What is ESG Benchmarking?
ESG benchmarking is a process of analyzing and comparing the sustainability initiatives & strategies of a firm with those of its competitors across a range of relevant ESG metrics. ESG benchmarking is critical to understanding competitor ESG performance, comparing them to established industry standards, and identifying an organization’s strengths and weaknesses to enhance ESG policies & strategies of a business. This further helps evaluate current ESG policies, strategies, & practices and identify areas of shortcomings to create bridging strategies & corrective practices.
On the other hand, ESG gap analysis, or sustainability gap assessment, is a process of performing a materiality analysis of a firm’s current ESG practices, studying its desired outcome, and comparing it against industry best practices and ESG frameworks. The outcome of ESG gap analysis is to implement an ESG strategy to achieve continuous improvement within the firm in terms of sustainability. Both ESG benchmarking and ESG gap analysis go hand in hand as both these processes aim to evaluate the current ESG strategies of the firm and improve its strategic positioning for the long term.
To achieve sustainability in operations, businesses use ESG benchmarking and ESG gap analysis as tools to assess, measure, and improve ESG performance. Furthermore, reporting frameworks, such as the Global Reporting Initiative (GRI), Sustainability Accounting Standards Board (SASB), and Task Force on Climate-related Financial Disclosures (TCFD), have enabled businesses to disclose ESG-related data to conduct ESG gap analysis and further perform ESG benchmarking.
The Importance of ESG Benchmarking and Gap Analysis in the Current Market Scenario
In real-time, there are several ESG benchmarking and gap analysis frameworks, standards, and initiatives that businesses across different sectors can use to assess and improve their ESG performance & strategies. For instance, the GRI provides comprehensive guidelines for companies and firms to report their economic, environmental, and social impacts to help organizations benchmark their ESG performance. International entities, such as SASB, focus on industry-specific ESG standards to help organizations disclose financial material sustainability information to investors, with standards being tailored to various sectors, making it easier for companies to perform ESG peer benchmarking against competitors. The TCFD provides a framework for disclosing climate-related financial risks & opportunities and helps organizations & firms across industries assess and disclose the impact of climate change on their operations & strategies.
In addition, global reporting platforms, such as the Carbon Disclosure Project (CDP), help organizations disclose their environmental data, including carbon emissions, water usage, and deforestation risk, to offer a system for benchmarking climate and environmental performances through qualitative ratings.
These established initiatives, standards, and frameworks for ESG benchmarking & gap analysis play a critical role in driving sustainability and improving the commitment of firms to sustainability & responsible business practices. ESG benchmarking and gap analysis provide organizations with the following benefits:
- Attract responsible investment
- Assess and manage ESG risks
- Improve an organization’s reputation and profitability
- Improve sustainability of businesses
- Protection from financial losses
- Quantify progress toward sustainability goals and identify areas that require attention
- Gap analysis provides a well-structured and planned strategy for achieving these goals and helps in improving overall ESG performance
How ESG Benchmarking and Gap Analysis Adds Value to Your Company
ESG policies help society and businesses address unique challenges pertaining to sustainability. Businesses, investors, and governments are key stakeholders that have the highest impact while addressing risks associated with ESG goals.
Business organizations and corporations – Benchmarking and gap analysis are indispensable tools for companies seeking to implement ESG strategies and aiming to reduce resource utilization & costs associated with failures. ESG gap analysis serves as a draft before developing a full-fledged sustainability or ESG report.
Investors and stakeholders – ESG investors and stakeholders evaluate ESG risks such as human rights risks, environmental & social performance risks, risks associated with the usage of resources, climate change risks, and corporate governance risks while making investment decisions. ESG benchmarking & gap analysis help investors and stakeholders understand the impact of an organization on its road to achieving sustainability within operations.
Regulatory bodies – Statutory bodies and policymakers can use ESG benchmarking and gap analysis on a global level to design, implement, and improvise regulatory frameworks related to ESG reporting, disclosure, & corporate governance, ensuring transparency and accountability in financial & business sectors. Moreover, as new businesses enter the market, ESG metrics and the need to track them will keep evolving.
Industries and sectors – Different industries across the globe can gain knowledge about the nature of policies & strategies and the impact of such policies on ESG or sustainability. ESG benchmarking and gap analysis provide scoring for top players of an industry, which helps in developing and establishing industry-specific ESG standards & indices.
How NeoImpact Can Help Your Business
NeoImpact employs powerful ESG tools to extract and present actionable data for conducting gap analysis, peer insights, and industry benchmarking.
ESG intelligence
ESG intelligence through benchmarking and gap analysis is a crucial process for businesses and organizations seeking to assess and improve their ESG performance. ESG performance indicators for benchmarking and gap analysis, along with the collection and documentation of relevant metrics specific to the industry/organization, are used to compare Key Performance Indicators (KPIs) against industry players. NeoImpact offers ESG intelligence starting from data collection, data analysis, data auditing, and benchmarking for firms to create ESG performance ratings and indices that help them determine their position in the industry.
Collective ESG intelligence
NeoImpact’s primary ESG taxonomy integrates more than 300 fundamental and alternative indicators to assess the ESG performance of companies across multiple KPIs based on present and historically relevant sustainability data. NeoImpact’s ESG dashboard integrates a proprietary scoring mechanism that simplifies the visualization of ESG performance for companies, aiding them in benchmarking their performance against their competitors across each pillar of ESG.
Peer insights
NeoImpact delivers comprehensive and actionable ESG peer benchmarking reports comprising insights using human and artificial intelligence. Subject Matter Experts (SMEs) create comprehensive peer analysis reports using sustainability data derived from NeoImpact’s customizable taxonomy based on the requirements of the client.
ESG gap analysis and materiality assessment
The team at NeoImpact helps conceptualize, analyze, and decide on material sustainability issues to focus on and invest in to attract & influence stakeholders. NeoImpact uses established frameworks to develop actionable ESG gap analysis reports and design ESG strategies & programs for ensuring long-term value for companies and promoting business success.
Industry benchmarking
NeoImpact employs both data analysts and SMEs to collect and analyze company-specific, industry-specific, and industry-agnostic data against multiple international standards, such as GRI, UNSDG, and SASB. NeoImpact’s company and industry ESG benchmarking reports are powerful tools for companies and industries to help them develop specific ESG strategies and programs tailored to their operations to achieve sustainable competitive advantage.
Sustainability disclosure benchmarking
In addition to ESG intelligence, NeoImpact helps an organization with sustainability disclosure benchmarking, which is one of the top offerings within ESG benchmarking. Sustainability disclosure benchmarking incorporates several frameworks, targets, programs, & policies to help firms define and structure ESG policies & strategies to aid stakeholders in gaining deep insights into ESG practices.
ESG competitor benchmarking
ESG competitor benchmarking helps evaluate an organization’s ESG performance against competitors in a specific industry. Competitor benchmarking is based on several KPIs across ESG pillars and includes a quantitative & qualitative assessment of parameters, such as emissions footprint, energy footprint, labor practices, and governance measures. The team at NeoImpact analyzes these indicators in-depth to prepare dashboards and analysis reports to assist firms in achieving sustainable advantage.
