ESG Metrics are the specific, measurable data points that show how a company is performing in each area. E.g. Carbon Footprint, water usage.

ESG Frameworks are the structured systems or guidelines that help companies decide which metrics to track and how to present them publicly. Frameworks like the Global Reporting Initiative (GRI) and the Sustainability Accounting Standards Board (SASB) provide a blueprint to follow.

In short, the metrics are the measure of "what," and the frameworks are the "how"!

How to choose the right ESG framework for your needs

To choose the right ESG framework, consider your company's goals for ESG reporting, whether it's attracting investors, aligning with standards, or meeting regulations.

• For broad stakeholder appeal, the Global Reporting Initiative (GRI) is suitable.

• For Environmental impact, the Sustainability Accounting Standards Board (SASB) may be better for specific industries like manufacturing or energy.

• For simpler reporting, the Carbon Disclosure Project (CDP) is ideal, especially for climate issues, while GRI or Integrated Reporting (IR) offers comprehensive structures.

Finally, tailor your choice to your audience—some frameworks cater to investors (like SASB), while others, like GRI, target a wider audience.

Sources of ESG Data

Companies have a variety of sources at their disposal, each bringing unique insights to the table. Let’s break down the main sources of ESG data and explore the advantages and challenges of each.

Internal Data

A significant portion of ESG data comes straight from a company’s internal records. This includes financial records, HR data, energy usage reports, waste management logs, and more. Since internal data is closely tied to day-to-day operations, it’s usually highly specific and up-to-date, making it essential for tracking real-time performance.

External Data

Beyond a company’s own records, external sources provide a broader perspective. This includes industry benchmarks, government reports, and information from external data providers. External data can help companies see how they stack up against similair businesses and track regulatory compliance trends.

Supplier and Stakeholder Surveys

A well-rounded ESG profile also takes into account feedback from suppliers, clients, customers, and employees. Surveys are a great way to gather this information, allowing a company to assess its impact and performance in areas like supply chain sustainability, employee well-being, and customer satisfaction.

Company-Reported Data

Many companies provide self-reported ESG data in their annual sustainability reports or on their websites. This data is often detailed and reflects the company’s most recent activities and achievements.

Third-Party Data Providers

External data providers offer comprehensive ESG datasets for various companies and industries. These providers use independent methodologies to gather and analyse data, which can add objectivity to a company’s own ESG score and profile.

Third-party data often provides consistent and comparable data across multiple companies, enabling investors and stakeholders to make fair comparisons. On the flip side, each third-party provider has its own methodology and data quality standards, which means ESG scores from different providers can vary.

Underlying ESG Data

When people refer to underlying ESG data points, they mean the raw data points that make up a company’s ESG scores and metrics. This foundational data includes specifics like carbon emissions levels, employee turnover rates, or community investment amounts.

Underlying data is highly versatile, allowing companies to design custom metrics and scores. For example, a tech company might emphasise data privacy metrics, while a manufacturing company may focus on energy efficiency.

ESG Data Quality and Management

High-quality ESG data is vital for informed decision-making and stakeholder trust. Effective data management differentiates companies that achieve ESG goals from those that do not.

Factors Affecting ESG Data Quality

Several factors impact the quality of ESG data, affecting its usefulness:

• Accuracy and Completeness: Essential for a true representation of a company's ESG performance; missing or inaccurate data can distort understanding.

• Consistency and Comparability: Consistent data across reporting periods and comparable across companies aids in tracking trends and benchmarking performance.

• Timeliness and Frequency: Up-to-date and regularly updated ESG data is crucial for informed decision-making and trend analysis.

How to Evaluate Data Reliability

Evaluating ESG data reliability is crucial for trustworthy information. Consider these factors:

• Data Source and Methodology: Reliable sources (company, third-party, regulatory) and transparent methods enhance trust.

• Data Quality and Accuracy: Verify data for errors or inconsistencies to avoid misinformation impacting decisions.

• Data Consistency and Comparability: Ensure alignment across time periods and reporting frameworks for accurate benchmarking against industry standards.

Best Practices for Ensuring Data Accuracy and Integration

To maintain high-quality ESG data, consider these practices:

• Use Multiple Data Sources: Combine internal data, external reports, and third-party providers for a comprehensive view.

• Apply Validation Techniques: Regularly review data through spot checks and cross-referencing, and seek independent verification to enhance trust.

• Implement Integration Techniques: Centralising data improves accessibility and allows for holistic analysis, identifying trends and areas for improvement.

High-quality ESG data is the foundation of effective reporting and decision-making, giving companies the relevant information they need to make a positive impact. By focusing on these factors and practices, you can ensure that your ESG data is both trustworthy and actionable!

ESG Data Analytics and Insights

Once a company has collected its ESG data, the next step is to make sense of it! Analyzing ESG data helps uncover trends, risks, and opportunities that guide better decision-making. With the right tools and techniques, companies have the capabilities to transform raw data into valuable insights that support sustainable growth and positive impact.

How to Analyse ESG Data for Meaningful Insights

Analysing ESG data goes beyond simply collecting it—it’s about interpreting it in ways that bring out the story behind the numbers. Here are some techniques that make this process easier and more insightful:

• Data Visualisation: Using graphs and dashboards to present complex data clearly for stakeholders.

• Statistical Analysis: Identifying patterns and relationships through trend analysis and forecasting future performance.

• Machine Learning and AI: Processing large data sets to uncover hidden patterns and predict effective sustainability initiatives or potential risks.

How to Use ESG Data to Inform Investment Decisions

Standardised sustainability reporting allows investors to make decisions based on more than just financials, factoring in sustainability and social responsibility. Here’s how ESG data can shape smart, sustainable investment choices:

• Evaluating ESG Performance: Investors assess a company's ESG strengths and weaknesses, aligning with their values and avoiding high-risk firms.

• Creating Sustainable Strategies: ESG data informs the development of investment portfolios that prioritize ESG values while balancing potential returns.

• Monitoring ESG Performance: Tracking ESG data over time reveals a company's progress, ensuring alignment with investment criteria.

Governance Data and Risk Management

How Governance Data Can Help Identify and Mitigate Risks

Governance data shines a light on the company’s leadership, management practices, and overall governance structure, all of which are critical for assessing a company's operations, stability and resilience.

• Identifying Risks and Opportunities: It reveals details like board composition, executive pay, and compliance, helping to spot governance issues and areas for improvement.

• Mitigating Risks through Informed Decisions: Strong governance signals lower risks, guiding investors toward companies with robust structures that promise sustainable, long-term value.

ESG Risk Ratings and Their Applications

ESG risk ratings are a helpful tool for evaluating a company’s overall ESG performance. These various risk ratings, provided by various third-party organizations, assess a company’s exposure to ESG-related risks and its ability to manage those risks effectively.

• Evaluating ESG Performance: ESG risk ratings distill a company’s ESG performance into an accessible score or grade, which simplifies comparisons between companies. For investors, these ratings help identify which companies align with their ESG criteria and which ones may pose higher risks.

• Informing Sustainable Investment Strategies: By incorporating ESG risk ratings into investment strategies, investors can choose companies that demonstrate both strong ESG performance and manageable risk levels. This makes it easier to build a sustainable portfolio that balances risk with the potential for positive impact.

ESG Data Reporting and Disclosure

Publicly reporting ESG data effectively is a key part of building trust and transparency. By sharing this data, companies showcase their commitment to sustainability and highlight their progress toward climate change goals. Let’s dive into the difference between ESG data and regulatory reporting.

What is the Difference Between ESG Data and ESG Reporting?

While they go hand-in-hand, ESG data and ESG reporting serve different research purposes:

• ESG Data: This is the raw information—such as greenhouse gas emissions, employee diversity statistics, and energy use—that tracks a company’s ESG performance.

• ESG Reporting: This is the process of communicating ESG data in a structured, understandable way for stakeholders. ESG reporting translates data into a story, showing how the company is meeting its goals, where it’s making progress, and areas for improvement.

In short, ESG data is the raw material, while ESG reporting is the polished, accessible presentation that stakeholders rely on for insights.

ESG Reporting Requirements and Regulations

ESG reporting requirements vary depending on a company’s industry, location, and size. While some organizations voluntarily disclose their ESG performance, others are required to meet specific regulations that are becoming increasingly stringent:

• Country and Industry Variations: Different regions and sectors have unique ESG reporting standards. For instance, the EU has stricter regulations than some other regions, requiring large companies to disclose specific information about their environmental and social impact.

• Increased Stringency: Globally, governments and regulatory bodies are raising the bar on ESG reporting. Companies are being called to provide more accurate, timely, and transparent information about their impact on the environment and society.

Best Practices for ESG Reporting and Disclosure

High-quality ESG reporting requires clear, accurate, and verified information. Here are some best practices to ensure your reports are informative and trustworthy:

• Use Clear and Concise Language: It’s important to communicate ESG data in straightforward language that all stakeholders can understand. Avoid jargon where possible and focus on explaining metrics and results in a way that’s accessible to a broad audience.

• Use Data Visualization and Reporting Techniques: Visual elements like graphs, charts, and tables can make complex data much easier to interpret. Visualization helps stakeholders see patterns and trends at a glance, which is especially helpful when dealing with large amounts of data.

• Use Third-Party Assurance and Verification: To enhance credibility, consider having your ESG data verified by an independent third party. Assurance services validate the accuracy and reliability of your data, building trust with stakeholders and reinforcing your commitment to transparency.

Incorporating these best practices into your ESG reporting process helps you craft a report that not only meets your own regulatory and reporting requirements but also resonates with stakeholders. Thoughtful ESG reporting turns raw data into a compelling narrative that demonstrates your company’s dedication to sustainability.

Accessing ESG Data

Accessing data efficiently is crucial for companies and investors who want to drive sustainable strategies and make informed decisions. With the help of modern platforms, tools, and access to data licenses, ESG data has never been more accessible or customisable. Let’s explore the types of ESG data platforms available and how data licenses can make it easy to access exactly what you need.

ESG Data Platforms and Tools

Today’s ESG data platforms are designed to make data collection, analysis, and reporting as efficient and seamless as possible. These platforms provide a wide range of ESG data and analytics solutions, making it easy to turn raw information into meaningful insights.

ESG data platforms often come equipped with various tools and features, including data dashboards, real-time analytics, and reporting templates. These solutions make it easy to track key metrics, benchmark against industry standards, and identify trends in ESG performance.

Future of ESG Data