The Sustainability Pay Gap: An Analysis of Executive Compensation in the Chemicals, Consumer Goods and Transport Sectors

In their corporate reporting, companies across sectors typically list sustainability-related challenges (for instance climate change, environmental breakdown) as potentially significant risks to their business. Incentivising management teams to take action to address corporate sustainability issues, or indeed penalising executives financially for not tackling these challenges adequately, seems logical.

This report highlights that although sustainability is often mentioned as a significant risk to corporates in the Chemicals, Transport and Consumer Goods sectors, addressing this risk is often not incorporated into how executives are incentivised. When sustainability targets are included in executive compensation setting, investors should not assume it is material until a more detailed analysis has been undertaken. They can rightly ask whether the targets are merely greenwashing if they can easily be rendered irrelevant.