GECN ESG Report 2024: General highlights after a year of impressive leaps

MM&K (the UK partner firm in the GECN group) has published its 2024 report on how the world’s largest firms have used ESG (environmental, social, governance) metrics in their 2023 executive incentive plans. Download your free copy here.

After the major progress seen in the 2022 report, one may have wondered if ESG would run out of steam. Not in 2023, it seems.

87% of global firms now use ESG in their incentives, marking a 23 percentage-point (p.p.) growth since 2020. This means that if the top-scoring 2020 region (Australia at 77%) were placed in 2023, it would now score second-last.

2023 saw growth in all regions, particularly a massive 15p.p. in the USA and 27p.p. in Singapore.

ESG – which has historically been more at home in short-term incentives – has seen a deepening commitment as its prevalence in long-term incentives continues to grow.

34% of long-term plans feature ESG, a doubling since 2020.

The UK saw a major growth of 21p.p. in 2023, winning the largest single-year growth in this dataset and joint first-place with Europe at 54%.

However, the US has seemed shy to introduce ESG metrics to long-term incentives as it remains joint-last at 12%, which is interesting given the US’s progress in other metrics. It is possible that the US position may change in future.

Though more firms include ESG in their long-term metrics, no such success is seen in the weighting of ESG metrics in those plans which has remained consistently at 20% on median since 2020.

Still, looking at the percentage of total compensation weighted for ESG shows a 3p.p rise since 2020, a sudden jump in the wake of three flat years. Top-ranked is Australia at 14% – unexpected bearing in mind its less positive metrics elsewhere. It is followed by the UK at 13%, earned after a 4p.p. rise in 2023, the largest single-year growth in the dataset.

Critics of ESG targets may say they are too easy and simply pay lip service or have been included to tick a box. However, roughly equal numbers of ESG measures amongst short-term plans paid above target as did below in 2023.

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 the FTSE100, S&P100, ASX100, DAX30, CAC40, TSX60, JSE TOP40, SMI20, and STI30.

For further discussion on this article or information on MM&K’s products and services, please do not hesitate to contact James Sharp.

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