for the corporation [Note: the “Supervisory Board” referred to often in Europe, consisting of the CEO and his/her direct reports, is not part of this section. That is covered under CEO Leadership and Culture and Organization.]

Brownfield Redevelopment: The expansion, redevelopment or reuse of land and property, which may be complicated by the presence or potential presence of hazardous substances or contaminants.

Carbon Neutral: Having a net zero carbon footprint; achieving net zero carbon emissions by balancing a measured amount of carbon released with an equivalent amount sequestered or offset, or buying enough carbon credits to make up the difference.

Chief Sustainability Officer (CSO): The most senior person in the company with responsibility for overseeing sustainability policy, positioning and activities. Note: the person may or may not be officially designated as the CSO by the company.

Circular Economy: An alternative to the traditional linear economy (make, use, dispose) in which resources remain in use for as long as possible, extracting the maximum value from them while in use, then recover and regenerate products and materials at the end of each product or service life.

Closed-Loop: Also referred to as the circular economy, where materials, at the end of their useful life, are consistently repurposed, recycled, reused, reclaimed, restored, or otherwise converted to some use rather than discharged as waste.

Community of Practice: A group of people who share a common interest (e.g., in sustainability); may evolve naturally or can be created to share knowledge.

Cradle to Cradle: A holistic framework for design of industry, products, buildings, or urban environments that seeks to create systems that are efficient and essentially waste free. (The term Cradle to Cradle is a registered trademark of McDonough Braungart Design Chemistry/MBDC.)

Crowdsourcing: The process of obtaining needed services, ideas, or content by soliciting contributions from a large group of people, especially from an online community, rather than from traditional employees or suppliers.

Design for Environment (DfE): A global movement incorporating environmental motives to improve product design to minimize health and environmental impacts.

Ecosystem Services: Humankind benefits in a multitude of ways from ecosystems (e.g., cleaning drinking water, decomposing wastes, etc.). Collectively, these benefits are known as ecosystem services.

ESG (Environmental, Social, and Governance): The term often used by the investment community to refer to what they characterize as the three central factors in measuring the sustainability of an investment in a company or business. In this book and the companion website, the term ESG is used interchangeably with sustainability.

Executive Committee: Refers to direct reports to the CEO charged with overseeing strategy and operations.

Executive Sustainability Council: The senior-level, cross-functional group of executives that many companies must provide a forum for setting policy direction; recommending goals and metrics; deciding priorities; allocating resources; and reviewing progress on key initiatives.

External Sustainability Advisory Board: A group of sustainability experts or thought leaders from various external stakeholder groups, assembled to periodically advise the CEO and CSO.

Externality: The cost or benefit that affects a party who did not choose to incur that cost or benefit. For example, manufacturing activities that cause air pollution or carbon emissions may impose health, cleanup, or other costs on society.

Footprint: A measure of an organization’s (or human’s) demand on the Earth’s ecosystems. Unless otherwise, in this context is used as a measure of the full impact across the supply chain of an organization’s operations, including, for example, consumption, use and emissions of energy, materials, resources, water, etc.

Forest Stewardship Council (FSC): An international not for-profit, multi-stakeholder organization established in 1993 to promote responsible management of the world’s forests. FSC is a global forest certification system established to promote forest management that is environmentally appropriate, socially beneficial, and economically viable.

Global Reporting Initiative (GRI): A nonprofit organization that produces one of the world’s most prevalent standards for sustainability reporting.

Green Chemistry: The design of chemical products and processes that reduce or eliminate the use or generation of hazardous substances across the full life cycle of chemical production, from design and manufacture to product use and disposal.

International Sustainability Charters/Commitments: A global sustainability charter, framework or set of principles such as, for example, the UN Global Compact; UN Declaration on Human Rights; the Precautionary Principle; Green Chemistry Principles; etc. Also includes commitments to global agreements such as the Paris Climate Accord.

Key Business Decisions: The handful of major decisions the CEO and Board make each year—typically involving merger, acquisition or divestiture; large capital expenditure; new product launch; major research and development expenditure, etc.

Key Sustainability Indicators (KSI): Hedstrom Associates uses the term key sustainability indicators to characterize the specific items in our Corporate Sustainability Scorecard C-suite rating system. The Corporate Sustainability Scorecard allows a user to rate a company on about 150 key sustainability indicators.

LEED: Leadership in Energy and Environmental Design is one of the most popular green building certification programs worldwide. It was developed by the nonprofit U.S. Green Building Council.

Life Cycle Assessment (LCA): A technique to assess environmental impacts associated with all the stages of a product’s life from-cradle-to-grave (i.e., from raw material extraction through materials processing, manufacture, distribution, use, repair and maintenance, and disposal or recycling). Also known as life-cycle analysis.

Material: Information is material if its omission or misstatement could influence the economic decision of users taken based on the financial statements. (See Materiality.)

Materiality: A concept or convention within the financial community relating to the importance/significance of something relevant to the corporation. Information is material if its omission or misstatement could influence the economic decision of users taken based on the financial statements. Materiality in relation to the inclusion of information in an integrated (financial and sustainability) report refers to matters that “could substantively affect the organization’s ability to create value over the short, medium and long term.”i

Net Neutral (Environmental Impact): Refers to a situation where the sum of the full environmental impacts of an organization—across the full supply chain—is offset by the net reduction in environmental impact caused by use of the company’s products, services or solutions.

Net Positive (Environmental Impact): Refers to a situation where the sum of the full environmental impacts of an organization—across the full supply chain—is less than the net reduction in environmental impact caused by use of the company’s products, services, or solutions.

NGO (Nongovernmental Organization): An organization that is neither a part of a government nor a conventional for-profit business; seen to represent “civil society.”

Precautionary Principle: If an action or policy has a suspected risk of causing harm to the public or to the environment, in the absence of scientific consensus that the action or policy is not harmful, the burden of proof that it is not harmful falls on those taking an action.

Products, Services, or Solutions (PSS): Items or services sold by companies that are intended to satisfy a market need. From a sustainability context, shifting from selling products to leasing products or selling services is consistent with moving from a linear (“take–make–waste”) system to a closed-loop one whereby products, after their useful life, are recycled, reused, refurbished, or returned to some productive use.

REACH: A European regulation promulgated in 2006 that addresses the production and use of chemical substances, and their potential impacts on both human health and the environment.

Sharing Economy: While there is not one widely agreed definition, the sharing economy involves attempts to make more efficient use of labor and capital resources using information technology that lowers the costs of matching buyer with sellers.

Stakeholder: Individuals or groups of people who can reasonably be expected to be significantly affected by an organization’s business activities, outputs, or outcomes, or whose actions can reasonably be expected to significantly affect the ability of the organization to create value over time.

Stranded Assets: Assets such as fossil fuel supply that are no longer able to earn an economic return because of changes associated with the transition to a low-carbon economy, posing an economic challenge to their owners.

Supply Chain: The system of organizations, people, activities, information and resources involved in moving a product or service from point of origin to point of consumption. Supply chains underlie value chains because, without them, no producer can provide customers what they want, when they want it, and at a price they will pay.

Sustainability: The pursuit of a business growth strategy that creates long-term shareholder value by seizing opportunities and managing risks related to the company’s environmental and social impacts. Sustainability includes conventional environment, health, and safety (EHS) management; community involvement and philanthropy; labor and workplace conditions as well as elements of corporate citizenship, corporate governance, supply chain, and procurement.

Sustainability Principles: Various ways of characterizing the concept of sustainability. One example would be the four system conditions of The Natural Step.

Sustainability Ratings and Rankings: Those independent sustainability ratings and rankings that major companies across industry sectors and geographies typically view as the most influential or worthy, including:

• Bloomberg
• CR Magazine 100 Best Corporate Citizens
• CDP
• Dow Jones Sustainability Index (DJSI)
• Fortune’s The World’s Most Admired Companies
• FTSE4Good Index Series
• Global 100 Most Sustainable Companies
• Newsweek Green Rankings
• Oekom Corporate Ratings

Sustainability Report: An organizational report that gives information about ESG positioning and performance. This can be a stand-alone report (often a companion to the Annual Report); it can be included with the financial information in a fully Integrated Report; or can be the equivalent information available on a company’s website.

Sustainable Development Goals (SDGs): A set of 17 “Global Goals” with 169 targets between them, adopted by 193-member countries of the United Nations, intended to galvanize and guide the world’s efforts to eradicate poverty, end hunger and address climate change by 2030.

TCFD (Task Force on Climate-Related Financial Disclosures): This industry-led task force, established by the Financial Stability Board (at the request of the G20 Finance Ministers and the Central Bank Governors) issued its final report in June 2017. The report includes recommendations to industry for disclosure to investors, following a simple structure (that incidentally is almost identical to our Corporate Sustainability Scorecard):

• Governance
• Strategy
• Risk (the Scorecard has separate sections for Environmental and Social)
• Metrics (the Scorecard folds this under Governance)

Unwritten Rules of the Game: How a cross-section of employees would describe “the way things work around here.”

Value Chain: The process by which a company adds value to an article, including during production, transportation, marketing, and the provision of after-sales service.

Water-Neutral: Refers to a situation where an organization is returning to surface water or ground water the volume of water it uses—across the full supply chain—at a level of purity that is of the same or higher quality of the receiving body or aquifer.

Workplace: The physical and social environment where employees do their work and interact with peers.

i The International Integrated Reporting Council, The International <IR> Framework 13 December 2013, p. 5. http://integratedreporting.org/resource/international-ir-framework/