Sustainability and Legislation Series - Chapter 3: Sustainability Terminology

Hello, I’m Jesper Risa, Data Analyst at Humans Not Robots. With sustainability increasingly at the forefront of business decision-making, and with upcoming chapters set to discuss regional approaches, it is essential to understand the terminology used to convey these concepts. Special mention goes to Kris Brown, our CTO, who wrote parts 1 and 2 of this series and provided invaluable support during the research phase of the project.

What are the different types of carbon emissions?

Emissions are typically divided into three classifications, known as Scope 1, Scope 2, and Scope 3, determined by how directly the company controls the sources of emissions.

Scope 1 emissions are those directly emitted by an organisation—for example, from the production of goods or the delivery of services. Examples include:

• The use of fossil fuels by a delivery company
• Gas leaks or venting by an energy provider

Because Scope 1 emissions are under the organisation’s direct control, they are usually the easiest to reduce. Measures might include electrifying your vehicle fleet or prioritising maintenance of company facilities.

Scope 2 emissions occur upstream in a company’s supply chain. While not emitted directly by the organisation, they result from the procurement of energy. Common sources include:

• Heating
• Air conditioning
• Powering computers and online systems

Reducing Scope 2 emissions, like Scope 1, is often straightforward, with the most obvious solution being to switch to an energy provider offering fully or near-fully green energy.

If your organisation does not control its own energy procurement, it may be more challenging, but options are available. Energy efficiency can be improved by:

• Switching to LED lighting
• Installing efficient heating and ventilation systems
• Joining a programme to schedule energy use outside peak hours

Scope 3 emissions are the most complex. These can arise both upstream and downstream in the supply chain, covering all sources not already included in Scope 1 or 2. Upstream activities in Scope 3 include:

• Leased assets such as offices and data centres
• Business travel
• Commuting
• Waste generation
• Shipping of input goods
• Capital inputs such as network infrastructure (fibre-optic, copper cables etc.)

Downstream activities include:

• Investments
• Transportation of the final product
• Use of the product
• End-of-life treatment of the product (recycling, landfill, etc.)

Scope 3 emissions account for the vast majority of most organisations’ carbon footprints. They are challenging to calculate accurately due to the variety of activities involved, and reducing them often requires multiple targeted solutions. Possible actions to tackle Scope 3 emissions include:

• Optimising the use of resources to avoid waste
• Shifting investments towards organisations with low carbon emissions or those actively working to reduce them
• Using less carbon-intensive shipping methods (for example, preferring trains and lorries over ships and aeroplanes)
• Making products more recyclable
• Leasing low-carbon vehicles
• Leasing properties with strong energy ratings

There are also different ways to determine which emissions should be counted in greenhouse gas reporting for companies with more complex business structures, this being determined by ‘organisational boundaries. There are two main approaches to this:

• The equity share approach counts emissions based on the amount of equity it has in a polluter. This means that if it owns 30% of a telecommunications provider, 30% of their emissions will count towards overall greenhouse gas emissions. ‍
• The two-control approach counts 100% of emissions from operations the company has control over. It does not count scope 1 and 2 emissions from operations in which it has a financial stake, but no control. It can still choose to count scope 3 emissions for these.

Double Materiality Assessments

Another term you may often encounter in ESG discussions is ‘double materiality assessment’ (DMA). But what does it mean?

A DMA assesses two forms of materiality: impact materiality and financial materiality.

• Impact materiality examines how the organisation affects the environment in which it operates, including:
  
  • Carbon footprint
    
  • Air pollution
  • Water pollution
  • Other externalities

• Financial materiality considers how external sustainability matters may affect the business itself, such as:
  
  • Different levels of global warming
  • Loss of biodiversity
  • Destruction of local communities

The assessment involves analysing potential impacts, risks, and opportunities, making it a key step in understanding what matters to the business. A DMA covers both cash flows/assets and non-financial factors like company reputation or the risk of non-compliance, giving a holistic view of the organisation’s position.

However, keep the following in mind when conducting a DMA:

1. Determining what is genuinely material to the organisation can be challenging, as it is impossible to consider everything.
2. Materiality assessments should not be one-off exercises. They need to evolve with your business and are likely to take place every two or three years after implementation.
3. To ensure your DMA is a useful business improvement tool—rather than just a box-ticking exercise—the process should be integrated with finance, strategy, risk, and other relevant departments.
4. Methodology is crucial. Involving an external auditor can help maximise the value of your DMA, but do not overlook the expertise already within your own organisation.

Why it matters?

Clear, shared terminology underpins every meaningful step towards sustainability. By defining key concepts and aligning on language, we enable organisations to measure, communicate, and achieve their goals more effectively. At Humans Not Robots, these definitions form the backbone of how we deliver insight, foster transparency, and help our customers and partners translate ambition into practical action.  

If you are looking to advance your own journey towards more sustainable operations, get in touch! We have the tools and experience to help you measure and optimise your technical infrastructure.  

In Chapter 4, we’ll turn to the EU’s Sustainability Framework, breaking down its core components and exploring how evolving regulations are shaping business strategies across the region. Watch this space!

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Key Definitions, Acronyms, and Initialisms

• Carbon Neutral – “...does not add to the total amount of carbon dioxide in the atmosphere...” (Cambridge Dictionary)

• Supply Chain – The full series of inputs and processes involved in the creation and delivery of a good or service

• Exclusive Economic Zone (EEZ) – “An area of sea around a country where only that country has the right to take something valuable, such as fish or oil” (Cambridge Dictionary)

• Reasonable Assurance – A form of assurance where an external party provides an opinion on the measurement of the subject matter against predefined criteria

• AMS – Administrative, management, and supervisory (as in AMS bodies)

• SME – Small and medium-sized enterprise

• Financial Materiality Threshold – The point at which information starts to impact financial decisions

• EU ETS – EU Emissions Trading System; covers emissions from electricity, heat, aviation, and sea transport (European Commission definition)

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