As we close out another year and get ready to turn over a new leaf in 2023, what ESG KPIs should businesses be focused on in the year ahead? One thing is for certain – the need for businesses to pay close attention to the way that they are monitoring their ESG performance in 2023 - the fact that ESG matters more than ever before.
The need to track and report on ESG factors will become increasingly mandatory year on year, so the smartest operations will be looking to get a head start on the aspects of strategy that make the biggest impact, while they are still a differentiating factor!
ESG KPIs need to be measurable, and can be expected to fall into two core categories – general (impacting all businesses) and sector specific. In this article, we’ll explore ten of the key ESG KPIs that can help your business stand out and succeed in 2023 and beyond…
1. Community Engagement
Increasingly, it's critically important for businesses to be able to measure (and improve) their charity and local community relations. The social impact that a business and its workforce can have is considerable, and something that should be consciously cultivated and tracked.
By putting systems in place to establish strong, supportive bonds with the local community, businesses can improve their reputation, employer branding and even staff retention, by improving morale and sense of purpose in the workplace. Community engagement can be improved through many channels, from sponsoring local events through to donations of time, skills and resources.
Another great KPI to track is hours volunteered by your workforce. KindLink can help facilitate corporate volunteering schemes, offering a digital platform to find opportunities to help, and then track the impact of your donated time.
Similarly, KindLink’s corporate fundraising tools make it easy for charities to share the impact that donations have made, facilitating closer bonds to donors and generating compelling content that is easy to share over official and personal social media channels.
2. Employee Diversity
Employee diversity is one of the most important social KPIs in the modern corporate world. Diversity within your organisation should be monitored by a number of KPIs that go beyond the actual makeup of your workforce.
Additionally, you should monitor and track the amount of diversity training given within your workplace, and the progression of HR strategies in place to encourage and support diversity over time.
As a KPI this is a great example of the way that great ESG strategy improves investment potential. Employee diversity is a key marker for investment, as diverse teams are shown to achieve higher financial targets.
3. Employee Wellbeing
Employee wellbeing covers a wide range of metrics, but a key focus is employee safety. This metric is particularly important with regard to sector specific KPIs. What you choose to track here will very much be dictated by your industry i.e. some are high risk and this will be a top priority against which you are judged.
For all businesses, metrics such as % of safety training sessions successfully delivered etc will be important to track and demonstrate. For example, number and rate of fatalities because of a work-related injury, recordable work-related injuries, and types of work-related injury per hour worked may all be relevant, on a sector-by-sector basis.
Pay equality is another employee wellbeing metric that should be tracked and taken into account. The importance of transparency and accountability when it comes to pay equality – both in terms of gender pay gap but also in terms of the gap between executive vs employee pay – cannot be overstated.
This can be tracked by taking the basic salary and dividing it by remuneration for each employee by department, gender, ethnicity etc. Success here will be closely linked to the success of your diversity metrics. In 2023 pay equality will continue to be a growing focus. Issues developing around the topic of pay equality represent a serious threat to PR and employer branding.
4. Carbon Footprint
First up, it will come as no surprise to learn that carbon footprint will remain a foundational cornerstone of ESG reporting. As carbon reporting becomes increasingly widespread, public scrutiny and mandated compliance to reporting requirements are both on the rise.
The good news is that, due to their popularity as a KPI, carbon emissions are relatively easy to benchmark and hold up for comparison against sector specific performance. Plenty of specialist assistance exists when it comes to gathering accurate figures (check out Plan A), and there’s plenty of data available to compare performance against.
By tracking total carbon emissions, you’re in a better position to offer carbon labelling of your products on a more micro level. Carbon labelling is becoming increasingly common and popular – for brands and consumers alike – particularly within the consumer goods sector.
As an ESG measurement which is becoming increasingly mandatory for certain businesses, there’s still value in getting “ahead of the curve” with carbon reporting. A “jump before you’re pushed” attitude shows your audience that there’s a set of authentic values behind your ESG strategy – you’re doing more than complying with minimum standards.
Our tip for 2023: don’t forget to account for your digital carbon footprint. While moving our businesses online typically represents a less resource-heavy mode of operation, the carbon cost of data storage and digital communication can be considerable. We predict an increased focus on and awareness of this in the year to come.
5. Waste Management
The operational efficiency of your business in terms of waste management is an increasingly important KPI. The nature of this ESG factor means that KPIs will vary from sector to sector.
Waste management will look very different, business to business, but the one common factor is that all companies can achieve better efficiency within their systems, and should strive for this.
Consider the ways in which waste can be reduced at all stages of your business – from product design based in sustainable sourcing through to more efficient methods of production. Wins here impact profitability as well as the planet. Learn from businesses like Lush Cosmetics, who have implemented a truly innovative approach to waste management and reduction within their business model.
Effective waste management is about more than limiting and recording your operational waste. You should also be looking at ways to improve waste management within your consumer base too. This means putting concerted, considered effort into educating your customer base on the way in which your items can be recycled or repaired. If you’re a product-based business, are you offering an officially sanctioned reselling channel? Apps like Recurate can assist here – “recommerce” is becoming increasingly popular within the consumer base, and in particular with Gen Z shoppers.
6. Total Energy Consumption
We can expect to see energy consumption going the same way as carbon footprint when it comes to ESG compliance. As a metric, mandatory reporting of this very telling KPI will only increase in the years to come. Again – it makes sense to get a good system in place for tracking and reporting now.
Energy consumption can be monitored in many ways, and the more granular you can get, the better. There are benefits, for example, of monitoring on a facility by facility basis in terms of seeing exactly where your strategy needs to be tweaked for maximum efficiency and impact.
A key trend for ESG in 2023 will be examining the impact of supply chain choices, and we can certainly expect to see this applied when it comes to energy consumption. Consider this factor when setting up your channel and supplier partnerships.
Energy consumption is a metric which all employees can have a hand in, and as a very clear and unambiguous measurement, it can be a great way to engage and incentivize employees when it comes to your ESG performance. Publicly displayed energy usage can be a great motivator on a day to day basis. Similarly, leveraging a method to track total usage over time can help encourage good practice around energy preservation.
KindLink can help digitise this, by allowing you to track and record energy consumption and display widgets across your internal websites and communication platforms. A great way to get instant visibility of progress – and even to inspire a bit of friendly rivalry between offices or facilities, for the greater good!
7. Expected Vs. Actual Energy Use
Another great KPI to track is expected versus actual usage of energy. Again, when communicated correctly, this can be a great way of boosting employee engagement with your ESG performance as they strive to hit eco targets, at the same time as guiding operational improvements by letting your organisation know when improvements need to be made.
Looking beyond the internal benefits, this is also a great ESG KPI to share publicly, as you can show true progression and also demonstrate a focus on measurable improvements over time. If you’re looking for a way to set your expected use and a target, then you can look to the ISO 50001 standard for energy management as a benchmarking tool.
8. Operational And Financial Transparency
Finally, we come to our key Governance KPIs. Demand for enhanced operational and financial transparency is on the rise. Openness here can be a positive for investors, customers and employees alike.
Efficiency is what you should be looking to demonstrate here, so keeping things open when it comes to the improvements of internal processes, and the impact that this implementation is having upon your quarterly financial statements can be a great boost to the Governance side of your ESG strategy.
9. Risk Mitigation
Another important metric for potential investors - this KPI involves demonstrating how many identified risks have a clear mitigation strategy linked to them. Many businesses learnt the importance of having a well considered approach to risk mitigation in real time, during the recent pandemic.
Again, the importance of sector-specific nuance should be kept in mind when it comes to risk mitigation as an ESG KPI. Every business will be exposed to its own unique set of risks, and it's important to be cognisant of them and to have a clear process in place to identify and mitigate them on an individual basis, with regularly recurring review.
10. Ethics Reporting Mechanisms
Finally, businesses need to consider what reporting mechanisms they have in place to ensure that ethical breaches are clearly monitored and acted upon.
Disclosure and tracking of ethics programs within a business, as well as the existence of clear reporting procedures for violations should be made a top priority. In order to make sure that no bias can find its way into the process, ideally an external accredited authority should be consulted when creating these procedures.
ESG KPI Success In 2023 And Far Beyond
It only remains for us to wish businesses of all shapes and sizes the best of luck for their ESG strategy overhauls and improvements in the year to come!
If you’re looking for a digital platform that can help you engage your employees, keep an accurate measure of your progress and enhance your chances of hitting key ESG targets, the team here at KindLink would love to help you find success in 2023.