In a world where businesses are intertwined with sustainability, ESG metrics have become a value proposition to measure a company’s environmental, social, and governance performance. ESG metrics are a qualitative and quantitative indicator to address global challenges, from carbon emissions to inequality. Chief Sustainability Officers (CSOs) and their C-suite peers are playing an instrumental role in adopting performance metrics to measure progress towards sustainability goals. According to the Conference Board, around 75% of S&P 500 index companies embed some ESG metric into their leadership compensation policies. Against this backdrop, it becomes a monumental task to track down the ESG metrics comprehensively.
Organizations are expected to measure their ESG performance to mitigate risks, attract capital and boost brand image. For instance, companies in plastic production and the oil and gas industry need to be aware of double materiality—the impacts of these organizations on sustainable development and the implications of sustainable development issues on the organization’s value.
The metrics cover a holistic aspect. Some ESG metrics can be quantified in percentages and numbers, while others may require close-ended questions. Some examples of ESG metrics (not an exhaustive list) are elucidated below:
Environmental Metrics
- Levels of nitrous oxide (N2O), carbon dioxide (CO2), carbon monoxide (CO), and methane (CH4).
- Water usage in liters or cubic meters.
- Energy consumption (based on Kilowatts per hour).
- Waste output (based on cubic meters and tons).
- Recycling rates.
- Global Warming Potential for greenhouse gas emissions.
Social Metrics
- Diversity, Equity, and Inclusion (DEI) percentage.
- Health and Safety policies.
- Fair and Just Level practices.
- Human rights violations.
- Supplier diversity, including the number of women-led businesses.
- Work for underserved communities.
Governance Metrics
- Questions around wealth inequality: A look at executive pay.
- Close-ended questions about anti-corruption policy.
- Whistleblower protection programs.
- Board diversity based on race, gender, age, ethnicity, professional experience, and education.
- Company risk factors and disclosures that shed light on material risks and opportunities.
- Business Transparency.
- ESG performance can be measured and tracked, and delving into the ESG metrics can channel sustainability strategies into robust business performance.
Some Prominent ESG Metrics
| Environmental Pillar | Social Pillar | Governance Pillar |
| Climate Change | Human Capital | Corporate Governance |
| Natural Resources | Product Liability | Corporate Behavior |
| Pollution & Waste | Stakeholder Opposition | Board Diversity |
| Environment Opportunity | Social Opportunity | Business Ethics |
| Carbon Emissions | Labor Management | Executive Pay |
| Water Stress | Product Safety & Quality | Anti-competitive Practices |
| Toxic Emissions & Waste | Health & Safety | Ownership |
| Opportunities in Clean Tech | Chemical Safety | Corruption & Instability |
| Product Carbon Footprint | Financial Product Safety | Accounting |
| Opportunities in Renewable Energy | Human Capital Development | Tax Transparency |
Sustainability Reporting Vital for ESG Metrics
ESG metrics serve as a benchmark to help investors and other stakeholders compare a company’s ESG performance against its peers. The performance metrics can also underscore sustainability claims and transparency in ESG reporting. So much so that ESG metrics are increasingly being reported on the heels of investors’ interest. In the same breath, ESG frameworks become an important cog in assessing the metrics, qualitative factors, and reporting frequency, helping businesses measure and score on sustainability performance.
ESG reporting has become mainstream as businesses set ESG goals to rights through a host of ESG frameworks and standards. Companies can emphasize how their sustainability investments preserve and add value to investors, regulators, customers and employees. ESG reporting can help vet suppliers and analyze investment opportunities.
ESG Reporting Metrics
Standardized ESG reporting frameworks and standards, such as GRI, CSRD, SASB, CDP, and SFDR, stand out to help companies analyze, identify, measure, and document their sustainability commitments. These frameworks touch on a myriad of ESG reporting metrics to monitor and track based on benchmarking. For instance, GRI standards focus on an organization’s impacts on the environment, economy and people and how they are managed. The Universal Standards (within GRI) push for reporting on environmental due diligence and human rights, while Sector Standards emphasize more consistent reporting on sector-specific impacts. The caveat is that there is no universal ESG reporting framework or standard.
Why Data is the New Green in ESG
With millennials and Gen Z populations putting a premium on ESG initiatives and goals, investors are left with no choice but to invest in products and services that complement a sustainable future. This is where data forays into the ESG metrics to bolster sustainability. ESG data can help stakeholders make an investment decision and assist in ESG investing.
To put this in perspective, ESG reporting inculcates sharing ESG data, scores and ratings with investors and other stakeholders to enhance transparency and attract investments. Robust ESG data will draw investments, help build trust and unlock growth avenues. For instance, if a company leverages ESG data to elucidate recycling rates, carbon emissions, and DEI and exhibit responsible business practices, the chances of safeguarding long-term returns from sustainable investments soar.
ESG Analytics Solutions Remains Pivotal
As businesses contemplate integrating sustainability into their operations, an ESG analytics becomes a vital cog in sustainability metrics, including water usage, carbon emissions, clean energy and social risks. ESG dashboard sheds light on double materiality—the outside-in and inside-out view. To reiterate, the former focuses on the impact of sustainability matters (people and the planet) on the company; the latter emphasizes the impact of a company’s operations and its value chain on the environment and the people.
ESG dashboards are a pivotal tool for bolstering accountability and transparency and ensuring compliance with frameworks and standards. NeoImpact’s ESG Dashboard and Consultation Services offer an end-to-end perspective of a company’s position based on ESG compliance. It dives into a company’s current score for the Environment, Social, and Governance pillars. It provides a comparison against the average industry score and the scores of the company leading the tally. It also provides a brief on the deviation from the average industry scores and existing policies. NeoImpact’s intuitive and unparalleled ESG Dashboard can help organizations zero in on the prevalent issues and the remedy to underscore responsible business practices.
Future Looks Promising
As C-suite leaders cross the Rubicon in integrating ESG into the business model, ESG metrics have become imperative for every business. With investors demanding greater transparency from companies, ESG strategies have become the fulcrum in building long-term value. Considering the long-term nature of several sustainability goals, NeoImpact’s ESG Analytics Solutions can be the torchbearer to help you define and track ESG metrics and benchmarking with a forward-looking approach.
