Measurable ESG Metrics Linked to Business Goals now Critical for the Long-term Success

Sustainability discussions in boardrooms across the world are at the ‘walk the talk’ stage. While broader awareness and understanding of Environment, Social and Governance (ESG) mandates continue, many brands have deployed well-defined Key Performance Indicators (KPIs) to measure where they stand on their sustainability commitments. This shift has prompted many organisations to take bold steps toward creating a model that will deliver sustainable business advantage and measurable value.

The advantages of proactively tracking and tackling ESG issues are beyond just satisfying institutional shareholders; the primary one is the overall growth. This is accomplished in two ways: by fostering trust among governments, making them more willing to grant access, permissions, and licences for new prospects, and, secondly, robust engagement with ethical customers and partners. According to research by McKinsey, more than 70% of buyers are willing to pay an extra 5% for a green product that meets the same requirements as a non-green alternative. With the younger generation expected to become a larger consumer cohort, ethical customers are projected to impact the bottom line.

One such brand that instantly comes to my mind is Starbucks. The company is putting its purpose into action by consistently committing to a resource-positive future, halving its carbon, water, and waste footprints. As a step ahead, the company recently pledged to produce Carbon Neutral Green Coffee by 2030 and reduce water usage in green coffee manufacturing by 50%.

However, the variety of ESG frameworks can be perplexing and establishing a reporting system that includes the KPIs that matter most to your business can be daunting. Therefore, it is crucial to set clear, universally agreed-upon ESG standards.

While every country has its own ESG targets, these standards are usually drafted keeping in mind global frameworks, which then are altered to suit the requirements of specific geographies. It’s advised to choose ESG criteria that can be measured and are relevant to your business and the entire list of stakeholders. Furthermore, these criteria should be in line with your company’s goals. For instance, a Materiality Assessment Analysis is a great tool to measure sustainability concerns and challenges through the lens of stakeholders.

To align corporate goals with ESG goals, firms can research industry reports within an important sustainability index to benchmark their company’s ESG framework in relation to their peers. Some indices are more investor-oriented and provide the framework for risk mitigation processes in the future; others focus on providing an overall year review aiming at multiple stakeholders. Global Initiative for Sustainability Rankings (GISR), Sustainability Accounting Standards Board (SASB) and Global Reporting Initiative (GRI) are some of the global non-profit advocacy organisations that identify and rank corporate ESG programs.

In a nutshell, ESG programmes driven by measurable targets will help organisations cultivate a strong brand affection and emerge as a responsible contributor to government visions and SDGs and the expectation of all its stakeholders. Sustainable company practices coupled with proactiveness are the foundation of good ESG reporting. Business leaders must engage with regulators and continue to push global harmonisation efforts to carry out ESG practices smoothly across geographies.

Views of the author are personal and do not necessarily represent the website’s views.

Dr. Elena Primikiri is VFS Global’s first-ever Head of ESG (Environmental, Social & Governance) function, and is responsible for increasing the sustainability components and ESG initiatives of VFS Global – from strategy formulation and implementation to operational control. A Greek national, Elena has done her PhD. in Environmental Technology, University of Michigan, where she also received her Master of Science degree, and a Master’s in Design Studies in Environmental Design, Harvard University, Cambridge MA, USA.

Thank you for reading. Please drop a line and help us do better.

Regards,
The CSR Journal Team

Subscribe