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Linking sustainability targets to bonuses

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Many companies today demonstrate their commitment to sustainability through goal setting. Establishing sustainability based Key Performance Indicators (KPIs) and quantifiable targets are a great way to show stakeholders your business is committed to improving operations and impact. The real question is though, how do you ensure these targets are met? How can leadership ensure that their team works to achieve these targets?

One way to do this is to tie executive remuneration bonuses to sustainability targets. This provides a huge incentive, and as a ‘carrot and stick’ approach  – it can be extremely effective. For example, a Dutch multinational unveiled a policy in 2010 which tied executive bonuses to environmental targets. It is a serious deal to think that the company’s four hundred executives will not get 50 percent of their annual bonuses if they fail to meet sustainability and climate goals – but from a strategic perspective it’s an extremely effective way to “get things get done.”

A review undertaken by Jayne-Anne Gadhia, the chief executive of Virgin Money recommended that, due to the persistent low number of female representation at senior level across UK financial services, financial service firms should “connect parts of the remuneration packages of their executive teams to gender balance targets.” 

In the tourism and travel industry this measure is also being used. For example, Intrepid Travel, a company that is a strong advocate for responsible business, expresses on their website that, “all Intrepid staff are rated on their contribution to environmental and social sustainability in their annual performance reviews.”

So if you are a business leader with a serious commitment to improving sustainability, then why not put some money in the equation? It might just pay off.

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