A Closer Look at What ESG Benchmarking Is
ESG benchmarking is the best way for companies to compare their disclosures of ESG factors to their competitors’ disclosures. This is important for establishing a baseline and building an ESG strategy with strong commitments and realistic, achievable goals. Typically, it involves looking at key ratings agencies, the ESG frameworks commonly used within your company’s industry, and the topics and frameworks used by your top shareholders. From there, you can identify the heaviest-weighted and most material topics you should consider reporting.
Additionally, the process includes selecting a list of peers to benchmark against. Oftentimes, the peer list may include a combination of competitive peers, proxy peers, aspirational peers, or companies of a similar size.
The goal of an ESG benchmarking exercise is to identify gaps within your ESG disclosures. By pinpointing the topics that you need to create policies and disclosures on, you can increase the chance of improving your ESG ratings and your standings in the eyes of investors.