10 ESG Metrics You Should Know

What are ESG Metrics?

ESG metrics are the quantitative markers of progress used by key stakeholders in an organization to evaluate and measure the societal impact an individual business or organization has on the environment around them. ESG metrics are often categorized into the main three pillars of ESG strategy: environmental, social, and governance.

We’ve identified ten of the most common metrics ESG teams use to track progress and success.

10 Common ESG Metrics

Environmental

#1 Greenhouse Gas (GHG) Emissions

Greenhouse gases are emissions that create the greenhouse effect. Certain gases trap heat and prevent it from escaping into space, contributing to an increase in global temperatures, which can drastically affect our ecosystems and climate patterns.

There are three greenhouse gas emission categories: Scope 1, 2, and 3.
Scope 1 emissions are direct emissions directly associated with activities by an organization or business. For example, any emission from combustion fossil fuels from devices controlled by an organization is considered a Scope 1 emission.

Scope 2 emissions are indirect greenhouse gas emissions that result from the generation of purchased or acquired energy. These emissions are commonly associated with the production of energy, such as electricity, heat, or steam. Emissions generated by purchased electricity from an external source are considered a Scope 2 emission.

Scope 3 emissions are the most indirect of emissions. These result from specific sources that aren’t owned or controlled by the organization but are still associated with business activities. These emissions are the most challenging to track as this definition encompasses a wide range of activities. An example of a Scope 3 emission is the emission created by employees commuting or through the transportation of goods. These emissions can be reduced by implementing reduction strategies, like providing your employees with a Carbon Savings Account.

#2 Renewable Energy Percentage

This metric measures how much renewable energy a business uses. Renewable energy sources are generated from renewable sources, such as sunlight, wind, and geothermal heat.

To calculate an organization’s renewable energy percentage, divide the energy generated by renewable sources by the total energy consumption and then multiply that number by 100 to create a percentage.

#3 Waste Generation

Waste generation measures the waste created by a company’s regular operations. Organizations try to measure waste by volume and category. For example, plastic waste or the amount sent to a landfill are all forms of waste generation.

#4 Water Usage

Water usage refers to the amount of water consumed by an organization's day-to-day operations. Fresh water is a scarce resource, so organizations that can minimize their water usage can help prevent the depletion of freshwater sources. One common way to do this is to recycle water for common business operations, such as sprinklers, and waste operations, such as plumbing.

Social

#5 Employee Turnover

High employee turnover often indicates poor worker satisfaction or major retention issues. Implementing employee engagement strategies and regularly submitting pulse surveys can help managers understand employees' sentiments at any given moment.

#6 Gender Pay Equity

Gender pay equity is the difference in pay between men and women in your organization for roles of the same level. It is important to ensure that your organization fosters an equitable environment. To achieve a more equitable gap, hiring must remain diverse within gender representations. This metric only focuses on gender, but organizations often also measure racial pay equity.

Governance

#7 Executive vs. Median Employee Pay

A high ratio between executive pay and employee pay can indicate corruption or excess consumption. Organizations that openly share their salary ranges often don’t have to worry about this metric, as salary transparency allows employees and stakeholders to analyze this ratio at any time.

#8 Board Diversity

Board diversity encourages additional voices at the table. Organizations with a more diverse board are more likely to consider various ideas and bring different viewpoints. Making an effort to create an inclusive board also means that inclusive hiring practices are considered throughout the organization. When diversity is a priority, everybody can have a seat at the table.

#9 Risk Management

Organizations should create processes that identify specific areas of risk, such as incidents of corruption, fraud, discrimination, or harassment. This requires evaluation of risk oversight committees and how the organization implements risk management into its general business strategy.

#10 Tax Transparency

Tax transparency refers to how an organization reports its tax practices, policies, and payments. This includes whether or not an organization is willing to disclose this information to key stakeholders and the public. Sharing this information helps to promote stakeholder trust and minimize risk.

ESG Metrics FAQ

What are the measures of ESG?

There is no one measurement of ESG strategies. ESG metrics often require many different metrics in the three major pillars (environmental, social, and governance) compiled together to create a cohesive score in each pillar.

What is a KPI in ESG?

A key performance indicator (KPI) in environmental, social, and governance (ESG) strategies is a metric that specifically measure the performance of a business in that specific area. For example, an organization might measure greenhouse gas emissions as one of the KPIs. Their goal should be to decrease the amount of emissions their organization produces, so the metric decrease is an indication of good performance.

What is the most important ESG metric?

ESG metrics are used in combination to create a well rounded strategy, and there’s no one metric that’s more important than the other. Depending on the reporting methodology used, some rating agencies may consider environmental metrics more heavily than social metrics and vice versa.

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