13 ESG Metrics HR Leaders Should Use To Track Performance
Companies improving performance on ESG metrics while pursuing stronger growth and profitability deliver superior shareholder returns. HR has a unique opportunity to lead this charge by focusing on diversity, fair labor practices, and employee wellbeing, driving long-term value.
A growing number of companies are prioritizing purpose, linking profit to environmental, social, and governance (ESG) metrics that attract conscious investors, customers, and employees.
These investments are paying dividends, with one study showing that purpose-driven brands with a high perceived positive impact have experienced 175% in brand value growth over 12 years versus 70% for low perceived positive impact brands.
And it’s not just consumers who care. SHRM noted that 75% of HR leaders reported ESG strategies positively impact employee engagement, and 86% of U.S. workers polled who work for organizations with ESG goals feel proud to work for those companies and want to stay.
For organizations looking to enhance their environmental, social, and governance credibility while doing more good in the world, ESG metrics are the key to setting targets and keeping score.
Contents
What are ESG metrics?
Key ESG metrics for HR leaders
– Environmental metrics
– Social metrics
– Governance metrics
Tracking ESG metrics
What are ESG metrics?
ESG metrics refer to a set of quantitative and qualitative indicators used to measure a company’s performance in Environmental, Social, and Governance (ESG) areas.
Tracking these metrics not only provides valuable insights into your organization’s sustainability practices, ethical behavior, and overall impact on society and the environment – it also signals a commitment to being a responsible corporate citizen.
Here’s what ESG metrics measure:
- Environmental metrics keep track of factors such as an organization’s energy consumption, greenhouse gas emissions, waste management, water usage, and biodiversity impact and conservation.
- Social metrics evaluate a company’s relationships and reputation with other parties, including shareholders, employees, customers, suppliers, and communities. These metrics often include employee diversity and inclusion, human rights practices, community engagement, and even product safety.
- Governance metrics measure how well a company governs itself in terms of its leadership, corporate structure, decision-making processes, and transparency. These metrics may include elements such as board composition diversity, executive compensation, anticorruption policies, and risk management practices.
For ESG to have an impact, it has to speak to the hearts and minds of employees while also gathering the right commitment from executive teams. That way, ESG becomes practical, aligned to business goals, and helps instill the desired culture of accountability that the organization aims for.
ESG and HR
Understanding ESG factors and their associated metrics is essential for HR leaders. When it comes to HR and ESG, numerous ESG-related responsibilities fall under the purview of Human Resources. As ESG gains traction among conscious consumers, investors, and the media, the responsibility of HR leaders will continue to grow.
HR plays a central role in various aspects of ESG, including social practices (such as managing employee wellbeing, promoting diversity and inclusion, and ensuring the ethical treatment of workers throughout its supply chains), governance (such as anti-fraud and corruption measures, transparency, and executive pay), and environmental issues (for example, by encouraging workers to carpool or work from home to reduce travel-related carbon emissions).
This puts HR leaders in a critical position to ensure that their people strategies align with their organizations’ broader ESG goals and to promote the broad integration of ESG into workplace culture, values, and practices.
For HR leaders to be adept at driving positive change within their organizations and contributing to a more sustainable future, they need a firm grip on collecting, analyzing, and reporting on ESG data. This requires the ability to:
- Execute data-driven HR initiatives
- Develop a strong analytical skillset
- Effectively scrutinize, summarize, and visualize ESG data into clear and impactful stories for decision-makers.
Collaboration with other teams is crucial here. “Importantly, ESG should never be the sole responsibility of HR—it has to be a shared responsibility, with various stakeholders taking joint accountability for the ESG agenda and making collective decisions on how ESG will be prioritized,” notes Dr. Dieter Veldsman, AIHR’s Chief HR Scientist.
Key ESG metrics for HR leaders
By tracking and analyzing key ESG metrics, HR leaders can play a major role in contributing to their company’s overall ESG efforts. Here’s a list of ESG metrics examples to consider:
Environmental metrics
1. Reduced commuting impact
Measure the reduction in commuting-related carbon emissions by tracking the percentage of employees working from home or using flexible work schedules.
Additionally, you can track the number of employees who commute using eco-friendly modes of transportation, such as public transport or bicycles. Then you can calculate the emissions saved from these efforts and monitor year-over-year progress.
2. Sustainability training participation
Track the percentage of employees who participate in environmental sustainability training and awareness programs. Measure progress over time and set goals for full participation across the organization.
3. Waste and energy consumption reduction
HR can support initiatives that track both waste and energy consumption per employee in the office. This includes monitoring recycling rates and promoting energy-saving habits. By introducing programs like zero-waste challenges or energy awareness campaigns, HR can encourage employees to adopt more sustainable behaviors, ultimately helping the company reduce its environmental footprint and meet sustainability goals.
For example, HR can collaborate with facility management to track and reduce energy consumption by promoting practices like turning off lights, using energy-efficient devices, and encouraging flexible work options to reduce overall office energy demand. Digital workflows and paperless practices, such as e-signatures and digital HR forms, can also significantly lower both paper use and energy consumption related to printing.
Social metrics
4. Employee community impact
If your organization offers volunteer time off, you can track the number of volunteer hours employees contribute to community outreach projects or environmental causes. Additionally, you can monitor participation rates in corporate social responsibility (CSR) initiatives, such as fundraising and community impact projects.
5. Employee diversity and inclusion
Beyond simply complying with equal opportunity regulations, tracking employee diversity and inclusion data can help your company build a more inclusive culture, which contributes to increased innovation, creativity, and employee engagement.
By tracking social metrics on gender diversity, ethnic representation, and diversity in leadership roles, HR can identify areas for improvement and implement targeted initiatives to promote greater diversity and inclusion.
6. Employee health and safety
A safe and healthy workplace is essential for building an environment where employees feel protected and valued.
Monitoring workplace incidents and injuries is important for HR to implement effective safety programs, demonstrate the company’s commitment to employee wellbeing, reduce costs associated with accidents and absenteeism, and fulfill legal obligations.
7. Labor practices and human rights metrics
Adhering to ethical labor practices and protecting human rights is not only a moral obligation, it’s a business imperative.
HR can mitigate reputational risks and avoid legal liabilities by tracking key compliance metrics, such as the number of non-compliance incidents related to labor laws, the frequency of wage or working condition disputes, and reported discrimination cases.
Other related metrics, especially relevant in global operations, include the percentage of suppliers audited for labor practices and the number of corrective actions taken for human rights violations in the supply chain. These metrics showcase a tangible commitment to social responsibility and ethical business practices.
8. Employee engagement and satisfaction
HR can monitor employee engagement and satisfaction using engagement surveys, turnover rates, and satisfaction metrics. These valuable insights allow them to identify areas for improvement and implement initiatives to enhance employee wellbeing and retention.
Building a positive environment where workers feel valued and engaged aligns with a company’s broader social responsibility goals.
9. Gender pay equity
In an era focused on addressing inequality, gender pay gaps are not just a legal requirement but a reputational liability. Tracking gender pay equity metrics and rectifying disparities is essential. Companies dedicated to fairness see improved employee morale and company reputation and attract and retain top talent.
10. Training and development metrics
Investing in employee training and development is essential for building a skilled and engaged workforce. Metrics to monitor this include training hours per employee, the percentage of employees who complete development programs, training effectiveness measured through post-training evaluation forms, and the impact on employee performance and promotion rates.
With these metrics at hand, HR can show how they’re empowering employees with the skills and knowledge needed to succeed, retain them, and contribute to the company’s long-term growth.
11. Employee turnover rate
High employee turnover is not only costly and disruptive to your organization, but it’s also typically an indicator of dissatisfaction, poor management, or lack of opportunities for growth and development.
By tracking turnover metrics and identifying the underlying causes, HR can address root causes, reduce churn, and improve your company’s employer brand.
Governance metrics
12. Executive compensation
HR plays a key role in shaping executive compensation strategies that align with both performance and ESG goals. Tracking metrics such as the ratio of executive pay to average employee salary, the inclusion of ESG-linked performance incentives, and shareholder approval rates on compensation packages ensure fairness and transparency. Moreover, it helps reduce excessive pay disparities and maintains trust with all stakeholders.
13. Whistleblower protection effectiveness
A strong whistleblower protection program is essential for fostering a culture of integrity and stamping out unethical behavior. By providing safe channels for employees to report unethical conduct without fear of job loss or retaliation, HR can help manage misconduct and protect your company’s reputation.
Whistleblower protection metrics track the effectiveness of a company’s reporting system for unethical behavior. Key metrics include the number of whistleblower reports filed, the types of incidents reported, and the resolution time for each case. Monitoring the percentage of reports successfully resolved and tracking any incidents of retaliation ensures that employees feel safe when reporting misconduct.
A well-managed whistleblower program with transparent metrics strengthens governance and supports ethical business practices.
Tracking ESG metrics
As ESG factors continue to gain prominence in the mainstream corporate landscape, HR leaders, as stewards of the workforce, have a central role to play in promoting sustainable and ethical practices.
By effectively tracking and reporting on key ESG metrics, HR leaders can drive momentum and create transparency around the organization’s sustainability strategy and achievements.
Here’s how to start.
Step 1. Identify the key ESG metrics to track
- When selecting key metrics, prioritize those that align with your company’s values and goals. However, keep an eye on your competitors to find an ESG space where they are absent, and you can excel to help you attract ESG-conscious investors, consumers, and talent.
- Metrics such as diversity and inclusion ratios, employee satisfaction scores, turnover rates, and employee wellbeing indicators are particularly relevant and commonly tracked.
- Tracking more challenging measures, such as employee carbon footprint, mental health, gender pay gaps, and social impact (community outreach initiatives and volunteerism), can push your organization to improve its commitment to these areas.
- Be careful to avoid selecting metrics that favor certain outcomes, locations, or demographics. Instead, strive for objectivity and inclusivity in measurement to ensure a fair and comprehensive assessment of ESG performance.
Step 2. Adopt standardized frameworks
- Adopting well-established and globally accepted ESG reporting frameworks, such as those by Global Reporting Initiative (GRI), the International Labour Organization or SASB Standards, can provide a structured approach to tracking metrics and ensure consistency and comparability across industries.
- These frameworks offer comprehensive sets of indicators that can be tailored to suit your specific organizational needs.
- By using standardized frameworks, you, as an HR leader, can streamline your reporting process and enhance the credibility of your ESG disclosures.
Step 3. Set clear benchmarks and targets
- Establishing baseline figures and setting clear, time-bound targets for improvement is essential for tracking progress toward your ESG goals and keeping score with your competitors.
- Setting ambitious yet achievable goals can motivate your HR team and demonstrate your company’s commitment to ESG.
- Regularly monitoring and evaluating performance against these benchmarks will help identify areas for improvement and inform strategic decision-making.
Step 4. Conduct regular employee surveys
- Employee surveys and feedback mechanisms are invaluable for gathering insights into employee satisfaction, diversity perceptions, and wellbeing.
- Analyzing employee sentiment on a regular basis allows you to pinpoint potential issues, measure the effectiveness of ESG initiatives over time, and make data-driven decisions about HR policies, programs, and initiatives that improve the workplace experience.
Step 5. Collaborate with other departments
- Effective ESG reporting cannot be done in a vacuum – it requires collaboration across various departments. HR should work closely with finance, legal, and sustainability teams to gather comprehensive data, ensure alignment with company-wide initiatives, and develop a cohesive ESG strategy. Marketing is also an essential partner in communicating your ESG goals and successes to internal and external audiences.
- By fostering cross-functional collaboration, HR can leverage the expertise of other departments to enhance the quality and reliability of its ESG metrics.
Step 6. Report ESG progress transparently
- Transparency and accountability are fundamental to building trust with employees and stakeholders. As an HR leader, you should regularly share key ESG performance metrics with employees and external stakeholders through various channels, such as annual reports, sustainability disclosures, and internal communications.
- Remember that tracking progress and celebrating achievements is important, but you should avoid focusing on short-term gains at the expense of long-term sustainability.
- ESG initiatives require a long-term perspective and a commitment to continuous improvement.
Internally, reporting has to go beyond the numbers, using both quantitative and qualitative data to show the organization’s impact on communities and other stakeholders. This has to be based on the organization’s identified priorities and a strong narrative that communicates the approach and objective of the organization’s ESG efforts.
Step 7. Leverage external audits
- One of the principal purposes of tracking ESG reporting metrics is to build a more responsible and trustworthy organization; therefore, it’s essential to avoid the mistake of ‘greenwashing’ by making misleading or exaggerated claims about ESG performance.
- Third-party audits that independently assess ESG data, particularly for metrics like pay equity and labor practices, can help your company validate its claims, protect its reputation, and build public trust.
- By engaging external auditors, HR leaders can enhance the credibility of their ESG reporting and disclosure and mitigate the reputational risks associated with inaccurate or incomplete data.
Step 8. Use technology to track metrics
- Technology plays a vital role in tracking and analyzing ESG metrics. Yet, a recent KPMG survey found that nearly half of respondents are still using spreadsheets to manage ESG reporting.
- HR leaders should invest in HR management systems and other tools to automate data collection, track metrics like diversity, pay equity, and employee engagement, and ensure more accurate reporting. For example, using integrated platforms can automatically track data on workforce demographics, training participation, and office energy consumption.
- By leveraging natural language processing and text mining technology, HR can analyze unstructured data, such as employee feedback from surveys or whistleblower reports, to uncover trends and sentiments tied to social and governance issues
Step 9. Keep up-to-date on ESG regulations
- The regulatory landscape for ESG reporting is constantly evolving.
- HR leaders must stay informed about new regulations and standards to ensure ongoing compliance and maintain their company’s reputation.
- By keeping abreast of legal and regulatory developments, HR can proactively adapt its tracking methods and reporting practices to meet new and evolving requirements.
To sum up
By prioritizing ESG initiatives, HR leaders can position their organizations as responsible corporate citizens and build goodwill with employees, investors, and customers.
Embracing worthy ESG goals and the metrics needed to track them aligns with societal expectations and creates a tangible impact on the environment and communities served.
As an HR leader, this strategic approach not only benefits your organization but also solidifies your role as a catalyst for positive change, building a legacy that extends far beyond financial performance.
Learn more
Related articles
Are you ready for the future of HR?
Learn modern and relevant HR skills, online
