When we read the original sentence, we should examine the pronoun "it." The reference is clear: "it" refers to the first three words of the sentence, "the term `sustainable.'" But that means the sentence isn't saying what it's trying to say. It's saying, "The term `sustainable' is a substance" that does some things. But the term "sustainable" isn't a substance; it's a term, a word. We need something more like, "The term `sustainable' means a substance," or, better, it refers to a substance that is recycled. We'll look for that.
Looking for that in the answer choices, we find (D), which uses a different verb but is otherwise exactly what we were looking for.
Choice (E) is a little awkward and is missing the words "that is," distorting the meaning of the end of the sentence.
The correct answer is (D).