By definition, ESG covers many areas including environmental, social and governance aspects. Obermatt defined 33 sub-categories of ESG, though not all topics get equal attention from investors and shareholders, who often focus on greenhouse gas emissions, diversity and inclusion and to some extent energy and health.
But, many more areas are important and influence a company’s long-term profitability. As such, the majority of ESG topics are in a company’s best financial interest.
When reviewing the ESG metrics that some leading Swiss companies included in their executive compensation, it became clear that companies only include a few ESG metrics. In many cases, these metrics neither align with the company’s strategic priorities nor do they include areas where a majority of executives or employees have an influence. In some cases, the ESG metrics used reflected rather the interest of investors or other stakeholders.
Our finding: most companies barely tap into the potential of ESG performance reporting.
The upside: there is an opportunity to do better than the rest. Include ESG topics that align with your company strategy, engage your managers and employees and you can also tell a stronger story to your stakeholders. In the long-term, your bottom line will profit.
Join the Obermatt ESG Panel and hear best practices in ESG reporting and compensation from finance, HR and sustainability peers.