Traditionally, we’ve assessed business success based on things like financial performance and rates of growth—but today’s consumers and B2B-connected organizations have broader and much more complex expectations. Luckily, quantitative ESG metrics can help you be a responsible employer and stay ahead of the competition.
Defining ESG metrics
Before we get started, we need to clear up the difference between two similar-sounding acronyms: ERM and ESG. So, what is ERM?
ERM stands for Enterprise Risk Management, which means calculating and handling any potential risk to your business. That might be deciding which markets and product lines to focus on, or managing any potential threat to branding and public relations.
ESG stands for Environmental, Social, and Governance, those being three key pillars of modern business ethics. So, ESG metrics are measurements of how a business is performing in any of those areas.
There is often crossover between these pillars and metrics—for example, commitment to recycling or employee mental health support policies also double as governance-based initiatives.
Qualitative versus quantitative ESG metrics
If you’ve spent any time at all learning data analytics, then you’re already familiar with the difference between qualitative and quantitative data. But let’s recap just in case.
Qualitative information is about detail and context. It’s typically non-numerical and can include anything from verbal responses to descriptions and lists of names.
By comparison, quantitative data is all about numbers and measurability. For instance, you might measure the percentage of each material you’re able to recycle, or set a specific marketing budget for working with charities.
Qualitative and quantitative data are most useful when implemented together. That said, it’s mainly quantitative data we’re going to talk about today.
ESG standards and frameworks
If you aren’t familiar with ESG metrics, you’re probably wondering where they come from. Of course, many will stem from your internal business processes, but there are several other vital sources of qualitative and quantitative ESG metrics to bear in mind:
Standards
ESG standards are a detailed list of specific performance measures or metrics to report on,
focusing on public interest while enabling independent governance. They’re usually fairly comprehensive to avoid any confusion. One of the most commonly adhered-to standards is the Global Reporting Initiative (GRI), an independent, international body.
Frameworks
A framework is a detailed set of information designed to communicate guiding principles. Frameworks don’t include any specific metrics, so they’re more like a set of general aims and methods to achieve them—but this means they’re adaptable to your own circumstances.
Regulations
Regulations are mandatory rules established by a given authority. For example, the SEC (US Securities and Exchange Commission) or, if you operate internationally, the EU’s CSRD (Corporate Sustainability Reporting Directive). It’s vital to stay on the right side of regulatory ESG metrics to avoid landing your business in legal trouble.
Questionnaires
Third-party questionnaires are a type of audit that assesses sustainability performance and assigns your business an ESG rating or score. These are entirely voluntary and may use their own standards, so the methodology isn’t always transparent.
Why ESGs matter
We’ve talked about industry standards and legal regulations, but they’re far from the only reason you should focus on ESGs.
Since many consumers and investors place an increasing emphasis on ethical business, ESGs are an important way of connecting with like-minded individuals and brands and encouraging their custom. ESG metrics show that you’re trustworthy and committed to doing your part for social equity and sustainability.
Let’s use the social example of automation in call centers, which causes concern for many workers over fears it could cause redundancies. A caring business will address these fears by providing information about the new technology and how it enhances rather than replaces human labor.
In this scenario, you can measure staff retention as a quantitative ESG metric, and monitor employee happiness levels to show how you’re committed to staff welfare.
How ESG metrics impact corporate governance
If the only business metric you care about is financial productivity, you’ll only ever have a one-dimensional view of your organization. Quantitative ESG metrics provide tangible goals that add depth to your brand strategy, helping you stay ahead of the curve and lead the way as a progressive, conscientiously run business.
On top of that, collect enough data over time and you can even use predictive analytics to forecast trends and patterns in environmental or social consumer concerns.
8 quantitative ESG metrics to benefit corporate governance
If you’re expecting a list of purely governance-based metrics, think again. If you’ll recall, many environmental and social policies are ultimately governance decisions—which is why we’ve taken eight quantitative ESG metrics from across the spectrum to show how they can enhance corporate governance in your business.
Environmental metrics
Environmentally-focused corporate governance raises your profile as a reputably green business. Beyond meeting regulatory requirements, these metrics are often a major priority for conscientious investors.
1: Energy efficiency ratings
Energy efficiency ratings are one of the easiest quantitative ESG metrics to engage with. You probably already have access to the raw data, even if it’s just monthly energy bills going to your accounting department or inbox.
Beyond legitimizing your green corporate branding, tracking energy efficiency KPIs also stands to save you money by highlighting areas for improvement. For instance, you might decide to switch to greener providers, set devices on timers, or even just use energy-saving light bulbs.
2: Waste management stats
If your business makes or sells any kind of goods, then you almost certainly produce waste as well, even if it’s just accidentally damaged stock. A lot of waste ends up in landfills each year, from businesses and consumers alike.
Once you start tracking waste metrics, you can set up alternative solutions, such as recording all the waste materials you recycle either through external services or by recycling them yourself. Goods and packaging made from such materials are a big selling point with environmentally-aware consumers.
Of course, if your company uses suppliers, you need to make sure they adhere to similar standards, as this is another way you can prove your sustainable credentials. Otherwise, they’ll only undo all your hard work.
Social metrics
These days, businesses are increasingly expected to take a stance on social issues, even if it’s only through internal policy. While these can be broader societal issues, many social metrics you can track relate directly to the workplace.
3: Employee salary ranges
While there’s certainly more to work than money, people need to be paid fairly—and the salaries you offer go a long way in influencing your attractiveness as a potential employer. In the battle for top talent, it’s often the deciding factor. The salary ranges you offer will also come under consideration in our section on governance metrics, so bear that in mind.
4: Levels of employee engagement and wellbeing
It doesn’t matter whether you publish flipbooks for elearning, run a chain of nightclubs, or ship goods around the world. No matter what kind of business you’re in, employee wellbeing and engagement are essential corporate governance metrics.
Poor employee wellbeing stems from stress, poor work/life balance, and dissatisfaction. Left unchecked, it can lead to burnout, meaning your employees may lose their ability to work effectively and may even have to quit their job entirely.
Employee engagement refers to how committed and focused someone is in their role, and they’re are more likely to be engaged if they’re proud of their work and feel valued by the company.
Key engagement and wellbeing metrics include:
Absence rates by type (sickness, emergency, unannounced, etc)
Incidence of presenteeism
Discretionary effort metrics
Turnover rates
5: Diversity, equality, and inclusion stats
Diversity, equality, and inclusion at work have become major points of focus in recent years. Aside from legal requirements to be an equal opportunities employer, a diverse workforce lends itself well to innovation and creative problem-solving. When people from different backgrounds work together, they’re less likely to get stuck on one perspective.
Beyond hiring, you should also monitor any form of discrimination or harassment in your workplace. That way, corporate governance can address toxic elements and create a more inclusive work culture.
Governance metrics
Governance-based quantitative ESG metrics focus on how your business is run, from the top down. They measure aspects like ethical decision-making, accountability, and transparency, which all have a knock-on effect for employees and customers.
6: Level of board diversity
Following on from our point on diversity, equality and inclusion, it’s not enough to have a diverse workforce—there has to be diversity at board level, too. That way, all employees (and the public) can see that the company supports equality in career mobility.
This also guards against bias when it comes to internal or external recruitment. For example, a C-Suite board composed entirely of men from similar cultural and economic backgrounds may be more likely to hire or promote similar candidates, potentially shutting out promising talent.
7: C-Suite compensation figures
For many large organizations, it goes without question that CEOs, CFOs and so on take home big salaries, and often a long list of company benefits. While this isn’t necessarily a bad thing, it does take on a different light when your employees are complaining about being underpaid.
Monitoring and recording C-Suite compensation in relation to employee salaries is vital, not just for supporting your people, but for preventing bad optics for you and your brand. If you collect the metrics, you can prove that all staff are fairly compensated.
8: Corporate cybersecurity metrics
Data is the new gold, and these days, most organizations handle at least some measure of sensitive information. Even if you aren’t a tech company, cybersecurity metrics are important for showing consumers and B2B clients they can trust you with their data. You can help give customers confidence by measuring things like encryption ratings and the number of cyber attacks you’ve prevented.
Then there’s vendor risk to worry about. But what is vendor risk management?
Simply put, third-party vendors can undo even the tightest cybersecurity by mishandling data. Vendor risk management involves evaluating the potential pitfalls and monitoring vendor data to ensure they’re not putting your firm at risk.
Quantitative ESG metrics inform practical decisions
By now, it should be clear that quantitative ESG metrics have a dual purpose:
Firstly, they provide a roadmap for objective corporate governance and help you to make decisions that fit the brand values you portray. Secondly, they’re an honest, evidence-based way of signaling to investors, partner businesses, and consumers that you’re serious about environmental and social commitments.
ESG is also a way to differentiate your business from companies that just do the bare minimum, so it makes sense to incorporate quantitative ESG metrics into your corporate governance strategies and prove your credentials to the world.
