How are CEOs Being Rewarded for Corporate Sustainability Efforts?
As corporate sustainability climbs higher on companies' agendas, some of the world's top CEOs are being financially rewarded for their efforts in corporate sustainability commitments and policies.
These payment schemes are known as "CSR contracting".
CSR contracting, or sustainability contracting as we like to refer to it at Strategic Sustainability Consultants, incentivises CEOs to prioritise sustainability above other operations in the organisation. While making a profit is still the number one priority for a business, especially when it comes to economic sustainability, this must be balanced with an organisation's commitment to social and environmental sustainability as well as economic sustainability on a macro scale.
CSR or sustainability contracting has gained a lot of momentum over the past ten years with almost a 350% increase in S&P 500 companies participating in the practice.
In a recent study conducted by Dylan Minor, using ten years of data, Minor discovered that sustainability contracting is largely beneficial to a company's corporate sustainability efforts. Improvements were seen across all three measured indicators in the study - toxic chemical emissions, number of green patents filed and overall social responsibility rating. On average, the introduction of sustainability contracting meant a 9% emissions cut, a 3% increase in green patents filed and a social responsibility rating increase of 5%.
After the introduction of or sustainability contracting, the companies in the study experienced a 3% increase to each firm's value over the next financial year.
The idea of sustainability contracting does not need to be reserved for CEOs, however. This kind of contracting can be applied throughout an organisation to heads of departments or even all staff, especially for a smaller organisation.
For SMEs, sustainability contracting can inspire staff to engage in sustainability practices. For example, if energy use is down and profits are up, staff can be paid a bonus for engaging in energy efficiency. Or if use of printing is down and profits are up, staff can be incentivised to repeat the same behaviour in the next financial year.
It is important to note that in order for sustainability contracting to be successful, a clear sustainability commitment needs to be put in place by your business with a well-developed plan as to how to achieve your corporate sustainability goals in order to fulfil your economic, social and environmental commitment.
If you would like more information about sustainability contracting, contact a member of our team today!