Navigating the complex world of ESG metrics

ESG (Environmental, Social, and Governance) reporting has become an essential aspect of business sustainability. Each ESG dimension has its own metrics that can help companies measure their performance and impact in relation to environmental, social and governance issues. However, with over 600 different ratings and frameworks currently in circulation, it can be challenging to determine where your company should focus its ESG strategy.

In this article, we aim to break down the complex world of ESG metrics and provide you with a beginner's guide to ESG reporting.

Understanding ESG Reporting Frameworks and Disclosure Standards

ESG Reporting Frameworks

ESG reporting frameworks provide companies with a set of voluntary principles and guidelines for disclosing their ESG performance. These frameworks offer recommendations on what to communicate about a company's sustainability-related risks and opportunities and on how to do it. Examples of ESG reporting frameworks include the Task Force on Climate-Related Financial Disclosures (TCFD) or the Corporate Sustainability Reporting Directive (CSRD).

Read more:🔗CSRD - What is it

ESG Disclosure Standards

On the other hand, ESG disclosure standards provide clear and consistent criteria and specifications for companies to report on their ESG performance, targets, and policies. These standards ensure consistency and comparability of information, both between reporting years and between reporting companies. Examples of ESG disclosure standards include the Global Reporting Initiative (GRI), the Sustainability Accounting Standards Board (SASB) and the European Sustainability Reporting Standards (ESRS).

ESG Metrics: Quantitative and Qualitative

💡ESG metrics are essential in determining a company's impact on sustainability and how they create, erode, or preserve long-term value. ESG metrics are either quantitative or qualitative. They can come from disclosure standards, frameworks, or regulations and include measures such as GHG emissions intensity, amount of waste generated, and board gender diversity.

Quantitative ESG Metrics

Quantitative ESG metrics resemble financial metrics and can be easily calculated and compared over multiple years for the same company or across companies. However, there is a significant distinction between ESG and financial metrics. Quantitative financial data is usually presented in a single unit, such as euros, whereas quantitative ESG metrics cover various unit families, such as energy consumption, weight of inputs or outputs, number of accidents/incidents/injuries, and number of people/employees, among other things, because they assess different aspects, such as CO2 equivalent, kilograms, kilometers etc.

Examples of ESG metrics:

Qualitative ESG Metrics

Qualitative ESG metrics, on the other hand, are usually more difficult to compute and compare, but they can be useful to complement and contextualize quantitative data. One example of a qualitative metric when it comes to employee Diversity, Equity and Inclusion can be the company's policies on hiring and promoting employees from diverse backgrounds.

Start Now with ESG Metrics

ESG reporting is a critical aspect of sustainability, and companies must understand the complexities of ESG metrics to create an effective sustainability strategy. ESG reporting frameworks and disclosure standards provide clear guidelines for companies to report on their ESG performance, while ESG metrics are essential in determining a company's impact on sustainability. By understanding ESG metrics, companies can identify sustainability-related risks and opportunities and make informed decisions to preserve long-term value.

At ROSE, our software solution helps you to determine and track 235 metrics of which 170 extracted from the CSRD so that you are ready to for reporting!

We'd be happy to discuss how we can help you tackle the increasing complexity of sustainability requirements and even have some fun in the process! 😉

‍