ESG Reporting: Selecting the Metrics that Matter

By Novata
Quality data is critical for ESG success - collecting this data starts with understanding the metrics that matter to your company's sustainability journey

The demand for data to understand how environmental, social, and governance (ESG) factors impact business performance continues to grow in importance in private markets. 

Many investors and company leaders expect ESG data to be critical to mitigating risks, cutting costs, and driving higher company valuations and brand equity. 

Emerging ESG regulations are also pushing disclosures from a voluntary to mandatory undertaking, and  transparency into sustainability initiatives requires ESG insights and communication with stakeholders. Addressing any or all of the above begins with an ESG data strategy.

Metrics in the foundations of data strategy

When developing a data strategy to guide your company's ESG journey, a great starting point is to figure out which metrics are most important to your company. This essential step shapes the data you'll gather, helps set your targets, and pinpoints the key opportunities you'll want to tackle to mitigate risks or create value across the organisation.

There are a few things to keep in mind when considering which ESG metrics matter most for the company. 

Conducting a materiality assessment and developing an ESG policy that outlines the organisation’s sustainability values is a foundational step. Additionally, companies should consider the issues important to stakeholders, such as investors and customers, and determine potential physical and reputational risks. 

For instance, Novata’s recently updated ESG Metrics Guide shows that Scope 1 emissions is the most requested metric from GPs across the platform. Number of work-related injuries and Number of Women Board Members are also among the top requested metrics. 

The ESG Metrics Guide highlights the top 15 metrics Novata users are curious about, and is designed to provide a clearer picture of the metrics firms are focusing on across each of the the environmental, social, and governance pillars.

How can regulations impact ESG?

Beyond understanding your stakeholder expectations, It is also important to be aware of any ESG regulations that govern the areas in which the company operates, as different regions have varying reporting requirements. 

Regulations such as the EU's Sustainable Finance Disclosure Regulation (SFDR) and the Corporate Sustainability Regulation Disclosure (CSRD) have also come into effect in recent years and define disclosure expectations for investors and private companies on key ESG and sustainability topics. 

Additionally, widely accepted standards such as the Global Reporting Initiative (GRI), the recent International Financial Reporting Standards (IFRS) S1 and S2 requirements, and the ESG Data Convergence Initiative (EDCI) are driving increased convergence and agreement on material metrics across the private markets. While there are no universal ESG metrics, these frameworks, standards, and regulations are helping to standardise reporting and disclosure.

Novata’s 2024 ESG Metrics Guide

For companies getting started with their ESG journey or looking to optimise their sustainability strategies, leveraging an end-to-end software solution can help simplify the process of identifying the metrics most material to the business. 

The metrics on the Novata platform are aligned to standards like EDCI, SASB, GRI, and Invest Europe, as well as data mandated by SFDR, ESRS 1, and ESRS 2, and more. Novata’s in-house experts work with clients to make it easy to identify key metrics, streamline data collection and analysis, and track progress over time. 

By working towards metric convergence, we are able to offer comprehensive benchmarks across industries, sectors, company size, and revenue to provide a greater level of insight and transparency into ESG performance. 

Download the Novata ESG Metrics Guide to learn more.

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