What is ESG data?
Environmental, social, and governance (ESG) data is a component businesses use to determine their corporate social responsibility and sustainability. ESG data helps organizations establish transparency around their environmental goals. Key stakeholders like board members, shareholders, and potential investors may also want to see an organization’s ESG data for various reasons.
Businesses use ESG reporting software to report on the environmental aspect of ESG data. This software helps companies maintain a single source of truth for data related to energy consumption and related costs. Additionally, it helps ensure compliance and improve efficiencies.
How is ESG data used?
Various stakeholders use ESG data differently. Companies use ESG data to track their internal performance and promote transparency around their ESG efforts. Investors use ESG data to assess risks and opportunities associated with investing in a business.
Agencies and analysis firms leverage ESG data to calculate an ESG score, which measures how well a company performs in ESG and the number of risks it has from an ESG perspective.
Types of ESG data
Many types of data fall into ESG categories. Some specific data points stakeholders may want to see in ESG data reports include:
- Environmental data (E): This centers around data points that reflect a company’s environmental impact. Data like energy usage, carbon emissions, waste volumes, local water and sewage usage, and performance against emissions targets fit into this category.
- Social data (S): Social data includes employee satisfaction, diversity initiatives, labor practices, human rights policies, and community engagement. A combination of quantifiable and anecdotal information may be used to provide a complete picture of an organization’s social data, as some elements are tough to measure.
- Governance data (G): This reflects how a company governs itself. Some common types of governance data include board composition, codes of conduct, executive pay, anti-corruption, and conflict of interest policies.
Benefits of ESG data
Capturing ESG data provides many tangible benefits for businesses, investors, and other key stakeholders. Some of the key benefits of ESG data include:
- Potential for more investments: Many investors and lenders request ESG data reports for their review process. Businesses engaged in and prioritizing ESG initiatives may be more likely to secure investments than those that don’t.
- Improved financial performance: ESG initiatives attract investors and can help improve a company’s financial performance, especially regarding sustainability efforts. Efficient energy upgrades and going paperless help businesses save money and improve the bottom line.
- Better reputation as a brand: ESG data can help companies attract and communicate their commitment to stakeholders that value sustainability and social responsibility issues. The awareness of an organization’s commitment to these issues can help boost its reputation and build trust with these critical stakeholder groups.
- Increased risk management: Companies can use ESG data to identify social and environmental risks that could negatively impact their operations and reputation. Leveraging ESG data to get ahead of and mitigate these risks can help prevent more severe issues from occurring.
ESG data best practices
For ESG data to provide the best business benefits, companies should view it as a shared responsibility and include it as part of the business strategy with the goal of adoption across the organization. Some best practices companies should follow to gather ESG data include the following:
- Identifying the most critical ESG data for the business: Companies may prioritize different aspects of ESG data depending on their industry, business strategy, company size, and location. Rather than collecting data on everything, it’s best to pick the data points most important to the business as a starting point and grow the data collection over time.
- Establishing a source of truth: After identifying what data to collect, teams should determine the source of the data and establish a source of truth. Even if data filters into multiple locations, companies need to understand which data they should pull and how they will accurately collect it on an ongoing basis.
- Educating ESG data owners: Various stakeholders will likely own different aspects of ESG data. Business owners need to clearly define who the data owners are and educate them on the significance of collecting and maintaining ESG data. Data owners must understand how to manage the data, how frequently it needs to be updated, who they should share it with, and why it matters as part of the company’s overall strategy.
- Defining processes and policies for data collection: ESG data isn’t helpful if it isn’t accurate and updated regularly. Teams must establish clear procedures and schedules for collecting and reviewing ESG data. Understanding who will update the data and who will review it is essential to ensure it’s accurate and up-to-date. It may also be beneficial to conduct internal audits of the data.
Analyze ESG data with ESG reporting software, one of G2’s newest categories, to generate reports on various topics like sustainability and diversity and inclusion initiatives.
Alyssa Towns
Alyssa Towns works in communications and change management and is a freelance writer for G2. She mainly writes SaaS, productivity, and career-adjacent content. In her spare time, Alyssa is either enjoying a new restaurant with her husband, playing with her Bengal cats Yeti and Yowie, adventuring outdoors, or reading a book from her TBR list.
