Once commitments have been set and actions determined for each materiality, the next step is to choose targets and metrics for each. Consider what indicators to follow in order to check whether progress is being made on the action or commitment. Here are some important points to keep in mind:

• Before thinking about how to measure progress on a particular action, consider setting targets. There are certain actions for which targets aren’t necessary; however, they can be very helpful in giving the organization a clear goal to aim for.
• If the team decides to set targets, ensure they are ambitious yet achievable. The rationale that has been set for each target should be clear (e.g., based on best practices globally). Here’s an example of how this could work:

Priority issue: Diversity, Equity, and Inclusion (DEI)

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Action: Embed DEI in the values, governance, and operational practices of our company

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Target: 30% representation of women on our board by 2025 (based on a 30% Club campaign)

• Some additional examples of targets could include (keep in mind that what’s feasible will vary based on where the company is based and/or operates):

  • Net zero
  • Achieve gender parity in C-level leadership by 2027
  • 100% flex working
  • Reduce energy consumption by at least 32.5% by 2030 (aligning with EU target)
  • All employee electronics devices repurposed or recycled by 2025

• Many business owners get nervous about hitting targets that are set. Bu we think about targets as being more about measurement, especially at the beginning, rather than being hit, per se. Irrespective of whether a company decides to set a firm target, we strongly recommend identifying metrics to measure progress against.

• Metrics don’t always need to be quantitative—and often cannot be. Metrics with a “yes” or “no” answer are still valid, and a mix of quantitative and qualitative metrics (across the full ESG roadmap) is healthy.

• There is also an element of practicality in defining metrics that will need to be measured over time. This means companies should :

  1. Think through what type of data is needed to track each selected metric—if possible, focusing on data that is most readily available
  2. Put in place a process to ensure easy access to the data needed on a regular basis
  3. Designate someone within the company to gather and track the defined metrics and their related data

• From our investor perspective, some metrics that should be measured on at least an annual basis include:

  • Diversity (minimum*: for Japanese companies, at least % women, % non-Japanese citizens; for all other companies: % women, % ethnic minorities)

    • Employee base
    • Managers
    • Management executives
    • Board of directors
    • Advisory committee
    • Note: Other factors such as disability, sexual and gender identity, and other aspects relevant to your country or other context should be considered as well.

  • GHG emissions

    • Scopes 1, 2, and 3

  • Employee engagement*

    • Retention rate/turnover
    • New hires
    • Note: When the company gets larger (50+ employees), we recommend conducting a periodic employee engagement survey

• As with targets, ESG and sustainability frameworks can provide helpful guidance on metrics to use.

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