What are ESG Metrics?
ESG stands for Environmental, Social, and Governance, representing aspects of a company’s sustainability efforts. ESG metrics are used to quantify these efforts effectively.
ESG metrics are a valuable tool for companies to disclose and evaluate their environmental, social, and managerial responsibilities.
Regarding the environment, ESG metrics may include water consumption, waste generation, CO2 emissions, or biodiversity conservation.
Social ESG data includes aspects such as labor conditions, workplace safety, or diversity.
Managerial metrics encompass business ethics, management structure, or political influence.
Why ESG Metrics are Essential
ESG metrics benefit not only the specific company but also partners, customers, and society at large.
They contribute to promoting sustainable development in both climate and social working conditions, impacting the company’s reputation.
ESG metrics help ensure:
- Transparent business:
Investors and customers seek companies that are clear about environmental and social responsibility. ESG metrics provide tangible information that is easy for companies to structure. - Positive reputation:
ESG metrics strengthen the company’s reputation by clearly presenting the responsibilities it undertakes. This makes it easier to retain and attract employees and investors while meeting customer demands. - Better data for decision-making:
Internally, ESG metrics can be used for strategic decision-making processes due to improved data quality. ESG data extends beyond financial results in the annual report, providing insights for strategic decisions. - Compliance with regulations:
As new sustainable transition regulations emerge from the EU, companies can use ESG data to ensure compliance. ESG metrics serve as documentation, ensuring that the company adheres to legal requirements regarding sustainable initiatives.
ESG Metrics: Organize the Company's Sustainable Efforts
Many companies collect and disclose their ESG metrics for valid reasons. It can be useful, for example, when customers inquire about the CO2 emissions in a company’s production process.
Accessible ESG metrics enhance credibility and may provide economic benefits in attracting investors and accessing capital.
Remember, measuring only the most relevant metrics for the given company is essential. Through a materiality assessment, the company can determine which metrics are particularly relevant to disclose and which ones can be omitted.
Read more about “ESG-reporting” here or feel free to contact us.
