Measuring environment, social, and governance (ESG) performance is about more than ticking off a checklist or playing it safe. Instead, it’s a pathway for businesses to innovate and grow sustainably.
The majority of Australian businesses (93 per cent) recognise that ESG performance is relevant to the enterprise value of organisations. Additionally, customer retention (41 per cent), market competition (44 per cent), customer attraction (46 per cent), and employee expectations (51 per cent) are among the key drivers for organisations adopting sustainability measures, alongside regulatory pressures (59 per cent).
Simply put, ESG is like a report card that looks beyond the bottom line. It includes clear numbers—such as greenhouse gas emissions and energy use—as well as a qualitative assessment of labour practices and community engagement. It’s this combination that gives a rounded view of a company’s impact. Companies that develop strong ESG frameworks are ahead of the regulatory curve and can attract customers and investors. However, more than 50 per cent of Australian organisations see data collection as one of the biggest challenges when it comes to achieving their sustainability goals.
Naveen Shettar, director of services, Logicalis Australia, said, “ESG metrics tell the full story of a company, way beyond just the bottom line. They shine a light on how a company treats the planet, the people it works with, and how it operates. Understanding this bigger picture is becoming more important to show the role a company plays in the society in which it operates. Beyond establishing ESG goals, it’s critical that businesses have a clear-cut way of measuring and understanding how they’re performing against those metrics to determine the real value of their efforts.”
Businesses can track their ESG progress in several ways. Third-party ESG scores and ratings can tell them how they stack up in the industry. Certifications, like those for Fairtrade or adherence to ISO 14001, can formally acknowledge a company’s commitment to ESG principles. Additionally, regular audits—both internal and external—provide in-depth reviews of ESG practices and identify areas for improvement.
However, pinning down ESG performance can be challenging. Challenges businesses face include a mix of different measures, data collection issues, and integrating ESG into the existing business strategies. To clear these hurdles, businesses must have clear ESG goals, investment in solid data systems, and effectively weave ESG thinking into their business planning and daily operations.
PwC 2022 data shows that ASX200 companies are getting better at ESG reporting . Now, 49 per cent of them have promised to reach net zero, a 13 per cent jump from 2021. However, of those aiming for net zero, just 55 per cent are actually talking about how they’ll do it and focusing on the specific steps they’ll take. The positive news is that many listed companies are acknowledging climate change as a financial risk and are setting targets to reduce their carbon footprint following global standards.
Unfortunately, the ESG journey can be tough for smaller companies. Limited resources and expertise can hinder their ability to effectively implement ESG measures. These businesses might find it difficult to get their hands on good ESG data or to live up to the benchmarks that bigger companies manage more easily. Investing in smart technology solutions that streamline data collection for ESG measurement can help to bridge the gap for businesses. With a real-time view of an organisation’s entire technology suite, and the impact each individual element has on the environment, businesses can gain a clear picture of how they stack up against their ESG goals and better measure—and manage—their carbon footprint.
The push for ESG is gaining steam, and investors are taking more notice of companies that prioritise sustainability and social responsibility. Plus, regulatory bodies are tightening up ESG reporting requirements. For example, the International Sustainability Standards Board (ISSB) asks companies to report on significant sustainability-related risks and opportunities across their operations. This push for better reporting lets companies mitigate risks as well as identify and jump on opportunities.
Naveen Shettar said, “Adopting ESG principles is a progressive journey. As new standardised reporting frameworks emerge, it’s becoming easier for companies to monitor and report their ESG initiatives, especially when they have technology solutions built into the digital fabrics of their organisation to manage and measure their impact in real-time.
“These metrics reshape corporate conduct, promote accountability, and provide clear guidance. This shift is a win-win that builds trust and credibility for businesses while advocating for sustainable and fair practices that benefit society. As we look to the future, it’s clear that ESG standards will be key in helping companies reach a place where success goes hand in hand with making a positive impact.”