How to Identify and Measure the Right ESG Metrics for Your Company

Environmental, social, and governance (ESG) metrics (performance measures) are essential for businesses to measure, track, and communicate their sustainability and ethical impact. They provide a data-driven approach to help organisations align with investor expectations, regulatory requirements, and stakeholder demands.

Achieving the core objective of the Paris Agreement—to limit global temperature rise to well below 2°C, with an ambition of 1.5°C above pre-industrial levels—is crucial for the successful implementation of all three agendas. This commitment underpins global sustainability efforts, driving climate action, economic resilience, and social well-being.

Around 72% of asset owners globally who receive ESG reports from managers desire standardised reports, yet only 18% are currently able to implement them. By 2025, ESG-mandated assets are projected to represent half of all professionally managed investments, totalling around $35 trillion.

Therefore, by embedding ESG metrics into strategic decision-making, companies can demonstrate accountability, improve operational efficiency, and create sustainable value in an increasingly conscious market.

An Introduction to ESG Metrics

The global business landscape is increasingly recognising the critical importance of addressing ESG challenges. Integrating ESG principles is no longer optional—it is a strategic imperative that drives long-term value and mitigates risk. In this evolving environment, organisations must not only commit to ESG initiatives but also demonstrate measurable progress. This requires the implementation and continuous tracking of ESG metric performance.

Traditionally, investors have relied on financial data and metrics to evaluate a company's investment potential. However, there is a growing shift towards incorporating ESG metrics to assess long-term viability and performance. By analysing non-financial ESG risks and opportunities alongside traditional business indicators, investors gain a more comprehensive understanding of a company's resilience, sustainability, and future growth prospects.

Some common ESG metrics include:

E - Environmental Metrics

• Greenhouse Gas (GHG) Emissions
• Water Usage & Efficiency
• Waste & Recycling
• Carbon Footprint

S - Social Metrics

• Volunteer Hours
• Fair & Just Labour Practices
• Diversity, Equity & Inclusion (DEI) Initiatives
• Partnering with Social Impact Organisations
• Product Safety & Quality
• Customer Satisfaction & Privacy

G - Governance Metrics

• Board Structure & Diversity
• Executive Compensation & Incentives
• Shareholder Rights & Engagement
• Anti-Corruption & Transparency
• Ethics & Compliance

Major Parameters to Measure ESG Metrics

As CFOs navigate the evolving financial landscape, these metrics encompass both quantitative and qualitative data, providing a comprehensive view of a company’s ESG commitments and impact.

Quantitative & Qualitative Metrics

Quantitative ESG metrics offer measurable, comparable data points such as carbon emissions, energy consumption, or workforce diversity percentages. Unlike financial figures, these metrics span various units of measurement, enabling benchmarking and performance tracking over time.

Qualitative ESG metrics offer critical insights into corporate policies, strategies, and operational frameworks.

For example, McKinsey & Company evaluates the effectiveness of safety management systems, the robustness of Diversity, Equity, and Inclusion (DEI) initiatives, or the impact on local communities. These qualitative factors help contextualise quantitative data, offering a more nuanced understanding of ESG performance.

For CFOs, integrating both quantitative and qualitative ESG metrics into corporate reporting is essential. It enhances transparency, strengthens investor confidence, mitigates risk, and aligns financial strategy with long-term sustainability goals.

Major Stakeholders Involved

1. People

1. Workforce diversity and inclusion statistics
2. Gender and ethnic pay gap analysis
3. Workplace safety incidents and compliance
4. Employee turnover rates and satisfaction metrics
5. Investments in training, upskilling, and professional development

2. Planet Earth

1. Proportion of energy sourced from renewables
2. Water consumption and conservation strategies
3. Waste reduction, recycling rates, and sustainable waste management
4. Biodiversity impact and conservation initiatives

3. Governance

1. Board composition, diversity, and independence
2. Executive compensation structures and pay equity
3. Policies on anti-bribery, corruption, and ethical business conduct
4. Cybersecurity frameworks and data privacy protection

Why Is It Needed?

Aligning financial strategy with sustainability goals while meeting stakeholder expectations is essential. A structured ESG approach not only mitigates risks but also enhances long-term financial resilience and corporate performance.

1. Improves ESG data collection and management, such as materiality assessment
2. Strengthens stakeholder engagement and trust
3. Enables continuous monitoring and performance optimisation
4. Ensures transparent and standardised ESG reporting
5. Enhances total tax contributions and financial transparency
6. Boosts economic impact and community engagement
7. Improves ethical labour practices and responsible supply chain management

By embedding ESG metrics into financial and operational strategies, CFOs can drive sustainable business practices, enhance investor confidence, and secure long-term economic value while meeting evolving market and regulatory demands.

How Companies Measure ESG Metrics

1. Identify Material ESG Topics

Begin by determining the ESG factors most relevant to your company’s operational and financial performance. Focus on those that directly impact business sustainability, regulatory compliance, environmental responsibility, and social impact. Prioritising material ESG issues ensures alignment with long-term value creation and risk management.

2. Assess ESG Regulatory Requirements

Evaluate whether your company falls under any ESG-related regulations in its operating regions. This includes frameworks such as the Corporate Sustainability Reporting Directive (CSRD) for EU-based operations or the SEC Climate Disclosure Rule for publicly listed U.S. companies. Understanding regulatory obligations helps ensure compliance and enhances corporate transparency.

3. Align with ESG Standards and Frameworks

Identify the key ESG performance metrics and disclosure frameworks that align with your company’s strategic objectives and regulatory requirements. Utilise globally recognised standards such as GRI, SASB, or TCFD to measure and report ESG performance effectively. Consider existing internal metrics and explore additional data points that can strengthen ESG integration within financial and operational decision-making.

Examples of Standards Offering Specific ESG Metrics

1. Global Reporting Initiative (GRI)

The GRI is an independent, international, and non-governmental organisation providing sustainability reporting standards (GRI Standards) to enable consistent communication of their impacts on sustainable development, both positive and negative. Released in 2010, these standards categorise metrics into Universal (for all companies), Sector (industry-specific), and Topic (material impact) Standards.

In 2021, the GRI updated its Universal Standard and introduced the first Sector Standard for Oil and Gas, announcing plans for additional sector-specific standards, such as the recently published GRI 101: Biodiversity 2024 standard.

2. Sustainability Accounting Standards Board (SASB)

SASB is an independent, not-for-profit organisation established in 2011 to set standards for companies to disclose sustainability or ESG information to investors and other providers of financial capital. SASB identifies industry-specific performance measures or metrics for 77 industries.

In 2021, SASB and IIRC merged to form the Value Reporting Foundation (VRF). By August 2022, the VRF integrated into the IFRS Foundation under the ISSB, establishing a comprehensive set of global corporate sustainability disclosure standards.

3. Corporate Sustainability Reporting Directive (CSRD)

The CSRD is an EU regulatory directive designed to enhance corporate sustainability disclosures. In line with the CSRD, the European Commission has also approved the European Sustainability Reporting Standards (ESRS) delegated act, which sets out comprehensive standards for ESG information disclosure.

4. Business Responsibility and Sustainability Reporting (BRSR)

In India, the BRSR framework is a standardised reporting format introduced by the Securities and Exchange Board of India (SEBI) to help listed companies disclose their ESG metrics. It is a key tool for companies to communicate their sustainability initiatives and impacts to stakeholders, including investors, regulators, and the public.

Conclusion

In an era of increasing global challenges—including climate change, social inequality, and corporate ethics—integrating ESG considerations into business strategy is no longer optional; it is a competitive necessity.

By embedding ESG into corporate decision-making, businesses can enhance stakeholder trust, drive sustainable growth, and contribute to a more equitable and responsible global economy. Prioritising ESG is not just about compliance—it is a strategic lever for future-proofing operations and securing long-term financial and societal impact.