The final link in the chain of improving corporate accountability for sustainability is to tie improvements to pay. In our last article, we explained that companies should use incentives to motivate executives to tap big strategic opportunities related to environmental, social, and governance (ESG) goals.
Now we want to describe how these incentives should be designed. What implementation steps do you take? And how can you overcome the challenges that deter executives and directors from changing how company incentives have traditionally been designed?
The challenges are easy enough to identify. For one, the number of possible sustainability improvement goals grows by the day, which makes it increasingly hard to know which to pursue: sourcing resources more wisely, managing waste and CO2 emissions responsibly, acting as a good citizen, celebrating diversity among workers, and so on. For another, the years-long efforts to realize payoffs from most ESG initiatives rarely fit typical annual or three-year incentive timeframes. That’s particularly true when you’re working to achieve indirect or intangible payoffs such as burnishing your brand and reputation. Results can build over decades.
More at HBR
