GECN ESG Report 2023: Community metrics a low priority for FTSE100 and other large global firms – download your free copy
April 27, 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.
We researched how the world’s top listed firms used ESG metrics when incentivising their CEOs; metrics were grouped into categories like community, environmental, health & safety, etc.
Community metrics are concerned with the effect businesses have on the society around them, e.g., investing in education, increasing skills, changing perceptions, etc.
We found that community measures lagged much behind other factors. For the FTSE100, only 1 in 8 firms had included community metrics in their plans; less than half of the next least-prevalent metric of Health & Safety:
A possible explanation for this is that firms are more likely to gravitate to metrics that are likely to benefit the external perception of their business or are of greater concern to customers and shareholders. For example, Diversity and Inclusion (part of the People & Culture category) was a major priority for companies this year, which may be a result of culture shifts against discrimination in the workplace. Likewise, environmental measures saw much higher rates of growth this year, perhaps for similar reasons, as climate change continues to be of increasing concern.
The upshot may be that community measures might fall by the wayside, as the impact and the visibility of a company adopting these metrics may only be felt and seen by the community affected and not much farther afield. Firms may be responding to consumer priorities: a 2021 survey from Deloitte, which found that more people listed environmental topics like climate change as their top priority over social and cultural issues like human rights may suggest this.
If that is right, companies might be missing an opportunity, as businesses have the potential to do much good in local communities. Many community metrics seen this year are focused on education, such as upskilling, or even changing attitudes to topics like underage and over drinking (Diageo) or to self-esteem (Dove); other metrics were concerned with unemployment or social housing investments. As ESG continues to grow in importance and play an increasing role in incentives across the globe, the adoption of community-linked metrics is likely to increase in the future.
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, ASX100, DAX30, CAC40, TSX60, JSE TOP40, SMI20 and STI30.