I'm not a 10-year-old (and most likely, neither are you), but I find the following explanations exceptionally clear and easy to understand. See if you understand these ESG terms in a similar way.
Phase-In: Imagine you've just learned how to play a new video game with lots of levels. At first, the game lets you try only a few easy levels to get used to the controls and how everything works. This is like a "phase-in" – it's a special time when companies start slowly and learn to do something new step by step, like following new rules for telling people about how they take care of the environment and people around them.
Double Materiality Assessment: Think of your school backpack. Some things in it are really important for your school day (like your lunch and homework), and some things are not as important. A "double materiality assessment" is like checking your backpack twice. First, you check to make sure you have everything you need (that's the first 'materiality'), and second, you make sure you're not carrying anything that might hurt you or your friends (that's the second 'materiality'). Companies do this to see what things are important for their business and also important for the world around them.
Materiality: "Materiality" is a fancy word for figuring out what things are super important and what things are less important. Just like when you decide what to play during recess - playing your favorite game might be very important to you (that's 'material'), but playing a game you don't like much might not matter as much.
Value Chain: Imagine making a big craft project, like a paper chain. You need scissors, glue, and paper, and maybe you get help from your friends or family. Everything and everyone that helps make that paper chain is part of the "value chain." For companies, the "value chain" includes all the steps and people involved in making their products, from getting the materials to making the product, all the way to when you buy it from the store.
Reporting: When you come home from school, you might tell your family about your day - what you did, what you learned, and if anything special happened. That's like "reporting." Companies do this too, but they write reports about how their business is doing, what good or bad things are happening, and how they're taking care of the environment and people.
Risks and Opportunities: Let's say you have a lemonade stand. A "risk" might be that it could rain, and not many people would buy your lemonade. An "opportunity" could be that it's a super hot day, and everyone wants a cool drink, so you might sell lots of lemonade! Companies think about "risks" as things that could go wrong and "opportunities" as chances to do something really great in their business.
Disclosure Requirement: You know how your teacher asks you to show your work on a math problem? It's not enough just to have the answer; you also need to explain how you got there. A "disclosure requirement" is like your teacher's rule. It's a must-do thing where companies have to share certain information about what they're doing, especially things that show they care about people and the environment. It's like a list of questions they need to answer so everyone can understand their work.
Disclosure Requirement Data Point: Think of a "data point" like a piece of a puzzle. Each piece has a bit of the picture, and when you put them all together, you can see what the whole puzzle looks like. For companies, each "data point" is a piece of information like how much energy they use or how much waste they make. They share each of these pieces to paint a full picture of what they're doing.
Cross-cutting Standards: Imagine you have rules at home that apply to everyone, like washing your hands before dinner or taking off your shoes at the door. "Cross-cutting standards" are like those house rules, but for companies. They're guidelines that every company follows, no matter what kind of business they're in, to make sure they're being fair and careful about how they affect people and the planet.
Sector-Agnostic: Say you have a rule in gym class: "No running indoors." It doesn't matter if you're playing basketball, dodgeball, or any other game - the rule is the same for everyone. "Sector-agnostic" means something that doesn't care what type of business you are; the rules or ideas apply to all companies equally, whether they're making toys, growing food, or running a bank.
Metrics and Targets: If you're playing a video game, you might try to reach a certain score or finish a level by a certain time. Those scores or times are "metrics," and the goals you're trying to hit are your "targets." Companies use "metrics and targets" to measure how well they are doing in different areas, like cutting down on pollution or helping the community, and they set goals (targets) for what they want to achieve in the future.
Time Horizons: Imagine you're planning your future: what you'll do tomorrow, next week, or even when you grow up. Each of these times is like a different "time horizon." For companies, "time horizons" are the different periods they plan for, like what they want to do soon, in a little while, and way down the road. They think about how their actions today will affect things both now and in the long-term future.
Boundaries: Think about playing a game of tag. There are certain areas where you can run, and if you step out of those areas, you're out of bounds. In the business world, "boundaries" are like the playing field for companies. They decide which parts of their business they need to watch and take care of, like their own stores, the factories that make their stuff, or even the places where their products end up. Boundaries help them know where they have to be responsible and make good choices for people and the environment.
Stakeholders: Think about a birthday party you're throwing. There are many people involved: your family who helps you set up, your friends who come to celebrate with you, your neighbors who might need to know it'll be noisy, and even the bakery that makes your cake. In business, "stakeholders" are like all the people and groups who are part of or affected by the party. They can be people who work at the company, customers who buy things, people who live nearby, and many others. Companies talk to their stakeholders to make sure they're making decisions that keep everyone happy and involved, just like you want everyone at your party to have a good time.
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