What ESG metrics are you tracking? Learn the most common and valuable environmental, social, and governance metrics to track in 2022.
More than half of global executives recently surveyed by ServiceNow and ThoughtLab say environmental, social, and governance (ESG) issues are top priorities for C-suite and board professionals. Companies across all sectors face massive pressure from consumers, employees, and investors to make measurable progress on ESG.
A board of directors should track certain ESG metrics to measure ESG initiatives in their organizations. These metrics show a company’s performance on environmental, social, and governance issues.
Read on for the most common, value-driven ESG metrics to monitor.
Common ESG Metrics
Many boards choose to monitor the following metrics.
- Greenhouse gas (GHG) emissions: An organization should measure GHG emissions at three levels for accurate results: direct emissions from company-owned sources; indirect GHG emissions linked to purchased energy, like using electricity from coal-fired power plants; and GHG emissions along the company’s value chain.
- Air and water pollution: Measures the type and amount of pollutants a company releases in the atmosphere and water sources in a particular period.
- Deforestation: Refers to a company’s activities that contribute to the clearing of forests.
- Recycling and waste management: Measures the total waste a company generates against the total amount it recycles.
- Water security: Shows the total amount of water a company uses, including the water used by employees in the workplace and the manufacturing process.
- Carbon footprint: A company’s total direct and indirect greenhouse emissions in energy usage, transportation, and waste production.
- Diversity, equity, and inclusion (DEI): Measures the company’s composition, as well as diversity and inclusion initiatives.
- Labor standards: Refers to fair and equitable wages, safe work environment, and other factors that affect employee well-being.
- Data protection and security: Measures a company’s effectiveness in protecting its intellectual assets, private information, and stakeholders’ personal data.
- Supply chain management: Shows how effectively a company manages supply chain activities like product development, raw material sourcing, and logistics.
- Board composition: Shows the board’s constituents in terms of members’ skills and qualifications. The metric also measures the board’s diversity and independence ratio. A board should have an independent majority that’s more likely to better represent shareholders.
- Shareholder rights: Measures corporate takeover defenses and shows how well shareholders’ rights protect them from attempts to buy a controlling stake without management’s consent.
- Investor relations: Measures a company’s communication flow between investors and stakeholders.
- Conflict of interest (COI) policy: Measures the effectiveness of pre-existing policies to manage a possible conflict between board members’ personal interests and the company’s interests. This metric helps an organization optimize COI policies to better manage ongoing, perceived, and potential conflicts of interest on the board.
- Compensation: Measures how effective a board’s compensation policies and practices are and reveals what it can do to improve them.
ESG Reporting Frameworks
ESG reporting frameworks set sustainability standards that enable investors to assess a company’s ESG impact. Companies can communicate their ESG initiatives to investors. Meanwhile, investors can use the metrics on the platform to assess the companies’ performance and risks. There are 3 common ESG reporting frameworks:
- Global Reporting Initiative (GRI)
- Task Force on Climate-Related Financial Disclosures (TCFD)
- Sustainability Accounting Standards Board (SASB)
Global Reporting Initiative (GRI)
GRI is a globally renowned, independent standards organization that helps companies communicate their ESG impacts on issues like human rights, corruption, and climate change.
The GRI standards are a set of three standards reporting companies should use together: Universal Standards, Sector Standards, and Topic Standards. Organizations can use GRI standards to create sustainability reports.
Task Force on Climate-Related Disclosures (TCFD)
As the name suggests, TCFD focuses on improving and increasing organizations’ reporting on climate-related financial information. TCFD standards help you to assess climate-related risks in your company, competitors, and suppliers.
You can then use this information to create a strategic ESG plan. Additionally, it allows you to avail necessary information for investors to make financial decisions easily. Your organization can use the framework to disclose climate-related metrics and how it manages climate risks.
Sustainability Accounting Standards Board (SASB)
SASB Standards help organizations disclose financially material sustainability information to investors. The standards focus on subsets of ESG issues related to financial performance in each industry. It covers metrics like GHG emissions, air quality, ecological impact, water and wastewater, energy management, and waste and hazardous materials.
ESG Reporting and Board Management
Reporting on ESG initiatives signifies a responsible company dedicated to being transparent and honest to its stakeholders. Through reporting, your company can better manage its ESG impacts on people and the planet. You can use the standards from the frameworks to reduce risk in your organization and make steps forward to becoming a responsible, trusted company in a more sustainable world.
OnBoard provides a purpose-built platform for measuring ESG metrics and securely storing ESG strategy documentation. In addition, it helps streamline board meetings and empowers board members to achieve more.
About The Author
- Josh Palmer serves as OnBoard's Head of Content. An experienced content creator, his previous roles have spanned numerous industries including B2C and B2B home improvement, healthcare, and software-as-a-service (SaaS). An Indianapolis native and graduate of Indiana University, Palmer currently resides in Fishers, Ind.
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