Boards should tie CEO pay directly to sustainability goals. After resisting it for a while, I’ve come to the conclusion that there’s simply no other way to make the progress that we urgently need.
The upside? The companies that make this shift will also end up stronger and more resilient.
We have a problem. Progress on climate action and sustainability is stalling. Even worse, I see little sign of companies catching on to the urgency of needing to do something. Global emissions continue to rise. The window to limit warming to 1.5 degrees is closing. And, yet, while corporate pledges pile up, delivery remains patchy at best.
And make no mistake: corporates are the single biggest factor here. Of course, consumer behaviour matters, but changes there are not enough. And we shouldn’t kid ourselves otherwise. The big emissions reductions we need will only come from companies cutting supply chain emissions and rethinking energy use.
In fact, more than 90% of CEOs say that sustainability is one of their top five business priorities. But fewer than one in five companies are actually on track to hit their own net-zero targets. There’s a yawning gap between intent and delivery.
The problem lies in the current model. Companies set their own ESG goals and track their own progress. If they fall short, there’s little consequence. Reporting frameworks help, but they don’t and can’t change basic incentives.
Some argue that governments should step in with tougher laws. But we’ve seen where that leads. Over the past decade, governments worldwide have added layers of regulation. Standards have improved, of course, but we haven’t seen the breakthrough results many people expected.
Politics also shifts. Dare I say that a new administration can undo years of progress overnight? If we want lasting solutions, they need to be baked into corporate structures.
How to make sure CEOs pay attention to ESG again
And that brings us to CEO pay. Why tie ESG to CEO pay? Let’s start with the basic argument: pay works. Incentives change behaviour. You don’t have to trust me on that.
It’s why most CEOs already have pay packages linked to share price performance. Boards and investors know it drives results. We should use the same logic for ESG.
It’s borne out by decades of corporate practice. When you tie compensation to a metric, executives focus on it. If quarterly earnings per share (EPS) moves their bonus, that’s where their attention goes. If emissions reduction targets affect their pay, that will climb their priority list overnight.
Now, I don’t make this case lightly. I know it’s a big change and it took me a while to get to this position myself.
I have the privilege of working alongside the CEOs and boards of some of the world’s biggest companies every day. And I see that the vast majority genuinely want to deliver on ESG commitments. So what stops them? They are pulled in every direction, whether it’s quarterly financials, activist investors or pressure to integrate AI.
ESG slips down the agenda. Every time. Not because leaders don’t care, but because distractions pile up.
We must be shrinking ESG into short-term goals
That’s what convinced me that we need to turn ESG and sustainability into a short-term priority. And the best way to keep ESG top-of-mind is to make it part of the pay packet. A monthly reminder, so to speak. Not as a side metric or something buried deep inside a 50-page report, but a central factor in how CEOs are rewarded in their monthly salary.
Boards may worry this is “corporate do-goodery” that risks hurting profits. But the reality is the opposite.
The evidence is now clear: ESG is fundamental to business success. It doesn’t pull in different directions. In fact, companies with strong sustainability credentials attract cheaper capital, win more customers and are better positioned to weather supply chain shocks. At the same time, younger consumers expect it and are quick to punish laggards.
At the same time, the world is heading toward resource constraints. Raw materials are all getting more expensive and harder to secure. Companies that build business models on low-carbon and resource-light operations will be the ones that thrive.
The message that boards need to hear
So, here’s the message to boards: connecting pay to ESG is not charity or playing politics. It’s smart business.
Think of it this way. Your CEO is, understandably, distracted by the short term. That’s natural. Every quarter brings new noise and pressure.
We can’t change that. But we can use it to our advantage. And the way to do just that is to make ESG part of the CEO’s short-term focus. In other words: make progress on sustainability a factor in this year’s bonus, not a vague promise about 2035.
Do that and we’ll see results. Your company will move faster. Your business will be more resilient. And you’ll be doing your part in addressing the greatest challenge of our time.
It’s time for boards to act. Tie CEO pay to ESG. That’s how we’ll turn promises into progress.
Scott Lane is CEO and founder of Speeki, a full-service ESG and sustainability reporting and management partner.
Boards should tie CEO pay directly to sustainability goals. After resisting it for a while, I've come to the conclusion that there's simply no other way to make the progress that we urgently need.
The upside? The companies that make this shift will also end up stronger and more resilient.
We have a problem. Progress on climate action and sustainability is stalling. Even worse, I see little sign of companies catching on to the urgency of needing to do something. Global emissions continue to rise. The window to limit warming to 1.5 degrees is closing. And, yet, while corporate pledges pile up, delivery remains patchy at best.
