Understanding ESG Metrics: A Guide to Environmental, Social, and Governance Indicators

Environmental, Social, and Governance (ESG) metrics are non-financial indicators that help organizations measure and manage their impact on the world. They offer insights into how companies address environmental sustainability, treat their employees and communities, and uphold ethical governance practices.

Unlike traditional financial data, ESG metrics include both quantitative data—like carbon emissions—and qualitative insights, such as descriptions of workplace safety systems or governance policies. As sustainability reporting moves from a “nice-to-have” to a business imperative, understanding and tracking ESG metrics is becoming critical for companies of all sizes.

What Are Sustainability or ESG Metrics?

ESG metrics measure how a company performs in areas that affect people and the planet, rather than just profit. These metrics fall under three main pillars:

• Environmental: Impact on the planet, including emissions, energy use, and resource consumption.
• Social: How a company manages relationships with employees, suppliers, customers, and communities.
• Governance: Corporate structure, ethics, transparency, and leadership oversight.

Some ESG metrics are quantitative, like greenhouse gas emissions or water consumption. Others are qualitative, such as policies around ethical supply chains or workforce inclusion.

These indicators help internal and external stakeholders understand how well a company aligns with its stated values—and how resilient it might be in a rapidly changing world.

Key Takeaways:

• ESG metrics provide a standardized way to evaluate non-financial risks and opportunities.
• They span environmental, social, and governance domains.
• Metrics can be numerical (e.g., emissions) or descriptive (e.g., ethics policies).
• ESG performance is increasingly tied to long-term financial performance.
• Investors and regulators use ESG data to assess risk, strategy, and accountability.

Why ESG Metrics Matter

ESG metrics are more than just reports for sustainability teams—they are now key inputs in investor decisions, consumer trust, and corporate strategy. Companies that effectively track and improve ESG performance are better positioned for long-term growth.

• Improve transparency and enhance public trust.
• Attract ESG-conscious investors and reduce compliance risks.
• Demonstrate commitment to sustainable, long-term value creation.

Transparency in ESG reporting helps protect brand reputation. It shows accountability, fosters trust with customers and partners, and improves relationships with regulators. ESG disclosures also support internal benchmarking, allowing businesses to identify gaps, measure progress, and prioritize actions.

For investors, ESG metrics offer another layer of due diligence. They help gauge potential liabilities (e.g., regulatory noncompliance) and opportunities (e.g., leadership in sustainable innovation).

ESG Frameworks & Reporting Standards

To bring structure to ESG reporting, companies turn to established frameworks. These frameworks offer a set of guidelines for what to measure and how to disclose it. These metrics are increasingly aligned with global frameworks such as the ISSB, CSRD, and GRI to ensure consistency and comparability in sustainability reporting.

Popular ESG reporting frameworks include:

• TCFD (Task Force on Climate-Related Financial Disclosures): Focuses on climate risks and opportunities. It helps companies disclose the financial impacts of climate change and supports long-term risk management and resilience planning.
• SASB (Sustainability Accounting Standards Board): Industry-specific standards for ESG reporting. SASB enables companies to identify the ESG issues most relevant to their sector and communicate performance in a financially material way.
• GRI (Global Reporting Initiative): Covers a wide range of ESG factors with global applicability. GRI encourages transparency and stakeholder engagement by promoting broad disclosures on economic, environmental, and social impacts.
• Corporate Sustainability Reporting Directive (CSRD): For companies preparing for mandatory EU disclosures, understanding the Corporate Sustainability Reporting Directive (CSRD) is essential, as it sets the legal foundation for ESG transparency across Europe

Using these frameworks helps ensure consistency and comparability in ESG reports. They also allow stakeholders—investors, analysts, and regulators—to evaluate data across companies and sectors with greater clarity.

However, challenges remain. ESG data can be complex to gather, especially when it spans global operations and supply chains. Some data—like Scope 3 emissions or supplier labor conditions—is hard to verify, making reporting difficult.

Environmental Metrics: Measuring Climate and Resource Impact

Environmental metrics focus on how a company uses and impacts natural resources. These are often the most visible and widely reported ESG indicators:

• Greenhouse gas emissions (Scope 1, 2, 3)
• Energy and water consumption
• Waste output and recycling rates
• Land use and biodiversity impact
• Existence of environmental governance policies

Greenhouse gas (GHG) emissions are a primary metric. Companies typically report Scope 1 (direct), Scope 2 (energy-related), and increasingly Scope 3 (value chain) emissions. Reporting emissions intensity (e.g., tons of CO₂e per million dollars in revenue) helps normalize performance across companies of different sizes. Many organizations also report through the Carbon Disclosure Project (CDP), a global framework that helps standardize climate-related disclosures and complements CSRD, TCFD, and GRI.

Energy and water usage are other key indicators. Businesses track total consumption and identify efficiencies in operations, facilities, and product design. Waste generation and biodiversity impacts also fall into this category.

Some environmental metrics are policy-based: does the company have board-level oversight on climate risks? Has it adopted frameworks like TCFD?

Social Metrics: Tracking People and Community Impact

The “S” in ESG focuses on how companies treat people—both inside and outside the organization. Social metrics are essential for understanding company culture, workforce dynamics, and community engagement:

• Workforce metrics (pay equity, DE&I, turnover)
• Training and career development investment
• Workplace health and safety indicators
• Community giving and human rights initiatives

Labor data, such as the gender pay gap, living wage policies, or representation across race and gender, reflect workplace equity. Metrics like employee turnover, engagement scores, and training hours reveal how invested a company is in its people.

Safety and well-being are also core. Companies often report health and safety incident rates and lost-time injury frequencies.

Externally, metrics include community investment, philanthropy, and the presence of human rights policies. These indicators show how the company operates as a corporate citizen.

Governance Metrics: Evaluating Ethics and Accountability

Governance metrics reflect how well a company is led and held accountable. These indicators focus on transparency, leadership ethics, and board oversight. Some key governance metrics include the following:

• Executive pay ratios
• Board diversity and independence
• Anti-corruption and ethical conduct policies
• Tax transparency
• Supplier ESG compliance and audits

One frequently reported metric is CEO-to-median employee pay ratio, which shows how equitable executive compensation is. Board diversity—by gender, race, and independence—is another key governance factor.

Companies also report on anti-corruption efforts, ethics codes, and third-party audits. Tax transparency, especially tax paid vs. revenue in different regions, can indicate ethical financial practices.

Supplier oversight is also gaining attention. Companies are now expected to monitor ESG performance across their supply chains, especially regarding labor standards and anti-bribery policies.

5 Best Practices in ESG Data Management

Tracking ESG metrics isn’t just about picking the right KPIs. It’s also about how you measure and manage them.

1. Align ESG metrics with company OKRs and targets: Tie ESG initiatives to business objectives to ensure relevance, accountability, and cross-functional support.
2. Create clear data governance structures: Assign ownership, define processes, and set quality controls to ensure ESG data is reliable and fit for decision-making.
3. Use software for data collection, analysis, and forecasting: Leverage ESG platforms and automation tools to streamline reporting, reduce manual errors, and generate actionable insights.
4. Standardize metrics across business units: Ensure consistency by using the same definitions, methodologies, and reporting formats organization-wide.
5. Conduct regular internal audits to ensure integrity: Review ESG data and processes routinely to catch errors early, maintain credibility, and prepare for external assurance if needed.

Companies need to align ESG metrics with strategic objectives. For example, if a business commits to net-zero emissions by 2040, it should set interim goals and measure progress using relevant KPIs.

Data governance is critical. ESG data should be accurate, timely, and “fit for purpose.” Organizations should invest in tools that ensure data quality, eliminate manual processes, and enable clear visualization for stakeholders.

Technology plays a major role. ESG software and platforms help automate data collection, generate dashboards, and forecast future scenarios using AI and machine learning.

5 Common Sustainability/ESG Metrics Challenges

Despite growing attention and investment, ESG reporting isn’t easy. Companies face several obstacles that slow progress or create confusion.

1. No single global standard or mandate: With multiple frameworks and voluntary guidelines, companies struggle to choose the “right” approach, making comparisons difficult.
2. Data collection issues, especially in global supply chains: Gathering consistent, accurate data across diverse geographies and vendors is time-consuming and often incomplete.
3. Inconsistent internal reporting processes: Different teams may track ESG data in silos, leading to gaps, duplication, or conflicting metrics.
4. Risk of misleading or superficial disclosures: Without clear standards or oversight, some companies may overstate progress, opening the door to greenwashing accusations.
5. Difficulty verifying third-party or Scope 3 data: Indirect emissions and supplier practices are notoriously hard to measure, making assurance and accountability challenging.

One major issue is the lack of universal standards. Different frameworks exist, and many companies mix and match them, leading to inconsistent reporting.

Data gaps—especially for indirect emissions or global suppliers—make it difficult to track impact accurately. Small or private companies may lack the tools or expertise to collect ESG data effectively.

There’s also the risk of greenwashing. Some companies report ESG progress that’s not backed by meaningful action or verified data. This erodes stakeholder trust and can backfire.

ESG Metrics Tips & Best Practices

If you’re just starting with ESG reporting—or looking to improve—it helps to follow a structured path.

Begin with a materiality assessment to find which ESG issues matter most to your business and stakeholders. This narrows your focus to relevant metrics.

Next, choose a framework that aligns with your industry and reporting goals. Set measurable goals tied to ESG KPIs and review them quarterly.

Technology matters. A digital ESG platform can save time and improve reporting accuracy. Finally, benchmark your performance. See how your metrics stack up against peers in your industry:

• Conduct a materiality assessment to focus efforts: Identify the ESG issues that matter most to your business and stakeholders to prioritize relevant, high-impact metrics.
• Use trusted frameworks like SASB or GRI to structure reporting: Frameworks provide consistency, improve comparability, and align disclosures with investor and regulatory expectations.
• Define goals and track progress with KPIs: Set clear, measurable objectives tied to key performance indicators to monitor improvement and drive accountability.
• Invest in tools for data management and automation: ESG software can streamline data collection, reduce errors, and enable more timely, accurate reporting.
• Benchmark ESG scores against industry peers: Comparing your performance to competitors highlights gaps, sets context, and helps guide future strategy.

Looking Ahead: The Case for ESG Investment

Companies that treat ESG metrics seriously aren’t just checking a box—they’re building long-term resilience. Investors are increasingly using ESG data to screen and prioritize opportunities. Regulators are tightening expectations, and consumers are choosing brands that align with their values.

If your company isn’t tracking ESG metrics yet, it’s falling behind.

ESG metrics aren’t a burden. They’re a tool for business intelligence, brand growth, and risk management. Whether you’re targeting investors, customers, or regulators, high-quality ESG data supports smarter decisions and a stronger future.

Want help building or improving your ESG reporting? Request a free ESG Gap Assessment for SEC/CSRD with a Nasdaq Expert.

ESG metrics are no longer optional. They’re a crucial lens through which stakeholders evaluate companies. From emissions to equity, ethics to executive pay, ESG data shows whether a business is truly sustainable—or just saying it is.

Getting it right means aligning metrics to strategy, choosing the right frameworks, managing data well, and committing to transparency. Companies that rise to this challenge are rewarded with trust, resilience, and long-term value.

ESG/Sustainability Metrics FAQs

What is the ESG metric?
An ESG metric is a data point used to evaluate a company’s performance in areas related to environmental impact, social responsibility, and corporate governance. These metrics help stakeholders understand how a company manages risks and opportunities tied to sustainability.

What are examples of ESG metrics?
Examples of ESG metrics include carbon emissions, energy consumption, employee turnover, workforce diversity, board independence, and cybersecurity incidents. These indicators vary by industry and reporting framework but provide insight into a company's sustainability practices.

What is KPIs for ESG?
Key Performance Indicators (KPIs) for ESG are specific, measurable values that track progress toward environmental, social, or governance goals. For example, a company might set a KPI to reduce Scope 1 emissions by 25% over five years or increase board diversity to 40%.

What are the ESG measures?
ESG measures refer to the broad set of standards and indicators used to assess a company’s sustainability performance. These can include both quantitative data (e.g., water usage, pay equity ratios) and qualitative assessments (e.g., policy disclosures, governance practices). They are often aligned with frameworks like CSRD, GRI, or TCFD.