GECN ESG Report 2023: Diversity and Inclusion remains a priority for businesses – download your free copy
January 26, 2023
MM&K (the UK partner firm in the GECN group) has published its 2023 research on how the world’s largest firms use ESG (environmental, social, governance) metrics in their executive incentive plans. Download your free copy here.
We researched the world’s top firms for how they use ESG metrics when paying their CEOs. A category among these metrics were “social” measures, which are metrics for areas such as Diversity and inclusion (DEI), employee engagement, employee culture, etc.
Social measures have kept their crown this year, as they are the most common to appear in incentive plans for firms around the globe. 72% of plans featured social measures, a growth of 5 percentage-points since last year.
Leading the charge are DEI metrics, featuring in 60% of plans after an impressive 15 percentage-point growth.
DEI’s prominence is maybe expected, as firms could be eager to avoid the punishment of being seen to be prejudiced from an increasingly conscious consumer and investor base. For example, a 2019 Adobe survey found that 34% of US consumers have boycotted a brand which didn’t represent their identity.
Improving diversity may work to a company’s interests beyond PR too. A 2020 McKinsey study found that firms with gender and/or ethnically diverse executive teams were significantly more likely to have above-average profitability. This may be due to diverse teams with a range of backgrounds, perspectives, and experiences allowing for richer decision making.
Likewise, a diverse company may reap the rewards of diversity through its staff base. CNBC found 40% of US workers say they would likely quit if their organisation took a stand on a political issue they do not agree with. Although such a figure seems steep, consider how intimately most of us tie our job with our identity.
However, all other metrics saw a decline or plateau this year, as they nearly all did last year too. As ESG grows in prominence, firms may be learning to shift to measures bearing the most fruit PR-wise. Public companies are subject to the most pressure to deliver short term results – often sacrificing long term goals – because their owners are typically responding to their stock price. Thus, measures like employee engagement or culture could take a backseat – whilst say DEI and CO2 emissions see major growth – because they are more prominent in the public consciousness. Perhaps firms will come to regret neglecting their employee measures at a time when the ONS reports job vacancy rates as among historic highs, many workers will have freedom to work for those providing a better working environment, as well as a decrease in the productivity of those who stay.
MM&K, together with our GECN partners, publishes research annually on how ESG shapes CEO incentive pay in the world’s top companies. This is the comprehensive guide to ESG in firms of the FTSE100, S&P100, DAX30, etc.