When it comes to ESG, which by definition encompasses environmental, social and governance issues, companies often focus on too few areas. ESG performance is often reduced to just a few metrics, such as climate change and diversity and inclusion. Furthermore, these areas are often not at the core of a company’s strategic priorities.
Sometimes, sustainability experts seek just one ESG metric to cover it all because they think financial performance is only one metric.
Companies have become used to talking about profit as a single metric, but they often forget that profit is made up of the cost of raw materials, product pricing, a company’s brand value, salaries, office costs and so many other factors. What’s more: a large portion of a company’s employee base has a direct or indirect effect on profit levels.
We believe companies should include a broader range of ESG metrics when setting their ESG priorities and assessing their ESG performance. ESG rating agencies include many more in their analyses than most companies believe. They also value a company’s effort in moving towards better ESG performance even if those areas aren’t measured in typical numerical ways.
The benefits of using a broader view on ESG performance:
- More inclusive of more executives and employees
- Less reliance on few metrics not aligned with a company’s core strategic priorities
- A richer story for shareholders and other stakeholders
Join the Obermatt ESG Panel and hear best practices in ESG reporting and compensation from finance, HR and sustainability peers.