Today, businesses are being judged on more than just their profits. Customers, investors, and employees are asking tougher questions. They want to know how companies treat people, how they care for the planet, and how they run their operations.

1. As of 2023, about 70% of S&P 500 companies tied executive compensation to ESG metrics

The rise to 70% is a huge leap. Just a few years ago, ESG metrics were a side conversation. Today, they are a main topic in the boardroom. This change happened because many leaders realized something important. Financial success alone is not enough.

Without good ESG practices, companies risk losing customers, damaging their brand, and facing regulatory penalties.

When a company ties executive pay to ESG metrics, it sends a strong message. It shows that ESG is not just public relations.

It is a serious business priority. Top leaders are held personally responsible for making progress on climate action, diversity, workplace safety, or ethical practices.

But how do you do it effectively?
First, companies must choose the right ESG goals. These goals must matter both to the business and to its stakeholders. For example, a manufacturing company might focus on reducing waste and carbon emissions, while a tech company might prioritize digital privacy and inclusion.

Second, goals must be clear and measurable. Telling an executive to “improve sustainability” is too vague. But asking them to “reduce company-wide carbon emissions by 20% by the end of the fiscal year” is clear.

Third, link a meaningful portion of the executive’s bonus or equity to these goals. If only a small percentage is tied to ESG, it won’t create real motivation. Make it significant enough that it gets real attention.

Finally, review and report progress regularly. This keeps everyone accountable and helps adjust the plan if needed. Successful companies do not just set ESG goals once. They review them quarterly and make adjustments when needed.

2. Approximately 50% of European companies linked executive pay to ESG goals in 2022

Europe has always been a few steps ahead when it comes to social responsibility. By 2022, half of all European companies had already tied executive pay to ESG. That is no surprise. European governments and investors have been very active in pushing for better corporate responsibility.

But even in Europe, not all ESG links are created equal. Some companies are very thoughtful. They pick the right goals, measure them carefully, and communicate openly. Others simply add ESG goals on paper but do not make them meaningful.

This can lead to “greenwashing,” where a company pretends to be more sustainable than it really is.

If you are running a company in Europe, or even competing with European companies, you need to understand this environment. Customers, investors, and regulators are watching closely. You cannot afford to treat ESG as just a marketing tool.

To do it right, make sure ESG goals are customized to your company’s real impact areas. If your operations have a large carbon footprint, focus on environmental goals. If your workforce is your strength, focus on diversity, equity, and inclusion.

Also, align your ESG-linked pay plans with recognized standards. In Europe, there are many respected frameworks like the European Sustainability Reporting Standards (ESRS) or the Sustainable Finance Disclosure Regulation (SFDR). Using these can give you extra credibility.

One more important tip: involve your employees. Let them help shape the ESG goals. This builds trust and makes the entire company more engaged. After all, achieving ESG success is a team effort, not just the CEO’s job.

3. Only 35% of companies globally tied executive pay to ESG metrics in 2020

Looking back to 2020, it is amazing to see how far we have come. Only 35% of companies worldwide were tying executive pay to ESG goals back then. This was still early days for ESG being seen as essential to business success.

This number tells us two things. First, it shows that change can happen fast. In just a few years, ESG-linked pay has gone from rare to common among leading companies. Second, it reminds us that many companies are still playing catch-up.

If your company was not among the early adopters, do not worry. You have not missed the boat. In fact, you can learn from what others have done well and what they have done poorly.

Start by studying what companies in your industry are doing. Look at competitors who are leading in ESG. What goals are they setting? How are they measuring success? How are they communicating results to shareholders and the public?

Then, create your own ESG-linked pay plan. But make it authentic. Do not just copy others. Your goals must reflect your company’s real mission and operations.

Another practical step is to engage your board of directors early. They need to support and oversee the ESG pay link. Some companies even create special ESG committees on the board to guide and monitor progress.

Lastly, remember that starting simple is better than doing nothing. Pick a few high-impact goals. Tie a meaningful part of executive compensation to these goals. Track progress carefully. And celebrate wins along the way.

4. Around 80% of large-cap companies in Europe integrated ESG into incentive plans by 2023

Large companies in Europe are moving quickly. By 2023, around 80% of large-cap businesses had woven ESG goals into their executive incentive plans. This tells us that ESG is no longer a side project for big companies. It is part of the core business strategy.

When large-cap companies make changes like this, it sends shockwaves through supply chains, partnerships, and even competitors. Smaller companies take notice. Investors take notice. Governments take notice.

If you are leading a smaller or mid-sized company, you might feel that ESG-linked pay is something only the big players have to worry about. That is a mistake. As large companies set the new standard, others will have to follow to stay competitive.

A good first move is to think about your largest stakeholders. What do they care about? Maybe your biggest customers are demanding sustainability improvements. Maybe your investors are starting to ask about your social policies. Maybe your employees are looking for a company that cares.

Once you know what matters most to your stakeholders, you can set ESG goals that align with these expectations. This makes your company stronger and better positioned for future growth. It also sends a clear signal to everyone you work with: you are serious about responsible leadership.

Also, consider publishing your ESG targets publicly. When companies are open about their goals, they build trust. And when pay is tied directly to those goals, the trust becomes even stronger.

5. In 2022, 49% of FTSE 100 companies included ESG measures in executive bonus plans

Nearly half of FTSE 100 companies included ESG measures in executive bonus plans by 2022. That shows that even in competitive markets like the United Kingdom, ESG is not just a nice-to-have. It is becoming a core part of business leadership.

Including ESG in bonus plans is a smart move. It creates a direct, tangible connection between doing good and being rewarded. When leaders know that part of their bonus depends on hitting ESG targets, it influences their decisions day to day.

For companies looking to create effective bonus plans, the key is to balance ESG targets with financial goals.

You do not want executives to feel like they are being pulled in opposite directions. Instead, show how ESG goals and business success go hand in hand.

For example, cutting energy use might save the company money. Improving workplace safety might reduce costs from accidents. Increasing diversity might bring new perspectives that lead to innovation.

Another tip is to avoid setting too many ESG goals at once. Focus on a few priorities where you can make a big impact. Make the targets clear, measurable, and achievable within the bonus period.

Also, be careful with the weight you give to ESG metrics. If ESG goals only make up a tiny portion of the bonus calculation, they will not drive real change. A good rule of thumb is to make ESG goals account for at least 20% of the total bonus opportunity.

Finally, communicate openly with executives about why ESG goals are part of the bonus plan. Help them see the connection between responsible leadership and long-term company success.

6. 65% of companies linking ESG to pay focus on social factors like diversity and inclusion

When companies link executive pay to ESG goals, many focus on the social side. About 65% of them prioritize issues like diversity, inclusion, employee engagement, and workplace culture.

This makes a lot of sense. Social issues are often highly visible. Customers notice. Employees notice. Investors notice. Companies that get it right can build stronger brands, attract better talent, and create more loyal customers.

If your company is thinking about linking pay to social goals, start by asking: What social issues are most important in your industry? For some companies, it might be racial and gender diversity. For others, it might be employee well-being or fair labor practices.

Once you identify your priorities, set clear and specific goals. Vague goals like “improve diversity” are not enough. A better goal might be “increase the percentage of women in leadership roles by 15% over two years.”

It is also important to measure progress carefully. Use real numbers, not just feelings or perceptions. Regularly review how you are doing and adjust your strategies if needed.

One of the biggest risks is setting goals that are too easy. If executives can hit their diversity targets without making real changes, the program will lose credibility. Set goals that are ambitious but achievable with real effort.

Lastly, make sure the whole company is involved, not just leadership. Social change happens when everyone is part of the journey. Create training programs, listening sessions, and mentorship opportunities to support your goals.

7. About 40% of companies worldwide incorporated environmental factors into executive incentives by 2023

By 2023, around 40% of companies across the globe tied environmental goals into executive pay. This trend shows that climate action and environmental responsibility are no longer just public relations moves. They are part of how businesses operate and how executives are measured.

If you are planning to include environmental factors in your incentive plans, the first thing to do is focus on what matters most to your business. For some companies, it might be reducing carbon emissions. For others, it could be cutting down water use, improving recycling rates, or minimizing waste.

The best way to make environmental goals meaningful is by making them measurable. For instance, instead of saying “we want to be greener,” a clear target would be “reduce greenhouse gas emissions by 30% over three years.”

Next, tie a significant part of executive bonuses or long-term incentives to hitting these goals. If the environmental targets are treated as an afterthought, they will not drive real behavior change.

Also, it is important to be transparent. Publish your environmental targets, your timelines, and your progress reports. This helps build trust with customers, investors, and employees. When people see that executives are held accountable for real progress, it shows that your company is serious about sustainability.

One thing to be careful about is setting goals that are too easy. If targets can be hit without real change, it will hurt your reputation. Ambitious, science-based goals create credibility and drive innovation.

Finally, align your environmental goals with recognized standards like the Science-Based Targets initiative (SBTi) or frameworks like CDP (formerly Carbon Disclosure Project). This adds legitimacy and helps guide your strategies in a proven direction.

8. Only 10% of U.S. mid-cap companies had ESG-linked executive pay in 2020

Back in 2020, only 10% of mid-cap companies in the United States tied executive pay to ESG goals. This number might sound small, but it reflects how ESG thinking was still gaining momentum among smaller and mid-sized businesses.

Mid-cap companies often face unique challenges. They may not have the same resources as larger corporations. Their leadership teams may be smaller. Their investor base may not yet be demanding ESG reporting.

But today, the expectations are changing quickly. Even mid-cap companies are under pressure to show how they are managing social and environmental risks. Customers, employees, and even regulators are starting to expect more.

If you are leading a mid-sized business, this is a major opportunity. You can stand out by being proactive. Start simple. Pick one or two ESG goals that tie directly to your business strategy. Link a meaningful portion of executive pay to achieving these goals.

Another smart move is to think about what matters to your customers and your local community. Mid-sized companies often have closer relationships with their stakeholders than huge multinationals do. Use that advantage to create ESG goals that resonate deeply.

Also, remember that you do not have to do everything at once. It is better to set a few meaningful goals and really work toward them, rather than try to cover every ESG topic at once.

Transparency is key. Even if you are starting small, communicate openly about your ESG efforts. Show how you are connecting executive incentives to real change. This will help you earn trust and build momentum over time.

9. 25% of Australian ASX 100 companies tied executive pay to ESG goals by 2022

In Australia, the pace of change has been steady. By 2022, around 25% of ASX 100 companies had tied executive pay to ESG outcomes. While this is lower than in Europe or among the S&P 500, it marks significant progress.

Australia has faced major environmental and social challenges in recent years, from bushfires to debates about indigenous rights and diversity. These issues have pushed companies to think differently about their role in society.

If you are operating in Australia or planning to enter the market, you need to understand that ESG expectations are growing fast. Investors, particularly large superannuation funds, are pushing companies to do better. Customers are demanding transparency. Employees are looking for purpose-driven employers.

When setting ESG goals for executive pay in Australia, it is wise to consider issues that resonate strongly with the Australian public. Environmental responsibility, indigenous engagement, gender diversity, and ethical governance are top priorities.

Setting meaningful ESG-linked goals is not just about risk management. It can also be a way to build competitive advantage. Companies that lead on ESG are often better able to attract investment, talent, and customer loyalty.

One tactical move is to align your ESG pay plans with frameworks like the Task Force on Climate-related Financial Disclosures (TCFD) or the UN Sustainable Development Goals (SDGs). These are well recognized in Australia and can help guide your strategy.

Also, be ready to show how you are making real progress. Reporting matters. Stakeholders want to see data, not just promises. Build strong measurement and reporting processes from the start to maintain credibility.

10. By 2023, 77% of companies with ESG-linked compensation also disclosed the specific metrics used

Transparency is becoming a non-negotiable part of ESG-linked pay. By 2023, 77% of companies that tied executive compensation to ESG goals also disclosed the exact metrics they used.

This is a major shift from a few years ago when many companies were secretive or vague about their ESG pay structures. Today, businesses are realizing that it is not enough to say they care about ESG. They need to show exactly how they are measuring success and holding leaders accountable.

If your company is designing or updating an ESG-linked pay plan, disclosure should be part of your strategy from the beginning. This builds trust with investors, employees, customers, and regulators. It shows that your ESG efforts are real, not just window dressing.

One smart move is to publish a detailed explanation in your annual report or proxy statement. Clearly lay out what the ESG goals are, how they are measured, what weight they carry in executive pay decisions, and what progress was made during the year.

Be specific. Instead of saying “we tied bonuses to sustainability,” explain that “20% of the CEO’s annual bonus was tied to achieving a 10% reduction in carbon emissions.”

Another important point is consistency. Once you set ESG metrics, stick with them over time unless there is a very good reason to change. Changing metrics too often can make it look like you are trying to game the system.

Also, be honest about where you fall short. If ESG targets were missed, explain why and what you are doing to improve. Transparency builds credibility even when the results are not perfect.

11. In 2021, 30% of companies using ESG in pay focused primarily on reducing carbon emissions

Carbon emissions have been a major focus for ESG-linked pay plans. In 2021, 30% of companies that included ESG in executive compensation focused mainly on cutting their carbon footprint.

This makes sense. Climate change is one of the biggest global challenges, and companies are under growing pressure to do their part. Investors, governments, and the public are all watching closely.

If your company operates in an industry with a significant carbon footprint — like energy, manufacturing, transportation, or agriculture — this is an area you cannot ignore. Linking executive pay to carbon reduction targets shows that you are serious about climate responsibility.

When setting carbon-related ESG goals, the first step is to understand your current emissions. This means doing a full greenhouse gas inventory, often broken down into Scope 1 (direct emissions), Scope 2 (indirect emissions from energy use), and Scope 3 (emissions from your value chain).

Next, set science-based targets that align with international goals, like the Paris Agreement to limit global warming to 1.5 degrees Celsius. Vague promises to “go green” are not enough. Stakeholders want to see real numbers and real deadlines.

Tie a significant part of executive bonuses or stock awards to hitting these carbon targets. Make sure the goals are ambitious but achievable. You want leaders to stretch but also believe that success is possible.

Also, integrate carbon reduction into everyday decision-making, not just once-a-year bonus calculations. For example, give leaders regular updates on progress, celebrate milestones, and tie operational budgets to sustainability improvements.

Finally, communicate openly. Publish your carbon goals and your progress in sustainability reports, investor updates, and employee communications. When people see real action, it builds loyalty and trust.

12. 15% of global companies included board diversity targets in executive pay schemes in 2022

Board diversity is becoming a central part of ESG-linked pay plans. In 2022, 15% of global companies tied executive compensation directly to improving diversity on their boards.

This shift reflects a deeper understanding that diverse leadership drives better decision-making, stronger financial performance, and better alignment with society’s expectations.

If your company is thinking about linking pay to board diversity, start by setting clear, specific goals. For example, you might aim to have at least 40% of your board seats held by women within three years, or to ensure that underrepresented groups make up at least 30% of the board.

Make sure these goals are public. Transparency builds trust and shows that you are serious. Also, tie a meaningful portion of executive incentives to achieving these goals. If diversity goals are only a tiny part of the overall bonus, they will not drive real behavior change.

One key to success is embedding diversity efforts into your broader talent and governance strategies. Look beyond the board. Build diverse leadership pipelines so that when board seats open up, there are strong, diverse candidates ready to step in.

Also, consider expanding how you define diversity. Gender and race are important, but so are factors like age, nationality, disability status, and industry background. A truly diverse board brings a rich range of experiences and perspectives.

Finally, remember that diversity is not just about numbers. It is about creating an environment where different voices are heard and valued. Support your diversity goals with inclusion initiatives, mentorship programs, and board training on unconscious bias.

13. About 45% of companies used short-term incentives to reward ESG progress in 2023

Short-term incentives are a popular way to reward ESG progress. By 2023, about 45% of companies used bonuses or other one-year performance awards to encourage leaders to hit ESG goals.

Short-term incentives are powerful because they keep ESG goals top of mind. When executives know that part of their bonus depends on achieving specific targets within the next 12 months, they are more likely to take immediate action.

If you are designing short-term ESG incentives, focus on goals that can reasonably be achieved or meaningfully advanced within one year. For example, launching a new recycling program, reducing workplace injuries, or improving employee engagement scores.

Be specific. Define what success looks like at the beginning of the year. Set clear targets, communicate them widely, and make sure executives understand how performance will be measured.

It is also important to balance ESG goals with financial goals. Most bonus plans still include financial metrics like revenue, profit, or stock price. The trick is to show that ESG success and financial success go hand in hand, not that one comes at the expense of the other.

Also, consider using ESG goals as a “modifier” on bonuses. For example, if financial targets are met but ESG performance is poor, the bonus could be reduced by a certain percentage. This reinforces that ESG matters without replacing traditional business goals entirely.

Finally, make ESG results visible. Share updates with employees, investors, and the public. Celebrate wins. Recognize leaders who go above and beyond. This creates momentum and shows that your company walks the talk on ESG.

14. 20% of companies applied ESG measures to long-term incentive plans only

By 2023, about 20% of companies chose to tie ESG goals specifically to long-term incentive plans (LTIPs), rather than short-term bonuses.

This approach sends a different kind of message. It says that real, lasting progress matters more than quick wins. It reflects an understanding that many ESG improvements, like cutting carbon emissions, building diverse leadership pipelines, or improving community relations, take time to achieve.

If your company wants to use ESG in long-term incentives, it is important to pick goals that are truly strategic and transformational. Think big. For example, achieving net-zero emissions, doubling representation of underrepresented groups in management, or building a fully circular product line.

Setting long-term ESG goals requires careful planning. You need to define clear milestones along the way, not just an end point five years from now. This keeps executives focused and motivated even though the ultimate targets are far off.

Another tip is to make ESG performance a condition for vesting long-term equity awards like stock options or restricted stock units (RSUs). For instance, leaders might only fully vest their awards if both financial and ESG targets are met over a three- to five-year period.

Transparency is critical. Stakeholders want to see that the ESG goals are tough, measurable, and tied to real-world impact. Avoid vague promises. Publish your goals, track progress every year, and explain how ESG performance influences equity payouts.

Also, remember that leadership changes over time. Your long-term ESG goals need to be embedded into the company’s DNA, not just tied to one or two executives. Make sure that new leaders understand and commit to the same targets if leadership transitions occur.

By using long-term incentives to drive ESG success, you can help ensure that your company is truly building a better future — not just chasing short-term headlines.

15. 85% of European companies tying pay to ESG were from energy, financial, and consumer goods sectors

When you look closely, you see that certain industries are leading the way on ESG-linked pay. By 2023, 85% of European companies that connected executive compensation to ESG goals came from the energy, financial, and consumer goods sectors.

This makes sense. These industries face intense scrutiny from regulators, investors, customers, and the public. They have large environmental footprints, complex social responsibilities, and major governance challenges.

If you are operating in one of these sectors, ESG leadership is not optional. It is a business imperative. Companies that fail to take ESG seriously risk losing customers, facing tougher regulations, and struggling to attract top talent.

For energy companies, environmental goals are often the priority. Think about reducing carbon emissions, investing in renewable energy, and improving environmental impact across operations.

For financial institutions, governance and social goals are often in focus. Issues like responsible lending, diversity and inclusion, and ethical investment practices are front and center.

For consumer goods companies, social and environmental factors both matter. Customers want products that are sustainably made, ethically sourced, and socially responsible.

When setting ESG-linked pay plans in these sectors, it is important to align goals with what matters most to your stakeholders. Listen carefully. Understand their concerns and expectations. Then build ESG goals that address those concerns directly.

Also, do not try to cover everything at once. Focus on the areas where your company can have the biggest impact. Set bold but achievable targets. Tie a meaningful portion of executive pay to hitting those targets.

And above all, be authentic. Stakeholders are smart. They can tell when a company is serious about ESG and when it is just checking boxes.

16. 55% of companies cited investor pressure as a reason for integrating ESG into executive compensation

More than half of companies that tied pay to ESG said they did so because of investor pressure. This is a huge shift from even five years ago, when most investors focused mainly on financial performance.

Today, large institutional investors like BlackRock, Vanguard, and State Street are pushing companies to prove that they are managing ESG risks and opportunities. They want to see real action, not just talk. And tying executive pay to ESG is one of the clearest ways to show commitment.

If you are designing an ESG-linked pay plan, it is smart to think about what your investors care about most. Study their voting guidelines, stewardship reports, and engagement priorities. These documents often spell out exactly what investors want to see.

Next, engage with your investors proactively. Do not wait for them to come to you with concerns. Reach out. Share your ESG goals. Explain how they are tied to executive incentives. Show that you are serious about driving long-term value, not just quarterly profits.

Another important move is to align your ESG reporting with investor expectations. Use widely recognized frameworks like the Global Reporting Initiative (GRI), the Sustainability Accounting Standards Board (SASB), or the Task Force on Climate-related Financial Disclosures (TCFD).

Finally, remember that investor expectations are rising over time. It is not enough to set ESG goals once and forget about them. You need to keep raising the bar, showing continuous improvement, and communicating openly about your progress.

By responding to investor pressure thoughtfully and proactively, you can turn it into a competitive advantage rather than a burden.

17. Only 5% of companies with ESG-linked pay in 2022 tied it to human rights or ethical sourcing

By 2022, just 5% of companies that linked executive pay to ESG goals included human rights or ethical sourcing targets. This is a surprisingly small number, especially considering how important these issues are to stakeholders around the world.

Human rights and ethical sourcing can seem harder to measure than environmental or financial targets. But that does not mean they should be ignored. Companies that lead in this space stand out, win trust, and build stronger, more resilient supply chains.

If you want to include human rights or ethical sourcing in executive pay, start by identifying your company’s biggest risks. Look at your supply chain. Where are the materials coming from? How are workers treated? Are there risks of forced labor, unsafe conditions, or unfair wages?

Next, set clear, measurable goals. For example, you might aim for 100% of suppliers to meet a verified ethical sourcing standard within two years. Or you could require independent human rights audits for your top 80% of suppliers.

Tie a meaningful part of executive pay to hitting these goals. Make it clear that ethical practices are not optional. They are a core part of how the business is managed.

Transparency is also critical. Publish your ethical sourcing policies. Report on your progress toward your human rights goals. Acknowledge challenges honestly. This builds credibility and trust with customers, investors, and employees.

Finally, work with your suppliers, not against them. Help them improve their practices through training, support, and partnership. Ethical sourcing is about building strong, lasting relationships, not just checking compliance boxes.

Companies that make human rights and ethical sourcing a real business priority — and hold executives accountable for progress — will be better prepared for the future.

18. 62% of companies tracked ESG goals using a mix of quantitative and qualitative measures

Most companies realize that numbers alone do not tell the full story. By 2023, 62% of companies that linked pay to ESG used a mix of quantitative (numbers-based) and qualitative (subjective or narrative) measures.

This balanced approach makes sense. Some ESG goals, like reducing carbon emissions or improving safety records, are easy to measure with hard numbers. Others, like improving corporate culture or building community trust, are harder to capture with data alone.

If you are designing an ESG-linked pay plan, it is smart to blend both types of measures.

For quantitative goals, be precise. Set clear targets with timelines. For example, “reduce energy use by 15% within 12 months” or “increase board diversity to 40% women by 2025.”

For qualitative goals, focus on meaningful actions and real-world impact. For example, you might evaluate how well a leader builds inclusive teams, mentors diverse talent, or drives innovation in sustainability.

One important tip is to define how qualitative goals will be assessed before the performance period starts. Otherwise, evaluations can feel arbitrary or unfair. Use tools like 360-degree feedback, stakeholder surveys, or structured interviews to support your assessments.

Another smart move is to link qualitative measures to your company’s core values. For example, if one of your values is “integrity,” you might assess how well leaders uphold ethical standards in tough situations.

By combining quantitative and qualitative measures, you create a richer, more complete picture of leadership performance. You show that ESG success is about both hitting numbers and living values.

19. By 2022, 33% of companies had net-zero targets embedded into executive incentive plans

Climate action is no longer just a nice idea. It is a business requirement. By 2022, 33% of companies had net-zero carbon emissions targets embedded directly into their executive incentive plans.

This is a bold and necessary step. Achieving net-zero emissions is one of the biggest challenges facing companies today. It requires innovation, investment, operational changes, and cultural shifts.

If you want to tie executive pay to net-zero targets, start by setting a clear, science-based goal. For example, commit to achieving net-zero emissions across your operations and supply chain by 2040.

Break the journey into stages. Set interim goals, such as cutting emissions by 30% by 2025 and 60% by 2030. Tie executive bonuses or stock awards to hitting these milestones, not just the end goal decades away.

Be transparent about your net-zero plan. Publish it. Report on progress every year. Explain what actions you are taking, what challenges you are facing, and how you are adapting.

Also, make sure that your net-zero goals cover all three scopes of emissions:

• Scope 1 (direct emissions from your operations)
• Scope 2 (indirect emissions from purchased energy)
• Scope 3 (emissions from your value chain)

Scope 3 is often the biggest and hardest to address, but ignoring it risks losing credibility.

Finally, support your leaders with the resources they need to succeed. Net-zero is a huge undertaking. It requires cross-functional teams, investment in new technologies, partnerships, and sometimes a complete rethink of products or services.

By embedding net-zero into executive pay, you signal that your company is serious about leading in the low-carbon economy.

20. Only 12% of companies linking pay to ESG had external auditors verify the ESG outcomes

Verification is where many companies fall short. As of 2023, only 12% of companies that linked executive pay to ESG goals used external auditors to verify whether targets were really met.

This is a missed opportunity. External verification builds trust. It shows that your ESG results are real, not self-reported or exaggerated. It strengthens credibility with investors, customers, regulators, and employees.

If you are serious about ESG-linked pay, consider adding external verification as part of your process.

Hire independent firms to audit your ESG data, just like you do for your financial results. For example, bring in third-party experts to verify your carbon emissions, diversity statistics, ethical sourcing records, or workplace safety performance.

Make verification a standard part of your bonus or equity award calculations. Require that ESG goals must be externally verified before payouts are finalized.

Also, publish your audit findings openly. Share both successes and areas for improvement. This kind of transparency builds loyalty and trust even if the results are not perfect.

Another benefit of external verification is that it helps you spot risks and opportunities earlier. Independent auditors can give you insights you might miss internally, helping you improve faster and stay ahead of competitors.

In a world where greenwashing scandals can destroy brand value overnight, external verification is not just a nice-to-have. It is a smart investment in your company’s future.

21. 29% of companies updated their pay structures between 2020 and 2022 to add ESG links

Between 2020 and 2022, about 29% of companies made changes to their executive pay structures to add ESG-linked goals. This shows how rapidly the business landscape is changing when it comes to environmental and social responsibility.

Updating pay structures is not a minor decision. It reflects a company’s commitment to changing how success is defined at the highest levels. When ESG becomes part of how executives are rewarded, it shifts behavior across the entire leadership team.

If you are considering updating your company’s pay structures, start by reviewing your overall compensation philosophy. Ask yourself: What do we really want to reward? Pure financial success? Or a broader definition of leadership that includes social impact, sustainability, and governance?

Next, engage your board of directors early in the process. Board approval is critical, and involving them from the start builds support and reduces risks of delays later.

Another smart move is to study how peer companies have updated their pay structures. Look for examples inside your industry and outside it. See what worked well and what challenges they faced.

When designing new ESG-linked pay structures, keep them simple and clear. Complicated bonus formulas or hard-to-understand targets will confuse leaders and reduce motivation. Focus on a few key ESG metrics that really matter.

Communicate changes clearly and openly. Help executives understand why the changes are happening, how the new system works, and what they need to do to succeed.

Finally, build flexibility into your system. The world is changing fast. New ESG priorities might emerge over the next few years. Your pay structures need to be able to adapt without losing credibility.

By updating your executive pay structures thoughtfully and proactively, you show that your company is serious about building long-term value for all stakeholders.

22. 44% of ESG-linked pay plans use relative peer performance for environmental goals

Almost half of ESG-linked pay plans now measure performance not just against internal goals but against how peers are doing. This is especially true for environmental goals.

Using relative performance measures makes sense because it provides context. It is not enough to say you reduced emissions by 10%. Investors and stakeholders want to know: Is that good? Is it better than your competitors? Are you leading your industry or falling behind?

If you want to use relative peer performance in your ESG-linked pay plans, the first step is to define the right peer group. Choose companies that operate in similar industries, face similar environmental challenges, and have similar opportunities for improvement.

Next, decide how to measure performance. You might use rankings, such as where your company stands on a published sustainability index compared to peers. Or you might compare specific metrics like carbon intensity, energy efficiency, or water use.

It is important to be transparent about your peer group and your comparison methods. Stakeholders need to understand how the relative performance is calculated and why it is fair.

Another smart tactic is to use relative performance as a modifier. For example, if you hit your internal carbon reduction goal but your peers did even better, your bonus might be slightly reduced. If you outperform your peers, your bonus might be enhanced.

This approach encourages continuous improvement. It prevents leaders from becoming complacent after reaching an easy internal goal. It pushes them to think competitively and strive for true leadership.

Finally, update your peer group regularly. Industries evolve. Competitors change. New players emerge. Keep your comparisons relevant and meaningful over time.

Relative peer performance adds a dynamic, competitive edge to ESG-linked pay plans — and it shows stakeholders that you are serious about being the best, not just doing enough.

23. In 2022, 58% of companies with ESG metrics in pay plans included employee engagement targets

Employee engagement is a rising star in ESG-linked executive pay plans. In 2022, 58% of companies that tied executive pay to ESG included some form of employee engagement measure.

This trend makes a lot of sense. Engaged employees drive better performance, higher customer satisfaction, more innovation, and stronger financial results. In a world where talent is a company’s most valuable asset, employee engagement is a critical business metric.

If you want to include employee engagement in your ESG-linked pay plans, start by choosing the right measures. Employee surveys are the most common tool. Look for metrics like overall engagement scores, manager effectiveness scores, or net promoter scores (NPS) for employees.

Make sure the surveys are anonymous and independently administered. Employees need to feel safe giving honest feedback.

Tie a meaningful portion of executive bonuses or equity to improving these scores. But be careful. You do not want leaders gaming the surveys or pressuring employees for positive responses.

The best way to drive real improvement is to link survey results to concrete action plans. Require leaders to create and implement engagement plans based on survey feedback. Track progress on those plans as part of the performance evaluation.

Also, consider combining employee engagement with other culture-focused goals, like reducing voluntary turnover, increasing internal promotions, or improving diversity and inclusion scores.

Recognize that building engagement is not just about making employees happy. It is about creating a workplace where people feel valued, empowered, and motivated to do their best work.

By linking executive pay to employee engagement, you align leadership incentives with building a stronger, more resilient organization — one where people want to stay, grow, and thrive.

24. 72% of firms linking pay to ESG emphasized safety and health metrics in manufacturing sectors

In manufacturing sectors, safety and health are often the top ESG priorities. By 2023, 72% of companies that tied executive pay to ESG emphasized safety and health goals.

This is both practical and strategic. Workplace safety protects employees. It also reduces costs from injuries, lawsuits, downtime, and insurance. Strong safety cultures build trust with employees, unions, regulators, and communities.

If your company operates in manufacturing, energy, construction, or similar industries, you should seriously consider tying executive pay to safety and health metrics.

Start by choosing clear, meaningful measures. Common metrics include lost-time injury frequency rates (LTIFR), total recordable injury rates (TRIR), or near-miss reporting rates.

Set ambitious but achievable targets. You want to stretch leaders without encouraging them to hide incidents or underreport problems.

Also, emphasize proactive measures, not just outcomes. Reward leaders for improving safety training, investing in safer equipment, conducting regular audits, and building a culture where safety is everyone’s responsibility.

Make safety part of everyday conversations, not just something you talk about once a year at bonus time. Celebrate safety milestones. Share lessons learned from incidents openly.

Another powerful tactic is to use leading indicators, not just lagging ones. For example, measure how many safety audits were completed, how many hazards were corrected, or how many employees participated in safety programs.

By tying executive pay to safety and health, you show that you value your people — and that you are committed to operating responsibly and sustainably for the long term.

25. Only 18% of companies provided clawback provisions tied to ESG metric failures

Clawback provisions are rules that let a company take back bonuses or equity if targets are not really achieved or if serious problems are uncovered later. In 2023, only 18% of companies had clawback provisions tied to ESG failures.

That number is low, but it points to a growing conversation. If companies are serious about tying executive pay to ESG goals, they need to think seriously about what happens if those goals are not met — or worse, if they are achieved through dishonest means.

If you want to add ESG-related clawbacks to your pay plans, start by setting clear conditions. Define what kinds of ESG failures could trigger a clawback. For example, major environmental violations, significant human rights abuses in the supply chain, or proven cases of safety data manipulation.

Also, be specific about the time frame. Many companies set a two- to three-year period after payout during which bonuses can be clawed back if serious problems come to light.

Communicate the rules clearly to executives and to the public. Transparency is critical. It builds trust and sets clear expectations for behavior.

Make sure the clawback policy is enforceable. Work closely with your legal team to design provisions that are legally sound in the jurisdictions where you operate.

Finally, use the clawback policy carefully and fairly. It should not create a culture of fear. It should support a culture of accountability, responsibility, and integrity.

Adding ESG clawbacks sends a strong message: hitting ESG goals the right way — ethically and sustainably — is just as important as hitting them at all.

26. 90% of companies with ESG incentives used internal performance targets, not public benchmarks

By 2023, about 90% of companies tying executive pay to ESG used internal performance targets rather than external benchmarks.

Internal targets are easier to customize. They let companies focus on their unique risks, opportunities, and strategies. But relying only on internal targets carries some risks too. It can lead to lower ambition if companies set easy goals.

If you are using internal targets, make sure they are challenging and meaningful. Avoid goals that can be hit without real change.

One smart move is to calibrate internal targets against public benchmarks even if you do not formally adopt them. For example, if you set a goal to cut emissions by 20%, check how that compares to industry averages or science-based targets.

Another tactic is to involve third parties in setting or reviewing your internal goals. Independent advisers can help ensure that targets are tough, fair, and aligned with best practices.

Also, consider publishing your internal targets publicly even if you do not benchmark them externally. Transparency holds you accountable and builds trust.

Finally, review and refresh your internal ESG goals regularly. What was ambitious two years ago might be the bare minimum today. Keep pushing forward to stay ahead.

Internal targets can be powerful if they are real, ambitious, and connected to broader societal expectations. They should drive real change, not just check boxes.

27. 37% of boards had a dedicated ESG committee overseeing executive pay as of 2023

By 2023, 37% of boards created special ESG committees to oversee issues like executive pay and corporate responsibility.

This is a smart move. ESG goals are complex. They touch every part of a business. Having a dedicated committee ensures that ESG issues get the focus and expertise they need.

If your company is thinking about creating an ESG committee, start by defining its mission clearly. Focus on strategic oversight, not day-to-day management. The committee should guide ESG goal-setting, monitor progress, review executive pay plans, and advise the full board.

Pick committee members carefully. Look for directors with real ESG expertise or strong interest in learning. Diversity of backgrounds and experiences is also important.

Meet regularly. ESG is a fast-moving space. Annual reviews are not enough. Most ESG committees meet quarterly or even monthly during key periods.

Also, make sure the ESG committee works closely with other board committees, like audit, risk, and compensation. ESG issues often cross committee boundaries.

Finally, communicate the committee’s work openly. Publish charters, activities, and findings in your governance reports or sustainability reports. Show stakeholders that ESG is embedded into how you govern the company at the highest level.

By building a strong ESG committee, you strengthen your board’s ability to lead responsibly and adapt to the evolving business environment.

28. 53% of global insurers tied senior management bonuses to ESG achievements by 2023

The insurance industry faces major ESG risks and opportunities. By 2023, 53% of global insurers tied senior management bonuses to ESG performance.

This shift reflects the growing recognition that insurers play a key role in managing environmental, social, and governance risks — for themselves and for their clients.

If you operate in insurance or financial services, ESG cannot be treated as a side project. It must be woven into risk management, underwriting, investments, operations, and leadership incentives.

Start by identifying the ESG factors that matter most to your business. For insurers, climate change is a huge risk. So are social issues like health equity and governance issues like responsible investing.

Set clear, measurable ESG targets. For example, you might tie executive bonuses to reducing the carbon footprint of your investment portfolio, increasing green insurance products, or meeting responsible underwriting standards.

Also, align your ESG-linked incentives with industry frameworks like the Principles for Sustainable Insurance (PSI) or the Net-Zero Insurance Alliance (NZIA).

Be prepared to report openly. Regulators are increasingly demanding ESG disclosures from insurers. Investors and customers are watching too.

Finally, treat ESG as a business opportunity, not just a risk. Insurers that lead on ESG can win new markets, attract loyal customers, and build stronger brands.

By linking pay to ESG, insurers show that they are not just reacting to change — they are driving it.

29. 48% of energy and utilities companies tied executive pay to environmental metrics in 2022

In the energy and utilities sectors, environmental impact is always under a microscope. By 2022, about 48% of companies in these industries had tied executive compensation directly to environmental performance goals.

This makes sense when you think about the scale of environmental risk and opportunity that these companies face. Whether it is carbon emissions, water usage, or land impact, energy and utility companies are often at the center of conversations about sustainability.

If your company is in this space, tying executive pay to environmental outcomes is not just smart — it is essential.

Start by choosing the environmental metrics that matter most for your operations. For oil and gas companies, carbon emissions and methane leaks might be key. For electricity utilities, it could be the share of energy produced from renewables. For water utilities, it might be about reducing water loss or improving water quality.

Be specific. Instead of vague goals like “be greener,” set clear targets like “achieve 50% renewable energy generation by 2030″ or “cut methane emissions by 25% over three years.”

Tie a meaningful portion of executive bonuses or long-term incentives to these goals. If environmental goals are only a small side note, they will not drive real behavior change.

Another important step is to align your environmental targets with national or international climate goals. For example, if your country has committed to net-zero emissions by 2050, align your company’s targets — and your executives’ incentives — accordingly.

Communicate openly about your goals and your progress. Publish sustainability reports. Share case studies. Be honest about challenges and setbacks.

And finally, integrate environmental performance into everyday business decisions. Make it part of capital planning, project approvals, and operational reviews — not just something you think about once a year during bonus season.

Energy and utility companies that lead on environmental performance are not just doing the right thing — they are building a stronger, more resilient, and more future-ready business.

30. 21% of firms had separate ESG-specific bonuses distinct from traditional financial bonuses

By 2023, 21% of firms took a bold step: they created separate ESG-specific bonuses, distinct from the traditional financial bonus structures.

This approach sends a powerful message. It shows that ESG performance is not just one more item on a long bonus checklist. It is a major leadership priority, deserving its own rewards and recognition.

If you are considering separate ESG bonuses, start by defining what you want to reward. Pick a small number of big, meaningful goals. For example, achieving major milestones on carbon reduction, diversity and inclusion, community investment, or ethical supply chain improvements.

Set a separate bonus pool or structure for ESG achievements. Make it visible and meaningful. For example, you might set aside 20% of the total bonus opportunity for ESG success, calculated separately from financial or operational targets.

Also, define success clearly. What are the specific ESG milestones or thresholds leaders need to reach to earn the bonus? Ambiguity leads to confusion and disappointment. Clarity builds motivation.

Communicate the program openly. Help executives and employees understand why ESG deserves its own bonus structure. Link it back to your company’s mission, values, and long-term strategy.

Track and report progress throughout the year. Celebrate achievements. If ESG goals are missed, explain why — and what will change to improve next year.

One powerful move is to tie ESG-specific bonuses to collective performance, not just individual achievements. For example, the entire leadership team might share in the ESG bonus if company-wide sustainability goals are met. This builds teamwork and shared accountability.

Separate ESG bonuses send a clear signal that doing well on environmental, social, and governance goals is just as important as hitting revenue or profit targets. It puts ESG at the heart of leadership — right where it belongs.

Conclusion

The way companies pay their executives is changing — and fast.
Tying executive pay to ESG goals is no longer rare. It is becoming the standard for responsible, future-ready businesses.

From climate action to diversity, from ethical sourcing to employee engagement, companies are redefining what success means. And they are holding their leaders accountable in real, tangible ways.