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Link board pay to corporate responsibility targets

26 November 2020

Board members at large companies need to have their pay packets linked to their firm’s ethical and environmental track record if they are to achieve lasting change, according to analysis of new research into attitudes towards corporate responsibility and sustainability.

The analysis by the Charities Aid Foundation (CAF) into a survey of 137 social responsibility leads at major UK companies found that while four out of five felt that their firm’s purpose and culture were the key drivers behind their approach, fewer than one in seven reported that executive pay was linked to delivering on corporate responsibility targets.

While nine in 10 (88%) said they felt senior management was supportive of what they were doing to deliver on their sustainability agenda, only half reported that their CEO was ultimately responsible for delivering on their commitments to improvements in areas such as environmental impact, ethical supply chains, supporting their local community and the wellbeing of their workforce.

Klara Kozlov, Head of Corporate Clients and Consultancy at CAF, said:

“These findings tell us that companies are very aware that they need to ‘walk the walk’ when it comes to sustainability and they are very wary of any hint that their efforts are an attempt at ‘purpose washing’.

“The Covid-19 pandemic, in addition to increasing awareness of the perils of climate change, has shined light on businesses that are doing the right things for the right reasons and the corporate responsibility professionals who shared their knowledge with us tell a story of widespread commitment among leading British businesses.

“It is also increasingly clear to business leaders that strong commitments to the environment, workplace well-being and ethical supply chains are not just good practice, they are good for business.

“This research also points us to areas crying out for improvement, including the need for the remuneration paid to senior leadership being directly linked to delivering on those commitments.”

The report also found that:

  • Reputation was a key driver in corporate responsibility for 55% of respondents, employee recruitment and retention was identified by 45%, followed by concerns for the environment (42%) or other ethical/moral issues (40%).
  • Only a quarter of respondents (26%) said they believed their company’s approach was defensive and ad hoc.
  • But a barrier to corporate responsibility becoming an integral part of the way companies plan and operate is that they do not link it to business performance. Only 16% of practitioners say that their company sees improving its financial performance, through the likes of cost savings or better sales, as one of the main reasons for having a strong plan for corporate responsibility.
  • Just 26% cited customer loyalty and a tiny 4% pointed to increasing staff productivity as key drivers for a corporate responsibility agenda.

Notes to Editors:

The findings are detailed in CAF’s new report, From Purpose to Practice, in which CAF surveyed corporate social responsibility professionals at large UK firms across fields ranging from finance to law to technology.

The poll was conducted online between February and May 2020, a unique moment in time as the Covid-19 pandemic spread around the world. Businesses were rapidly altering the way they operated, including adjusting their financial, strategic and social priorities. It is likely that we captured a mixture of opinions and behaviours from a pre- and post-coronavirus situation, and our findings and recommendations take account of this.

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