Why ESG Metrics, KPIs and Materiality Assessments Matter 

Learn how to measure ESG performance with metrics, KPIs, and materiality assessments. Explore sustainability scorecards, risk and company rating.

Far from being a box-ticking exercise, there’s credible evidence that firms which do an excellent job of designing and managing financially-material ESG metrics and KPIs tend to outperform their competitors and carry a lower cost of capital thanks to reduced risk. The strongest results come when metrics are sector-materiality assessed (typically when following SASB/ISSB recommendations). In this article we consider how to treat ESG metrics as a driver of value, as opposed to a generic checklist. 

Introduction: Choose the Right Metrics! 

Choosing the right metrics is essential for leveraging ESG to deliver value. Following the Sustainability Accountancy Standards Board (SASB) framework is a good place to start, first of all because the recommendations are industry specific.  

SASB (now consolidated into ISSB standards under IFRS S1/S2) is considered the best starting point for ESG KPIs for several interlinked reasons. 

First, materiality is financial, not generic. SASB/ISSB identifies which ESG factors are financially material in each industry (e.g., water use in semiconductors, safety metrics in mining, emissions intensity in power generation). This avoids the widespread problem of companies reporting dozens of immaterial metrics that don’t move the needle for investors or CFOs. 

Second, because ISSB sits under the IFRS Foundation, its standards are explicitly designed to dovetail with financial reporting. Investors, auditors, and regulators are adopting ISSB baselines in multiple jurisdictions. For a CFO, this ensures ESG metrics are not in a parallel reporting universe but tied back to financial statements. 

Third, comparability. One challenge in ESG has been the lack of apples-to-apples comparison. SASB/ISSB frameworks reduce noise by defining consistent KPIs per sector. That means procurement-related risks (e.g., Tier-N supplier transparency) can be benchmarked against peers, making it clearer how ESG performance affects valuation and risk exposure. 

Fourth, integration into wider risk management. SASB/ISSB KPIs map naturally into risk registers, scenario planning, and dashboards because they are expressed in decision-useful units (intensity per unit, percentage exposure, lost-time incident frequency, etc.) 

And fifth, compliance efficiency. Many internationally operating companies face multiple reporting regimes (notably CSRD in the EU and SEC climate disclosure in the US). ISSB is increasingly used as the “common currency.” Starting with SASB/ISSB helps reduce duplication and ensures that ESG metrics developed for compliance can also be leveraged for performance management and investor communication. 

Understanding KPIs and Materiality Maps   

The concept of a materiality map should be central to any organization’s thinking when it comes to ESG metrics. In SASB’s own words (before it was consolidated into ISSB), the SASB Materiality Map® is a research tool that identifies which sustainability/ESG issues are likely to be financially material for companies in 77 different industries. “Financially material” means the issue could affect a company’s financial condition or operating performance (e.g., revenues, costs, assets, liabilities, cost of capital). The map groups topics into five broad ESG dimensions (Environment, Social Capital, Human Capital, Business Model & Innovation, and Leadership & Governance). Within those dimensions, it specifies industry-relevant subtopics (such as Product Safety for autos, Data Security for banks, Water Management for semiconductors). 

Thus, a materiality map helps companies and investors to see which ESG issues actually drive enterprise value in a given sector. It is especially valuable for Chief Procurement Officers and procurement leaders: it’s not just about being “comprehensive,” it’s about focusing effort where ESG risk and opportunity are most likely to affect margins, supply resilience, and financing costs. 

Sustainability KPIs 

Having designed a materiality map using the SASB or some other framework, now comes the hard work of stipulating the relevant sustainability KPIs. Let’s consider the main sustainability KPI examples under the three ESG headings, taking the automotive industry.

Environmental  

Core automotive sector sustainability KPIs start with greenhouse gas emissions (GHG) intensity. These subdivide into Scope 1 & 2 per vehicle produced, plus Scope 3 from the supply chain and vehicle use-phase). In addition, manufacturers should measure energy mix and efficiency (renewable share of total energy; kWh per vehicle). Though less important than in some other sectors, water management (withdrawal intensity, recycling rates in plants) is also a consideration, as is waste and recycling (hazardous waste per unit; percentage recycled content in inputs). CPOs should also consider the environmental impact in the extended supply chain, all the way back to raw materials (use of critical minerals, rare earths, but also recycled inputs). 

This has especial relevance for procurement because supplier contracts increasingly require emissions disclosure and reduction commitments. But procurement can also add value through lower energy/water intensity, reducing operational costs and resilience against carbon/water pricing. Investors will reward OEMs who show credible supply-chain decarbonization (lowers cost of capital through better ESG ratings and green financing access). 

Social

Metrics to be specified under the “Social” heading include those relating to labor practices such as health & safety incident rates (LTIFR, TRIR), overtime breaches, fair wages in supply chain. Likewise, companies measure and report on workforce diversity, equality and inclusion (gender, ethnicity) and management representation of minorities. DEI has been shown to have an impact on performance as well as social justice. 

Less obviously, product quality and safety come under this heading as they affect wider society. Metrics can include recall rates, warranty costs, safety test results. 

Procurement and supply chain managers have a special responsibility for tracking human rights in the supply chain. Metrics can include suppliers audited, non-compliance findings and remediation rates. This has come to the fore with legislation such as the German supply chain due diligence law. 

More generally, these metrics are of importance to procurement leaders because supplier safety and labor standards directly affect continuity and productivity (fewer stoppages, fewer disputes). Strong social practices enhance reputation and make access to capital markets smoother (investors screen for social risk). Moreover, product recalls and warranty claims are costly; KPI-driven supplier quality management reduces downstream cost. 

Governance 

Core metrics under the “Governance” heading include business ethics and compliance: anti-corruption incidents, fines, and compliance training coverage. This extends to supply chain transparency, with metrics such as percentage of Tier 1/2/3 supplier mapping, and ESG audit coverage. Board oversight metrics are much the same across all sectors, for example governance of ESG risks, integration into executive pay. Cybersecurity in the supply chain has come to the fore in recent years. KPIs include incidents reported and supplier compliance with cybersecurity standards. 

Governance KPIs reduce legal and regulatory risk, avoiding fines that can run to millions. Transparent, well-audited supply chains also protect against reputational shocks (such as child and forced labor scandals). Investors increasingly demand ESG integration at the board and executive level. Companies with robust governance score lower credit spreads and enjoy lower cost of finance capital. 

Translation of KPIs into an Actionable Scorecard 

So now you have the KPIs, what are you going to do with them? Having a sustainability scorecard or ESG dashboard for business is essential first and foremost because ESG metrics only drive decisions if they’re integrated with operational and financial KPIs, including those generated by procurement. Procurement leaders need a single view of risk and performance: cost, supply continuity, compliance, and ESG. Such a consolidated view allows for prioritization (which issues are red/amber/green) and scenario planning (e.g., carbon tax impact on suppliers). Without this integration, ESG KPIs risk becoming a reporting exercise rather than an actionable management tool. 

Sustainability scorecards are not proscribed in frameworks such as SASB. Whereas SASB defines KPIs, how to operationalize them inside scorecards, dashboards or balanced scorecards is down to the organization in question. It is best to work with specialist ESG consultants and technology providers such as JAGGAER to do this. JAGGAER One integrates ESG metrics into customized supplier dashboards and scorecards. These can combine SASB/ISSB KPIs for financial materiality, CSRD/GRI disclosures for compliance breadth, and company-specific KPIs (such as the percentage of preferred suppliers with SBTi commitments. 

Company Sustainability Ratings 

All of this hard work will pay off for a company looking to improve its sustainability rating and ESG benchmarking with the sustainability ratings agencies, which will be regarded favorably by institutional investors in particular. Each ESG ratings agency has its own methodology. All of them synthesize public disclosures, questionnaire responses, and sometimes controversy data into scores. But each has a slightly different emphasis. 

EcoVadis is the most relevant to the procurement function as its focus is on supply chain ESG assessments. Ratings are based on a company-completed questionnaire and supporting documents, scored across four themes: Environment, Labor & Human Rights, Ethics, Sustainable Procurement. EcoVadis scores companies on a scale of 0–100 and awards medals (Platinum/Gold/Silver/Bronze). Buyers often require suppliers to have a valid EcoVadis score. 

Morgan Stanley Capital International (MSCI) focuses on financial materiality by sector and uses a 7-point scale (CCC to AAA). It is heavily aligned to the old SASB/ISSB concept of industry materiality maps. Inputs include company disclosures, alternative data, and media coverage. Key issues are weighted by sector materiality, and the final rating is relative to peers. 

Sustainalytics (Morningstar) is more concerned with ESG risk exposure and management. It provides a numeric ESG Risk Rating (on a scale from 0 = negligible, to >40 = severe). Its formula is based on industry, management policies and practices, and event risk (controversies). 

The Carbon Disclosure Project (CDP) focuses on climate, water, and forests. Its ratings are based on company-submitted questionnaires, and it grades companies from A to D, where A = leadership and D = disclosure only. Scoring covers governance, risk management, target-setting, and progress against science-based pathways. CDP is increasingly used by investors to gauge transition readiness. 

ESG Supply Chain Assessment with JAGGAER and EcoVadis 

EcoVadis is almost synonymous with what has come to be termed “supply chain assessment” in the context of ESG: structured evaluation of suppliers’ environmental, social, and governance practices, often through a mix of self-reported data, evidence, and third-party verification. It evaluates suppliers across 200+ industries and 175+ countries. The value for procurement is clear: instead of every buyer running its own ESG audit program, EcoVadis provides a shared assessment platform, reducing duplication and cost. 

JAGGAER One provides supplier intelligence needed based on your own transactional procurement data. EcoVadis complements this, integrating with the JAGGAER One platform so CPOs and procurement leaders can combine ESG ratings with their own spend and performance data. Via custom APIs, the EcoVadis scorecard is linked to the supplier record in JAGGAER One. Ratings are refreshed automatically. 

EcoVadis ratings can then appear in the supplier profile alongside spend, performance, and risk metrics in JAGGAER. For example, a sourcing event can be configured to give weighting to EcoVadis scores and suppliers flagged “high ESG risk” can be routed for mitigation or exclusion.  

Conclusion – Why Sustainability KPIs Matter, and How to Use Them 

In conclusion, SASB/ISSB tells you what to measure. It provides the “management cockpit” with KPIs that can be implemented in scorecards and dashboards. Ratings agencies then translate those disclosures into external scores that investors and lenders use as shorthand for risk. If you’re a CPO, ensuring your ESG scorecards align with SASB/ISSB not only improves internal decision-making but also strengthens your external profile with investors, lenders, and customers. 

A good rating with one of these agencies is extremely helpful but it does not guarantee anything. Institutional investors use them as signals, not gospel. Large asset managers (BlackRock, State Street, Norges Bank, etc.) subscribe to all the major ratings providers and triangulate rather than relying on a single score. MSCI and Sustainalytics are the most influential for equity investors (indexed into ESG exchange-traded funds (ETFs), which are widely used in ratings models). CDP is particularly influential for climate/transition risk. EcoVadis is less investor-facing, but extremely influential in procurement (supplier selection and compliance). 

EcoVadis plugs into JAGGAER to enrich transactional supplier data with ESG insights. That lets CPOs manage sourcing decisions, risk, and compliance in a single workflow, rather than juggling spreadsheets or separate systems. Get in touch to find out more about how ESG supply chain assessments can be integrated into your day-to-day procurement while also providing solid KPIs for better decision making, efficient compliance and better scores for external rating agencies.