https://www.techtarget.com/sustainability/feature/ESG-metrics-Tips-and-examples-for-measuring-ESG-performance
Environmental, social and governance considerations are increasingly important for businesses. While issues such as employee well-being and business ethics are longstanding corporate concerns, sustainability, environmental impact and broader social and internal governance factors have also become key elements of ESG initiatives in companies.
With this increased attention, corporate leaders must be able to measure their organization's ESG performance to help manage business risks and capitalize on business opportunities. Also, more jurisdictions around the world are requiring detailed ESG disclosures from companies, with significant financial penalties for noncompliance. Accurate ESG metrics are crucial in an environment where performance on ESG issues directly affects market access, corporate costs and regulatory standing.
ESG metrics are various performance indicators that help companies assess their business operations on sustainable and responsible practices. Primarily nonfinancial in nature, these metrics provide insights into things such as environmental impacts, corporate social responsibility (CSR) efforts and corporate governance structures. By tracking and analyzing relevant ESG metrics, companies can monitor their progress toward improved business sustainability and better business practices -- and, ultimately, their contributions to overall economic value creation and societal welfare in the areas where they operate.
Consumers are increasingly concerned about the social and environmental impact of products and services, and many are more likely to support companies that are transparent about their ESG performance. Investors also use ESG metrics to evaluate companies.
In addition, ESG metrics can help businesses identify opportunities for growth and innovation. For example, companies that invest in renewable energy, green computing and other sustainable measures could better position themselves to take advantage of changes in customer preferences and the impact of new government regulations on their industries.
Effective use of ESG metrics delivers the following tangible business benefits:
ESG metrics can be divided into two main categories: quantitative and qualitative. Quantitative metrics are based on numerical data that can typically be directly measured and compared. Examples of quantitative ESG metrics include greenhouse gas emissions, energy usage, employee turnover rates and reported HR violations. These metrics are useful for benchmarking and tracking performance over time.
Qualitative metrics, on the other hand, are based on non-numeric data and are harder to measure and compare. Examples of qualitative ESG metrics include a company's commitment to diversity, equity and inclusion (DEI), its labor practices and its impact on local communities. These metrics are more subjective and require more interpretation, but they can provide valuable insights into a company's culture and values.
Both quantitative and qualitative metrics are important for measuring a company's ESG performance. By using a combination of them, businesses can gain a more comprehensive understanding of ESG issues and work to improve in the areas where they fall short.
While the metrics that are most meaningful to track might vary from organization to organization, let's look at some commonly used ones in the different aspects of ESG.
These metrics assess a company's environmental impact and efforts to reduce it. They typically are quantitative and lend themselves to direct comparison across different organizations. The following are notable examples.
Greenhouse gas emissions. This measures the amount of greenhouse gases, such as carbon dioxide and methane, that a company emits into the atmosphere. Greenhouse gas emissions drive climate change, and companies that emit large amounts face potential regulatory, reputational and financial risks. Key performance indicators on emissions include:
Energy usage. The amount of energy a company uses to produce goods and services, power its data centers and run other operations is another common ESG metric. Companies that use renewable energy sources, such as solar or wind, might have a lower environmental impact than those that rely on fossil fuels. Analyzing data on energy consumption can also highlight opportunities to increase energy efficiency. KPIs include:
Water usage. Water is an increasingly limited natural resource in many areas, and companies that use large amounts of it can face reputational and financial risks -- as well as excessive operating expenses -- if they don't take steps to reduce their consumption levels. Doing so begins with accurately measuring the amount of water used in a company's operations, along with related metrics. KPIs include:
Waste management. This includes metrics on waste generation and programs for managing waste. It's relatively simple for a company to track the amount of waste it generates and the materials it recycles. But it might also look at actions that are more complex to measure -- for example, efforts to reduce waste at the source or implement circular economy principles to minimize waste. KPIs include:
Impact on biodiversity and nature. Due to recommendations from the Taskforce on Nature-related Financial Disclosures and requirements under disclosure mandates such as the EU's Corporate Sustainability Reporting Directive (CSRD), companies face increasing pressure to measure their impacts on biodiversity and natural ecosystems. KPIs include:
Measuring a company's performance on the social factors of ESG isn't always so straightforward: Social metrics are often qualitative and can be subjective. Here are some examples of these metrics.
Labor practices. ESG metrics can be used to evaluate how a company treats its employees and the workers in its supply chains. Labor practices that are commonly tracked include issues such as fair wages and safe working conditions, which have quantitative components. Other considerations, such as nondiscrimination policies, are more qualitative. KPIs include:
Supply chain sustainability. In addition to labor issues, a company can look at the broader social impact of its supply chain. This might include measuring supplier diversity and the social benefits of responsible sourcing and sustainable procurement initiatives. KPIs include:
Human rights and associated labor standards. There's an increased regulatory focus on due diligence related to human rights protections for workers, particularly in high-risk sectors such as manufacturing, mining, agriculture and apparel. As a result, companies now track more comprehensive metrics on prevention of forced labor and other human rights violations, both internally and in supply chains. KPIs include:
Community engagement. This measures how a company engages with the communities in which it operates. Community engagement can include things such as philanthropy, volunteerism and CSR programs. KPIs include:
These can be used to measure how well a company is managed and the effectiveness of its internal controls and corporate policies. Many governance metrics are quantitative and can be easily compared across different organizations. The following are some examples.
Executive compensation. How much a company pays its top executives can be an indicator of how well-managed it is and whether its financial incentives for senior management are aligned with the interests of employees and other stakeholders. KPIs include:
Business ethics. This assesses a company's commitment to ethical business practices, such as anti-corruption policies, whistleblower protection programs, and transparency in business operations and financial reporting. KPIs include:
Compliance and risk management. How well does an organization manage business risks and comply with laws, regulations and industry codes of practice? Regulatory compliance should be considered across all the jurisdictions where a company operates, while internal risk assessments inform risk management metrics to track, including different key risk indicators and the results of risk mitigation efforts. KPIs include:
Selecting and implementing the right ESG metrics requires a strategic approach that aligns with your company's business objectives, stakeholder expectations and regulatory requirements. Rather than attempting to track every possible metric, successful organizations focus on material issues that have real business impacts. Here's a structured approach to help chief sustainability officers, ESG program managers, CIOs and business leaders navigate this process effectively.
The foundation of any effective ESG program starts with understanding which issues matter most to an organization's business operations and its various stakeholders. An ESG materiality assessment is a vital tool for identifying and prioritizing relevant factors. Take the following steps to conduct one:
Understanding the regulatory landscape that applies to your organization is fundamental to building a compliant and future-proof ESG metrics program. For example, conducting a materiality assessment is becoming a requirement, especially for companies that are subject to the CSRD. Follow the steps outlined below:
ESG reporting demands strong data management capabilities. Too many organizations still rely on error-prone spreadsheets to manage the ESG data that underlies the metrics they track, an approach that becomes unsustainable as reporting requirements grow more complex. The following steps can help ensure that your company is using suitable tools:
Standardized reporting frameworks provide structure, credibility and comparability to an ESG metrics program. Rather than creating metrics from scratch, use ones in established frameworks that align with your organization's material issues and reporting needs. Doing so builds confidence among investors, customers and other stakeholders. It also enables easier benchmarking against industry peers and reduces development time and costs on metrics.
The following are some prominent ESG reporting frameworks and standards:
Be strategic in choosing which framework, or frameworks, to use. Adopting more than one -- such as reporting against both the GRI Standards and the SASB Standards -- might provide more comprehensive and balanced reporting and better meet your company's needs for relevant metrics on material issues.
For simplicity's sake, though, many organizations begin with one framework and gradually incorporate additional standards as their ESG program matures.
Here are some best practices to adopt when implementing ESG metrics and associated reporting procedures:
In addition to reporting and the business uses and benefits detailed previously, the following are some additional options for using the ESG metrics your company tracks:
Inevitably, there will be areas in which companies need to do better on ESG-related practices. However, to make improvements, an organization must ensure that its ESG metrics are properly targeted and actionable. This often is a challenge itself, in the following ways:
Many organizations struggle with vague or overly ambitious ESG commitments. Without clear and measurable targets, it's difficult to track progress, allocate resources effectively or demonstrate meaningful business impacts to stakeholders.
Aim for clarity on ESG goals to help focus efforts and ensure that progress can be measured. For example, your company might set a goal to reduce its greenhouse gas emissions by 20% over the next five years. Doing so with the involvement of a wide range of stakeholders creates a sense of accountability while also ensuring that the efforts are aligned with strategic priorities -- and realistic.
Organizations frequently encounter significant obstacles in tracking and reporting their ESG performance. The required data can be incomplete, inconsistent or difficult to obtain, particularly for supply chain metrics and Scope 3 emissions by suppliers and other business partners. There's often a lack of standardization in how ESG metrics are measured and reported, making it challenging for companies to compare their performance across time periods or against industry peers.
Many companies also struggle with manual processes prone to errors and fragmented systems that don't communicate effectively with one another. As a result, you might need to invest in new systems or processes that can capture and report on ESG data more effectively. For example, this could involve steps such as working with third-party data providers or developing better data governance capabilities.
Many organizations treat ESG as a separate initiative instead of integrating it into core business processes. This siloed approach means ESG considerations and metrics are often overlooked in strategic decisions, capital allocation and operational planning. There could be a lack of understanding or buy-in from key business stakeholders who view ESG as a compliance exercise rather than a value driver.
Committing to assess ESG issues in decision-making processes will help ensure that they're weighed alongside other factors, such as financial performance and risk management. For example, a company might consider the environmental impact of a new product line before deciding whether to invest in it. This approach could require changes to existing systems, processes and workflows. You might also need to provide training and education on ESG, including the various metrics being tracked, to business executives and other employees.
There are numerous obstacles to engaging stakeholders in ESG initiatives. The different perspectives and priorities that various stakeholders have make it difficult to align on common goals or approaches. Stakeholder engagement can be time-consuming and resource-intensive, requiring dedicated personnel and budget allocations that might compete with other business priorities. Organizations also face the challenge of identifying the right stakeholders and determining appropriate levels of involvement for them.
To get a full range of stakeholder input, it's helpful to use multiple channels of engagement, such as surveys, focus groups, social media outreach, one-on-one meetings and public events. When this process is managed effectively, the insights gained help organizations focus their ESG efforts on the most relevant issues and metrics.
ESG practices and the metrics used to gauge their performance continue to evolve rapidly despite political polarization and regional variations in regulatory approaches. The fundamental drivers for ESG and sustainability initiatives in companies remain strong, with trends pointing toward a more standardized, data-driven future.
Key trends shaping the ESG landscape include the expansion of mandatory reporting -- albeit somewhat fitfully due to delays and policy changes -- and the continued emphasis on ESG-focused institutional investments. Technology is transforming performance measurement through the use of AI, cloud-based APIs and real-time data integration, while metrics are becoming more sophisticated and expanding into emerging focus areas such as biodiversity loss and mental health indicators.
Notwithstanding the current political backlash in some countries and ongoing concerns about greenwashing, leaders from many multinational companies and other businesses find it impractical to walk back their sustainability commitments. There's a good reason for that: Companies that factor ESG considerations into their business strategies should still be better positioned to thrive in the future, especially if the ESG metrics they track become more precise, actionable and integrated into core business decision-making.
Editor's note: This article was updated in October 2025 for timeliness and to add new information.
Donald Farmer is a data strategist with 30-plus years of experience, including as a product team leader at Microsoft and Qlik. He advises global clients on data, analytics, AI and innovation strategy, with expertise spanning from tech giants to startups.
15 Oct 2025