7 ESG Metrics That Your Business Should Be Tracking

In recent years, investors have begun to focus more on a company’s sustainability efforts than ever before. This has resulted in socially responsible investing – a form of sustainable investing that considers environmental, social and governance (ESG) factors in order to evaluate the financial return and overall impact of potential investment in a company.

Investors now focus heavily on ESG criteria in order to determine which companies they should invest in. In fact, ESG-mandated assets could make up half of all managed assets in the United States by 2025. Investors expect to find company ESG reports and recent statistics readily available before investing. With so many ESG metrics, it can be difficult to know where to start or which areas need improvement.

Whether you’re just getting started or looking to improve your ESG efforts, here are seven key metrics that your business should be tracking:

1. Carbon Footprint Reduction

One of the most important ESG metrics is a company’s carbon footprint. This has become a standard metric when measuring environmental impact. By reducing carbon emissions, companies can help slow climate change and preserve the environment.

Tips for reducing your company’s carbon footprint include:

• Reducing, reusing and recycling company materials
• Choosing a renewable energy provider
• Reducing business travel or opt for public transportation

2. Energy Efficiency Improvements

Many companies assume that energy efficiency is a complicated metric, but it may be one of the simplest ESG metrics to implement and report when it comes to demonstrating impressive results. In order to improve energy efficiency, your company must complete the same tasks using less energy.

By implementing small changes, you can make a big impact. For example, turning off company lights, replacing lights with energy-saving lightbulbs, shutting down and unplugging equipment after business hours, and monitoring office temperatures are some of the best ways to reduce energy usage without disrupting business operations. In fact, encouraging employees to use natural sunlight when available can also positively impact your team’s mood, while simultaneously helping cut down on energy usage. Don’t forget that while improving your company’s energy efficiency, you’ll be reducing costs over the long run as well.

3. Employee Health & Safety

Great leaders know that keeping employees healthy, safe and happy is critical for the company’s success. In fact, research proves that award-winning health and safety companies outperform the market. By monitoring and improving your employees’ health and safety, you’ll see fewer work-related accidents, lower turnover rates, and improved productivity rates and profits.

For investors, safety management is a good indication of an organization’s financial position, operational performance and competency in managing risks. Plus, safety management is a good indicator that your company can create long-term value for its shareholders.

4. Product Safety

Product safety also plays a role in gaining the trust of sustainable investors. Tracking the number of product recalls, along with the fines and litigations related to product safety, will be an important factor when creating or improving ESG materials. Investors want to know that product-related risks are being managed and minimized.

Generally, safer products demonstrate that a company cares about employee and customer safety, along with the company’s reputation. Monitoring product safety and having updates readily available will help influence investors. While the importance of product safety differs across industries, if your business is in the manufacturing or consumer goods sector, this should definitely be a top ESG metric for your company.

5. Established Business Ethics

According to the CFA Institute, a strong ethical culture fosters the trust of investors, leads to robust global capital markets and benefits society. For some people, being ethical means they are following the law – but business ethics goes deeper than that. Business ethics should ensure that the company and its stakeholders are doing the right thing all the time. All companies should strive to be good stewards and implement business ethics.

One of the most important ways that businesses can implement business ethics is by creating a code of conduct. For example, RPM International Inc., a $6.1-billion global leader in specialty coatings and sealants, uses a corporate philosophy to guide its culture of growth and worldwide code of conduct called The Values & Expectations of 168. RPM’s code of conduct communicates the company’s enduring commitment to conduct business by doing the right things, the right way, for the right reasons.

6. Diverse Board of Directors

People used to believe that having like-minded people working together was best. Nowadays, society has learned that having people with unique perspectives and experiences better serves a company. For this reason, many investors will review a company’s board of directors prior to investing.

A company’s board is responsible for making decisions on behalf of the shareholders and ensuring the company is set up for success. A board of directors should be well structured and diverse, meaning there should be directors of varying ages, gender and ethnicity. Additionally, a board benefits from various backgrounds and experiences. This creates a more balanced, structured board to handle a wide range of challenges that may arise.

7. Diversity & Inclusion

While investors care about a board’s diversity, they also review the company’s diversity and inclusion efforts throughout the organization. Diversity and inclusion programs can range from education and apprenticeship programs, to promoting a multi-lingual work culture.

Diversity and inclusion are important to sustainable investors, but also have a positive impact on overall business performance. According to McKinsey & Company, research shows that ethnic and culturally diverse executive teams outperform others and are directly correlated with higher profitability. Encouraging a more inclusive culture is a great way to appeal to investors and, in the process, benefit your company as well.