ESG KPIs explained

Every sustainability report contains dozens of metrics, but only a few are the key performance indicators management actually steers by and investors compare. Choosing them, defining them precisely and calculating them the same way every year is harder than it looks, and small changes in definition can turn a deterioration into an apparent improvement. This guide explains what ESG KPIs are, the most common ones, how to define them, works through a manufacturer's dashboard, and covers absolute and intensity measures, links to pay and financing, and common pitfalls.

By Awais Jameel, Chartered Accountant. Reviewed by Muhammad Bilal, Chartered Accountant. 4 minute read.

Short answer

ESG KPIs are the key performance indicators a company uses to measure and report its environmental, social and governance performance, such as greenhouse gas emissions and their intensity, energy and water use, injury rates, employee turnover, the gender pay gap and board diversity. A useful ESG KPI has a precise definition, boundary, unit and calculation method, a base year, an owner and controls over its data, and is reported consistently over time. Frameworks supply many standard definitions: the ESRS and GRI for broad sustainability reporting, and the industry-based SASB Standards, which IFRS S1 requires companies to refer to and consider. KPIs can be absolute or intensity-based, and the two can tell different stories. ESG KPIs are also used in executive pay and sustainability-linked loans, which raises the stakes for getting them right. In this guide's example, a manufacturer's emissions intensity falls 16% while its absolute emissions rise 5%.

At a glance

What they are
ESG performance measures
Environmental
Emissions, energy, water
Social
Safety, pay gap, turnover
Governance
Board, ethics, pay links
Definitions from
ESRS, GRI, SASB
Key choice
Absolute or intensity
ESG KPIs explainedWhat they are: ESG performance measures; Environmental: Emissions, energy, water; Social: Safety, pay gap, turnover; Governance: Board, ethics, pay links; Definitions from: ESRS, GRI, SASB; Key choice: Absolute or intensity.KEY FACTS AT A GLANCEESG KPIs explainedWhat they areESG performance measuresEnvironmentalEmissions, energy, waterSocialSafety, pay gap, turnoverGovernanceBoard, ethics, pay linksDefinitions fromESRS, GRI, SASBKey choiceAbsolute or intensityTax BakersESG KPIs explainedWhat they are: ESG performance measures; Environmental: Emissions, energy, water; Social: Safety, pay gap, turnover; Governance: Board, ethics, pay links; Definitions from: ESRS, GRI, SASB; Key choice: Absolute or intensity.KEY FACTS AT A GLANCEESG KPIs explainedWhat they areESG performance measuresEnvironmentalEmissions, energy, waterSocialSafety, pay gap, turnoverGovernanceBoard, ethics, pay linksDefinitions fromESRS, GRI, SASBKey choiceAbsolute or intensityTax Bakers
Key facts at a glance, as set out in this guide.

What are ESG KPIs?

An ESG KPI is a metric a company uses to track progress on a material sustainability matter, usually against a target. ESG KPIs are a subset of everything a company reports: a sustainability statement under the ESRS may contain hundreds of datapoints, but a handful of KPIs carry the story, appear in the management report and investor presentations, and often in remuneration and financing terms. See sustainability reporting explained.

Which ESG KPIs are most common?

  • Environmental: scope 1, 2 and 3 emissions and their intensity, energy use and renewable share, water withdrawal in stressed areas, waste and recycling rates.
  • Social: recordable injury rate and fatalities, employee turnover, training hours, gender pay gap, diversity in management, and supply chain audit results. See ESRS S1 own workforce.
  • Governance: board independence and diversity, ethics and anti-corruption training, confirmed incidents of corruption, and the share of executive pay linked to sustainability targets. See ESRS G1 business conduct.

Industry KPIs matter as much: energy efficiency of products for manufacturers, financed emissions for banks, and water intensity for drinks companies. See scope 1 and 2 emissions.

How should an ESG KPI be defined?

Write down the definition, boundary, unit, calculation, data sources, estimation methods, base year, restatement policy and owner, and use a recognised framework definition where one exists, because users compare across companies. For example, the ESRS express the recordable injury rate per million hours worked, while US OSHA uses 200,000 hours, so the same data can give rates five times apart. IFRS S1 requires companies to refer to and consider the SASB Standards' industry metrics, explained in SASB standards and industry-based metrics, and the ESRS and GRI define many others. Build controls over the data as you would for financial KPIs, because assurance will test them. See ESRS 2 general disclosures.

ESG KPIs in practice: a manufacturer's dashboard

A manufacturer reports six ESG KPIs. Its revenue grew from EUR 400 million to EUR 500 million.

KPIDefinition20252026
Scope 1 and 2 emissions intensityMarket-based tonnes CO2e per EUR million of revenue10084
Renewable electricityShare of electricity bought or generated from renewable sources30%50%
Recordable injury rateRecordable work-related injuries per million hours worked3.02.0
Employee turnoverLeavers divided by average headcount12.0%10.0%
Gender pay gapMen's minus women's average gross hourly pay, as a share of men's12.0%10.0%
Women in senior managementWomen among the top 50 managers28%34%
Revenue, emissions and emissions intensity (index, 2025 = 100)Revenue, emissions and emissions intensity (index, 2025 = 100)100125Revenue100105Absolute emissions10084Emissions intensity20252026
Intensity can fall while absolute emissions rise.

Emissions intensity fell from 100 to 84 tonnes per EUR million, but absolute emissions rose from 40,000 to 42,000 tonnes, because revenue grew faster than efficiency improved. Reporting only the intensity figure would flatter the result, so the company reports both, and explains that its absolute target needs further cuts. The injury rate improved from 12 injuries in 4.0 million hours to 9 in 4.5 million. The pay gap fell to 10%, and the company notes that a change in its workforce mix explains part of the improvement.

Should ESG KPIs be absolute or intensity-based?

Absolute measures, such as tonnes of emissions, show the total effect on the climate and are what science-based targets use; intensity measures, such as tonnes per unit of revenue or output, show efficiency and allow comparison between companies of different sizes. Revenue-based intensity also moves with prices and inflation, so physical denominators, such as tonnes of product, are often better. Reporting both, with the denominators disclosed, is the safest approach. See setting and reporting net zero targets.

How are ESG KPIs used in pay and financing?

Many companies link part of executive bonuses or long-term incentives to ESG KPIs, and IFRS S2 requires disclosure of whether and how climate-related considerations are factored into executive remuneration, including the percentage of remuneration recognised in the period that is linked to them. Sustainability-linked loans and bonds tie interest rates to KPIs, so the definitions in loan documents must match those in the report. In the US, the SEC's 2020 guidance on key performance indicators in MD&A expects a clear definition, calculation and explanation of any KPI used. See green bonds and sustainability-linked loans.

What are the common pitfalls with ESG KPIs?

Changing definitions without restating prior years, mixing location-based and market-based emissions, choosing denominators that flatter results, reporting only the KPIs that improved, and relying on estimates that are not disclosed. Each is a source of greenwashing risk and an assurance finding. See greenwashing risk.

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Questions people ask

What are ESG KPIs?

Key performance indicators a company uses to measure its environmental, social and governance performance, such as emissions intensity, injury rates and the gender pay gap.

What makes a good ESG KPI?

A precise definition, boundary, unit and method, a base year, an owner and controls, ideally using a recognised framework definition, applied consistently over time.

Should companies report absolute or intensity emissions?

Both. Absolute emissions show the effect on the climate; intensity shows efficiency and allows comparison.

Are ESG KPIs used in executive pay?

Often. IFRS S2 requires disclosure of how climate considerations are factored into executive remuneration and the share of pay linked to them.

Sources

Every fee, date and rule on this page was taken from these official and primary sources.

  1. IFRS Foundation: IFRS Sustainability Disclosure Standards (IFRS S1 and IFRS S2)
  2. EFRAG Knowledge Hub: revised ESRS 1 General requirements, delegated act version
  3. EFRAG Knowledge Hub: revised ESRS 2 General disclosures, delegated act version
  4. Global Reporting Initiative: the GRI Standards
  5. US Federal Register: SEC Commission Guidance on Management's Discussion and Analysis, key performance indicators and metrics (February 2020)

Rules and fees change. If you are reading this long after October 11, 2026, confirm the figures with the source before you rely on them.

SustainabilitySustainability reporting explained: ISSB, ESRS, GRI and US rulesSustainabilityESRS 2 general disclosuresSustainabilityCalculating scope 1 and 2 emissions

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This guide is general information. It is not tax or legal advice for your situation.