Top 14 ESG Metrics CEOs Must Disclose in ESG Reports (2023)

Dear CEO,

You likely know already that stakeholder demand for corporate sustainability performance data is growing exponentially. But what specific ESG metrics should you focus on disclosing in 2024 and beyond?

In this comprehensive guide, I‘ll equip you with the top 14 environmental, social and governance indicators that companies need to include in their annual ESG reports going forward. You‘ll also get tips on how to collect quality data for each metric and interpret it to tell your unique ESG story.

So let‘s get started on your essential ESG metrics cheat sheet!

The ESG Revolution in Investing

First, let‘s take a quick look at why ESG metrics matter so much to investors today.

Sustainable investing assets now total $35 trillion worldwide, representing over a third of all professionally managed investments. This massive growth has been driven by:

  • Risk management – Investors use ESG screens to reduce exposure to issues like climate change, poor governance and human capital risks.
  • Returns – Numerous studies show that high ESG-scoring companies tend to outperform the market. MSCI found that ESG leaders beat laggards by 6% annually from 2014-2019.
  • Values alignment – Millennial investors especially want their money to reflect their sustainability values.

With so much capital allocation at stake, public companies face intense pressure to disclose high-quality, decision-useful ESG data.

Let‘s examine the metrics that matter most.

Key ESG Frameworks

While various ESG reporting frameworks exist, three leading standards have emerged globally:

  • GRI: The most comprehensive guidance across a wide range of economic, environmental and social topics.
  • SASB: Identifies financially material metrics specific to each sector. Favored by U.S. investors.
  • TCFD: Focuses solely on climate-related risks and opportunities.

Though each framework has a different focus, major investors consider them complementary. Your ESG report should align with their requirements.

Now let‘s explore the top metrics from each pillar.

Top Environmental Metrics

1. Greenhouse Gas Emissions

Tracking total Scope 1, 2, and 3 emissions is perhaps the most important metric to demonstrate your commitment to combating climate change.

In 2021, 90% of S&P 500 companies reported Scope 1 and 2 emissions while just 28% disclosed Scope 3. So you‘ll stand out by providing full value chain data.

Ask your sustainability team to calculate emissions using the GHG Protocol and get external assurance for credibility. Offsetting remaining emissions is another best practice.

2. Emissions Intensity

While absolute emissions show total footprint, intensity metrics like emissions per dollar of revenue better reflect operational efficiency improvements over time.

Leading companies set intensity reduction targets (e.g. cut CO2e/USD sales by 50% by 2030 from a 2019 base year).

For specific activities, intensity can also be calculated as:

  • CO2e per unit of production
  • CO2e per square foot of facilities
  • CO2e per employee

3. Energy Usage

The breakdown of your total energy consumption from renewable vs non-renewable sources is another key indicator of your transition towards clean power.

TCFD specifically recommends disclosing your share of low carbon energy along with any related targets or goals.

4. Water Usage

In water-stressed regions, your company‘s water use intensity (e.g. cubic meters consumed per unit of production) and reliance on recycled water are especially important metrics to report.

Prioritize gathering data on facilities in high baseline water stress locations as mapped by tools like WRI‘s Aqueduct.

5. Waste Management

Managing waste sustainably involves measuring total waste generated, diverted from landfills through recycling/reuse, and disposed.

Disclosing your diversion rate highlights circular economy efforts while waste intensity metrics can show production efficiency.

Top Social Metrics

1. Gender Diversity

The percentage of women at all levels of your company helps reveal any imbalances in promotion rates, hiring and retention by gender.

Disclose gender representation across management tiers, business units, regional offices and corporate boards for the full picture.

2. Pay Equality

The ratio of male to female median earnings for comparable roles indicates any systemic pay gaps. Dig deeper with data segmented by level, department and location.

Ethnicity pay gap reporting is the next frontier as investors watch for progress on racial justice.

3. Health & Safety

Workplace health and safety data includes recordable injury rates, lost days, and fatalities. Rates can be further segmented by region, gender, and employee category.

Leading firms now also report on initiatives like employee wellness programs, mental health resources, and safety culture surveys.

4. Employee Engagement

Factors like participation rates and scores from employee engagement surveys or pulse checks provide useful cultural insights.

Combine with other listening tools like confidential hotlines, focus groups, and exit interviews for a multi-dimensional view.

5. Human Rights

Describe your processes to identify, prevent and mitigate potential human rights issues across operations and supply chains per the UN Guiding Principles.

Disclose associated training programs, audits/assessments performed, and governance.

Top Governance Metrics

1. Board Diversity

Gender and ethnic diversity among board directors signals commitment to equitable leadership and strong oversight.

Report the percentage of women, underrepresented ethnicities, and independent directors on the board.

2. CEO Pay Ratio

The ratio between your CEO’s total compensation and median employee pay. Per the SEC, ratios above 100x indicate potential concerns over internal pay equity.

3. Data Privacy & Security

Cyber risks are a growing governance priority for investors. Disclose data breaches, customers impacted, fines paid, and your privacy program maturity level.

4. Business Ethics

Share metrics like the percentage of employees trained annually on your code of conduct, corruption prevention, and ethical culture.

5. Supplier Audits

ESG issues often occur upstream in supply chains, so report on your supplier risk assessment processes and social compliance audit findings.

Navigating Your ESG Journey

Tracking this set of 14 metrics across environmental, social and governance categories will form the backbone of a robust ESG report that satisfies leading disclosure frameworks and investor demands.

Of course, the metrics above are just a starting point. Engage stakeholders to identify additional sustainability performance indicators unique to your business model, industry and regional context.

As you embark on the ESG reporting journey, remember these tips:

  • Start small: Don‘t let perfection be the enemy of progress. Disclose on a few key metrics first.
  • Get help: Consult ESG experts to build capacity for high-quality data collection and analysis.
  • Prioritize material issues: Focus on the ESG risks and opportunities with greatest impact for your business.
  • Think long-term: Building mature, automated reporting processes takes time. Take a multi-year approach.
  • Make it actionable: Instill a culture where ESG data guides strategy and decision making.

The ESG metrics revolution is here to stay. As an ESG leader, you have an immense opportunity to demonstrate your commitment to building a sustainable future. This guide equips you to get started.

Wishing you success on your ESG reporting journey ahead!

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