Measuring the Impact of ESG Initiatives

_{June 2023}

To unleash the real power of ESG initiatives, organizations must set the right targets and track where they’re delivering — or faltering. 

In a time of grave challenges to people and the planet, companies face increasing expectations to look beyond the bottom line and ensure their initiatives create a better world for all. Whether their projects address a worsening climate crisis or global economic and educational disparities, it’s clear that companies need to do more than set ambitious goals for environmental, social and governance (ESG) progress. 

This awareness, fueled by growing interest in ESG as well as dire projections on long-term outlooks for benchmarks like greenhouse gas emissions and income inequality, is driving a fundamental rethink of how project leaders and their teams define and measure outcomes.

That means developing rigorous plans to identify, track and analyze the most critical elements that deliver deep and meaningful ROI — and align with the organization’s long-term ESG vision. Yet many organizations see an uphill battle: 63% of decision makers report feeling unprepared to meet their ESG goals and government and regulatory reporting mandates, according to a 2022 global survey by Workiva. On top of that, 72% lack confidence in the data reported to stakeholders, the survey says. That leaves a huge gap when it comes to tracking performance — and keeping stakeholders in the loop, including investors who expect transparency in data and insights from ESG initiatives.

The increasing attention on ESG presents opportunities but also raises the stakes for project leaders quantifying the impact of ESG initiatives. External pressure to track impact with greater rigor is on the horizon — and organizations need to start preparing for those requirements now. As noted in The ESG Imperative, the United States recently proposed new government mandates for climate disclosures for publicly listed companies — following the lead of the United Kingdom, Japan, New Zealand and Singapore. Additionally, new funding for the U.S. Environmental Protection Agency (EPA) will help create standards for companies’ climate commitments and plans to reduce greenhouse gases. The agency also will press for greater transparency from companies about their progress toward meeting these commitments. 

As governments set ambitious climate goals and organizations look to supercharge their ESG initiatives, project leaders are best positioned to help them carry out a reality check on that progress — or to what degree it’s lacking. One telling stat: While a strong majority of executives, government leaders and sustainability experts see an increased focus on achieving sustainability goals, less than half (46%) of project managers agree, according to a 2022 report by PMI strategic partner Green Project Management (GPM). 

Project managers are well positioned to use their skills to identify opportunities to move the needle on ESG initiatives — and quantify impact through effective measurement. Perhaps just as importantly, they can also serve as the first line of defense if those projects aren’t delivering as intended.

In one recently completed mixed-use development project in Latin America, the client organization had environmental goals that could be measured quantitatively. But it also had a qualitative objective to be accepted by residents of the vulnerable community where the development would be located. Cushman & Wakefield helped create a plan to involve community members in the construction, providing jobs and the resulting income. The building also was designed to be entirely accessible to people with disabilities, another way to demonstrate the client’s commitment to DE&I. 

Such metrics tell a story that can show momentum and build support. “The ESG agenda is a change agenda, a transformation agenda,” says Orlando Nastri, a professor at FIA Business School and an ESG project consultant in São Paulo, Brazil. “We can have pragmatic metrics — for example, the number of women or Black people in leadership roles. We can look at the numbers of promotions in certain departments. But it’s also really important to measure the atmosphere, how the organization is moving.”

Nastri recently worked with a client on a full week of events to engage and mobilize more than 10,000 employees to collaborate toward ESG goals. The training included discussions on aligning projects with the U.N. Global Compact. Nastri says one way to track buy-in from employees is to conduct surveys that measure the willingness of respondents to recommend the ESG efforts to others.

Even established ESG initiatives require ongoing metrics to demonstrate that they continue to meet expectations. Case in point: UNICEF’s Learning Passport, which designs digital platforms powered by Microsoft to provide portable educational materials to nearly 2.5 million students in 26 countries. To ensure the program is still delivering on its goals, the team works with UNICEF’s independent research team in Italy to measure how well students are learning. Data include how often students log in and how many units they complete, as well as qualitative user feedback, which the Learning Passport team can then use to iterate and improve.

The research team “will poke holes in your stuff,” says Mac Glovinsky, global program chief of Learning Passport at UNICEF in New York, New York, USA. “We use them as a reality check to say, ‘This is what’s happening, this is what’s not happening.’”  

In one recent case in Sierra Leone, the education ministry worked with Learning Passport to design a pilot allowing students to take practice exams. The goal was to test online methods of studying for national exams and analyze the impact and effectiveness of online preparation for those exams. The pilot was aimed at hundreds of children in 20 schools. After hearing about the program, thousands of students outside of the pilot used the Learning Passport to study for exams. 

When the pilot was completed, the research team captured data about how the students used the technology and how they felt about it. Teachers unanimously reported that they found the tool useful and would recommend it to other instructors, and 92 percent of students found the program to be effective. As researchers and Glovinsky’s team use those results to design the next round of testing, they will also ensure any changes align with UN SDG 4, which helps the team define quality education.  

“Improved learning can look like a lot of different things,” Glovinsky says. “Are you teaching digital skills? Can children read? Can they understand numbers? Are they ready to learn? From a global level, foundational literacy and numeracy are critical to UNICEF. At the same time, we work to meet the needs that individual countries have articulated.”

Rubio’s team also helps building owners use ESG metrics to tell their story to stakeholders, including investors, prospective tenants, the community at large or even future project collaborators. By using the data to develop marketing materials and investor relations messaging, project teams can help owners address questions about which ESG measures were incorporated and why. Such data dives increase transparency and authenticity for ESG initiatives. In the process, teams can mitigate the possibility of ESG actions being dismissed as having a greater positive impact than what’s true, or being perceived as propping up initiatives with misleading claims, also known as greenwashing.

“For example, people might say, ‘Why don’t you have a green roof?’ For some cases that could be a very greenwashable thing, in my point of view,” says Rubio. Having clear metrics helps her team justify ESG decision-making and show, for instance, why a solar reflective roof coating might have a greater impact than a green roof when it comes to achieving the larger goal of reducing an urban area’s heat-island effect.

“We can show the real calculations on the impact — we can do the comparison and we can show the comparison,” she says. “With the numbers, you can never lie.”

Communication with shareholders, executives and the board of directors about outcomes not only shows how a particular project contributes to larger ESG goals, but also builds momentum for future projects, Nastri says. And that communication of ESG success stories — whether through social media, a podcast, a newsletter or a case study — must extend outside the company so stakeholders across the community understand the impact.

When communicating outcomes, don’t overlook a crucial stakeholder group — the project team members. “They need to have the evidence and own results,” Nastri says. “It makes people happy to know that they achieved something together.”

To turn ESG ambitions into reality, organizations need a rigorous plan to track the impact of their projects — and adapt when necessary. Strong project and program management practices enable project leaders and teams to proactively identify what to measure, ensure the metrics align with the strategic vision and document outcomes in ways that sustain commitment and deliver results that translate the organization’s ESG goals into reality.

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