Here's How to Properly Measure ESG for Your Company
In an increasingly competitive and transparent business environment, sustainability is no longer a complementary initiative. ESG (Environmental, Social, and Governance) has become a key driver of reputation, access to capital, and long-term competitive advantage.
Deloitte (2024) notes that companies that strategically integrate ESG principles are 2.6 times more likely to maintain a competitive edge compared to their peers.
However, how can ESG be measured in a concrete and meaningful way? Many companies struggle to identify the most relevant indicators and measurement methods. This is why understanding how to measure ESG effectively is critical.
This article explores the importance of ESG assessment, the core components of a strong ESG score, and practical steps for implementation.
If you want to ensure your company remains relevant amid growing global demands, read on.
Why Is ESG Assessment Important?
Amid global pressure for greater transparency and responsibility in environmental, social, and governance practices, ESG assessment is no longer optional.
According to the PwC Global Investor Survey 2023, 76% of investors state that a company’s ESG performance significantly influences their investment decisions.
This demonstrates that ESG assessment is not only about sustainability—it is also about long-term competitiveness. Understanding why ESG matters can be a strategic step in strengthening your company’s position in an increasingly ethical and competitive market.
1. Improving Access to Investors and Financing
Modern investors are no longer focused solely on profitability. They also consider how companies manage environmental and social risks.
PwC (2023) reports that more than 70% of global investors regard ESG information as a critical part of their due diligence process.
This means that when your company demonstrates strong and measurable ESG performance, you not only meet investor expectations but also unlock broader financing opportunities.
By providing credible and auditable ESG data, you signal a genuine commitment to sustainability—not mere rhetoric. This increases trust among institutional investors, enables access to lower-cost capital, and opens doors to green financing or ESG-linked loans. In a competitive market, ESG credibility can be a decisive differentiator.
2. Strengthening Brand Image and Public Trust
Today’s consumers—especially Millennials and Gen Z—tend to be more loyal to brands that uphold sustainability values.
They are not just purchasing products; they are buying into a company’s values and commitment to environmental and social responsibility.
By transparently publishing ESG reports, your company gains greater trust and appreciation from the public, even amid intense price competition.
A strong ESG assessment also supports long-term reputation building. During times of crisis or reputational risk, companies with consistent ESG commitments are better positioned to rebuild public trust. Moreover, strong ESG credentials enhance your standing with regulators, local communities, and business partners by demonstrating concrete ethical and social accountability.
ESG Score Components
Understanding ESG score components is essential for companies aiming to strengthen sustainability strategies and attract responsible investors.
Based on reports from Sustainalytics and official data from the Indonesia Stock Exchange (IDX, 2024), ESG assessments evaluate not only a company’s commitments but also how effectively it manages ESG-related risks.
Sustainalytics assesses companies using two main parameters: exposure (inherent risk) and management (the company’s ability to manage those risks). Strong ESG management translates into lower overall ESG risk scores.
The three core components—Environmental, Social, and Governance—help companies design more focused and impactful sustainability strategies.
1. Environmental Aspect
The Environmental component evaluates how a company manages its impact on the environment.
Key indicators include renewable energy usage, energy efficiency, waste management, carbon footprint, water conservation, and climate change mitigation strategies.
Companies that excel in this area typically have documented environmental policies and publish regular reports on emissions reduction and waste management.
Common environmental metrics include CO₂ emission intensity per unit of production, total energy savings over a defined period, and the percentage of recycled materials used in production. The more measurable your contribution to reducing emissions and waste, the stronger your ESG score—while also improving operational efficiency and reducing regulatory risk.
2. Social Aspect
The Social component assesses how companies interact with employees, communities, and supply chain partners.
Indicators include labor practices (health, safety, and human rights), diversity and inclusion, corporate social responsibility (CSR) programs, and community engagement. Supply chain standards—such as supplier compliance with labor and safety regulations—are also critical.
Common social metrics include employee satisfaction levels, gender diversity in leadership, training hours per employee, and the scope and frequency of CSR programs.
Strong social performance enhances internal relationships, builds a positive public reputation, improves talent retention, and strengthens community trust.
3. Governance Aspect
Governance reflects how a company manages leadership structures and decision-making processes.
Key evaluation areas include financial transparency, anti-corruption policies, board independence, internal audit mechanisms, and risk oversight systems.
Companies with documented anti-bribery policies and effective whistleblowing mechanisms tend to score highly. Board diversity and independence further signal fair decision-making and reduced conflicts of interest.
Strong governance is a foundational indicator of integrity and long-term reliability for investors and stakeholders.
ESG Risk Rating Based on Sustainalytics
To better understand ESG scores quantitatively, below is the ESG risk classification used by Sustainalytics, as cited by the Indonesia Stock Exchange:
| Risk Score | Category | Description |
|---|---|---|
| 0–10 | Negligible | ESG risk is minimal |
| 10–20 | Low | Low ESG risk |
| 20–30 | Medium | Moderate ESG risk |
| 30–40 | High | High ESG risk |
| >40 | Severe | Severe ESG risk |
Lower scores indicate lower ESG risk exposure and stronger management systems.
Controversy Categories (Sustainalytics)
In addition to risk scores, Sustainalytics conducts controversy screening based on public incidents affecting ESG reputation:
| Category | Description |
|---|---|
| No Evidence | No relevant ESG controversy |
| Category 1 | Low impact; negligible risk |
| Category 2 | Moderate impact; minimal risk; good risk management |
| Category 3 | Significant impact; high business risk; inadequate systems |
| Category 4 | High impact; recurring incidents; structural or systemic issues |
| Category 5 | Severe impact; frequent major incidents; very poor management response |
Avoiding higher categories (4 and 5) is critical, as they significantly affect investor perception, market credibility, and business continuity.
How to Measure ESG Effectively
According to Deloitte (2024), approximately 85% of large companies have developed dedicated methodologies to measure ESG performance regularly.
Rising pressure from investors, regulators, and consumers has made transparency and accountability essential. KPMG further reports that companies with structured ESG measurement systems are twice as likely to retain long-term investors.
1. Define Objectives and Scope
Begin by clearly defining the purpose of your ESG evaluation. Is it to meet regulatory requirements, attract institutional investors, or develop a long-term sustainability strategy?
Your objective determines the most suitable framework. For shareholder transparency, GRI (Global Reporting Initiative) is recommended, while SASB may be more appropriate for financial sector companies.
Equally important is defining the scope—whether company-wide, by business unit, or project-specific. A clear scope ensures relevant indicators, efficient data collection, and actionable insights.
2. Identify Relevant ESG Indicators
Select Key Performance Indicators (KPIs) aligned with your industry. Manufacturing companies should prioritize emissions, energy use, and waste management, while service companies may focus on employee engagement, diversity, and customer satisfaction.
Refer to international standards such as GRI, TCFD, and ISO 26000, while adapting indicators to local regulations and stakeholder expectations. This ensures global relevance and local alignment.
3. Leverage Analytical Tools and Technology
Digital transformation plays a critical role in ESG measurement. Platforms such as Bloomberg ESG, Refinitiv, Sustainalytics, and S&P Global enable automated tracking, real-time dashboards, and standardized reporting.
Integrating data across HR, finance, and operations improves accuracy, reduces manual errors, and enables ESG benchmarking against industry peers.
4. Engage Professional Consultants
Due to ESG’s complexity, many companies partner with professional consultants.
This is where prasmul-eli becomes your strategic partner. With extensive experience across industries, prasmul-eli supports companies in building credible and verifiable ESG systems—covering framework design, indicator selection, and strategic interpretation.
We ensure ESG reports are clear, meaningful, and impactful for investors, regulators, and communities—strengthening long-term corporate reputation.
5. Continuous Review and Improvement
ESG measurement is an ongoing process. Conduct annual reviews, set more ambitious targets, and adapt strategies to evolving regulations and market expectations.
Regular internal training strengthens ESG culture across the organization. When employees understand their role in ESG, implementation becomes more consistent and impactful.
Is This the Right Time for Your Company to Measure ESG?
Effective ESG measurement is key to building a business that not only survives—but excels.
With the right strategy and indicators, ESG can shift from a compliance requirement into a true competitive advantage.
If you are ready to build a trusted and effective ESG system, prasmul eli is here to support your journey through training and consulting programs.
Contact us today and prepare your organization to meet future challenges sustainably.
