“CEOs are putting their money where their mouth is on ESG,” PwC expert Phillippa O’Connor said as the company published its 25th annual survey of chief executive officers. Well, some are.
The survey spanned almost 4,500 CEOs in 89 countries, but the UK results showed only 19% have their personal annual bonus and long-term incentives linked to their greenhouse gas emissions reduction targets. This is behind customer satisfaction (31%) and employee engagement (34%) but ahead of gender representation (13%) and race and ethnicity representation (10%).
“Adding environmental, social and governance (ESG) metrics to executive pay packages can be a powerful way for a company to prove its commitment to these principles and to help elevate such metrics to the top of the CEO agenda,” PwC noted. However, pay should follow strategy, not drive it, the consultants said.
Of the UK CEOs involved, spanning all sectors, 34% have made a net-zero commitment and 33% are working towards a commitment. Among these, just over a third (37%) report their commitment is, or will be, aligned to the science-based target of reducing global warming by 1.5°C.
Around one in three (31%) are yet to make a commitment. Some 93% of those say their company doesn’t produce a meaningful amount of greenhouse gas emissions; 89% admit they do not have the ability to measure their emissions.
Climate change (34%) also falls fourth in the list of threats UK CEOs are most concerned about, behind macroeconomic volatility (41%), health risks (40%) and cyber security risks (48%). The main worry relating to climate change is the impact on the company’s ability to sell products and services (30%).
Among UKs CEOs who have made a commitment to net-zero, 43% cited investor demands and 72% cited customer expectations as being very, or extremely, influential in their decision.
“These trends are only heading in one direction,” explained PwC head of purpose Sarah Moore. “A clear purpose, backed up with authentic action, makes an organisation more investable, more productive and more attractive to talent and customers.”