It is essential to protect the shower from moisture before laying the tiles. This means that you must use a suitable backing plate to replace any existing drywall, as well as seal and protect that backing material with waterproof joint sealing products. The best way to waterproof shower walls before laying tiles is to build the walls with a waterproof backing board. Cement board is the traditional option, but newer shower systems use panels made of extruded polystyrene foam.
Both materials can be used instead of drywall to build truly durable shower walls. You must waterproof all the walls of the shower before laying the tiles. A tile backing or cement board is usually not waterproof, although many are water resistant. The most effective and reliable solution is a separate waterproofing membrane on the primed shower walls before tiling.
The best and safest way is to install the drywall high enough where you know the least amount of water splashes. Next, install HardieBacker cement board, adhesive tape, and mud (thin layer) on the seams, apply two or three coats of RedGard waterproofing, allow everything to dry, and finally flatten and apply the tile. I've done two showers this way; it works like a charm. Installing a waterproof wall material is much more efficient and durable than installing drywall and trying to waterproof it.
Waterproof drywall (often referred to as green panels) is not waterproof enough to withstand the use of shower walls without a sheet of waterproof membrane attached. If you want to waterproof the drywall in the shower frame, it is essential to install a waterproof membrane on top of the drywall before laying the tiles.
