Five fresh insights for the future were provided by a recent Farient report that examined the use of ESG incentives globally.
The big picture: As companies advance their ESG strategies and progress towards quantifiable goals, the prevalence of ESG measures in their incentive plans will continue and practices will evolve.
2024’s Forward Looking Global Insights
- Incentives will continue to be tied to ESG strategies.
- Nearly 90% of large companies incorporate ESG into their incentives – a 23% increase from 2020, with the largest jumps in Canada, Singapore, South Africa, and the U.S.
- The adoption of ESG incentives depends on the maturity of the ESG strategy. The report offers an ESG maturity curve illustrating the continuum of where companies fall in the process.
- Nearly 90% of large companies incorporate ESG into their incentives – a 23% increase from 2020, with the largest jumps in Canada, Singapore, South Africa, and the U.S.
- U.S. polarization of ESG is not dissuading companies from long-term value creation.
- Among large companies globally, the prevalence of DEI measures increased by 22% from 2020, now used at 67% of companies.
- Response to pushback has taken three forms: a move away from the term “ESG” in favor of more specific terminology, a doubling down on commitment messages and an emphasis on targeted initiatives.
- Among large companies globally, the prevalence of DEI measures increased by 22% from 2020, now used at 67% of companies.
- There is an increased urgency to reduce greenhouse gas emissions, as evidenced by a sharp rise in incentives tied to these reductions.
- 52% of large-cap U.S. companies and 61% of large companies globally have environmental measures in their incentives.
- More aggressive targets and shorter goal periods are now possible thanks to improved data access and measurement tools.
- 52% of large-cap U.S. companies and 61% of large companies globally have environmental measures in their incentives.
- The long-term nature of ESG goals will manifest in the use of these measures in the LTI plan as well as continued prevalence in STI plans.
- 34% of international corporations put ESG measures in their LTI plans – up from 28% last year; 12% of American companies now follow suit.
- 34% of international corporations put ESG measures in their LTI plans – up from 28% last year; 12% of American companies now follow suit.
- Relative benchmarks could be forthcoming as data reporting improves.
- As more comparable data becomes available and disclosures standardized, an opportunity may be created to use relative benchmarks to assess performance.
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Megan Wolf
Director, Practice, HR Policy Association and Center On Executive Compensation