Increasingly, incentives offered to executives as part of their pay packages can include measures related to delivering on a company's ESG strategy. For example, executive bonuses based in part on progress towards a company's net-zero target.
In this podcast – the latest in our series on the impact of the transition towards net zero – Rachel Tucker and Anthony Voigt take a closer look at what’s happening here, in particular:
- what we are seeing in the market in Australia, the UK and US;
- what companies need to consider when incorporating ESG measures into pay incentives; and
- what impacts these measures can have on the financial reporting.
Incorporating ESG measures into executive incentive arrangements sends a clear signal to senior management that executing on the company's ESG strategy is a priority, firstly, but it also sets a clear tone from the top for the rest of the organisation.
Similar to sustainability reporting requirements, ESG measures will require information not collected as part of the financial reporting process. So consider how you will collect that and collate that information needed.
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