Many of the largest textile firms in the world are failing to link executive pay to environmental, social, and governance (ESG) performance, a crucial factor in credible action, according to new research by financial think tank Planet Tracker.
Over half of these businesses, including Anta Sports, Gap, Levi Strauss, Nordstrom, Under Armour, and Victoria’s Secret, lack any connection between compensation and ESG measures, according to Planet Tracker’s analysis of 30 prominent textile brands.
According to Planet Tracker, just 7 percent of links have clear annual objectives and reporting, which are essential components of successful compensation programmes.
The study reveals that although the textile industry is responsible for 10% of global emissions, only 57% of textile companies relate CEO compensation to sustainability practises. Additionally, the top 20 equity investors in these businesses have a combined USD 278 billion in their possession.
Investors are urged by Planet Tracker to expand compensation performance standards beyond merely financial measurements and incorporate sustainability-related criteria.
The study also reveals that the majority of organisations that do link compensation to ESG performance use inadequate strategies. Companies should establish precise, measurable annual targets connected to sustainability progress in order to guarantee that compensation programmes produce significant change.
Only two businesses, Adidas and Puma, have CEO compensation programmes with specific yearly sustainability-related objectives and reporting.
Richard Wielechowski, Head of the Textiles Programme at Planet Tracker, comments, “Every textile player we analyzed is publicly committed to embedding sustainability into their operations and growth, yet these pledges are mere window dressing if the leaders of these companies are not held accountable for delivering sustainability goals.”
The report urges investors to support meaningful performance-linked pay that is linked to sustainability by making sure that the pay is material, that the targets and results are independently verified, that the targets are quantitative, that they are annual as well as long-term, that the sustainability targets are separate from the financial targets, and that the accomplishments are transparent.
