Insight

Crafting effective incentive plans tied to ESG

ESG goals are becoming part of the strategy. So, it makes sense to make ESG achievement part of executive compensation and incentives.

John Luce

John Luce

Principal, Advisory M&A Services, KPMG US

+1 312-665-1112

Gregory Kopp

Gregory Kopp

Advisory Managing Director, Strategy, KPMG US

+1 202-533-8011

Robert Berkowitz

Robert Berkowitz

Director, Advisory Strategy, KPMG US

+1 917-438-3865

John W Travis

John W Travis

Sr Associate Advisory, Strategy - COE, KPMG US

+1 212-954-8670

For companies that have incorporated ESG into strategy, including accountability for reaching ESG goals into executive compensation and incentive plans makes sense. But there are right ways and wrong ways to craft these rewards. Should incentives be based on annual goals or on long-term goals? Should goals be spread across the environmental, social, and governance, or focus on just one? Can the performance levels be determined and quantified? Should ESG metrics be reflected in the annual incentive or long-term incentive plans? Should ESG metrics be included the same way as financial measures? Does the inclusion change the structure and intention of the incentive plans?

In this brief paper, we show how to answer these questions and how to craft ESG incentives that are appropriate for each company and executive team. We also offer how to implement and adjust the plan to keep the results coming.

Contact us

John Luce

John Luce

Principal, Advisory M&A Services, KPMG US

+1 312-665-1112
Gregory Kopp

Gregory Kopp

Advisory Managing Director, Strategy, KPMG US

+1 202-533-8011
Robert Berkowitz

Robert Berkowitz

Director, Advisory Strategy, KPMG US

+1 917-438-3865
John W Travis

John W Travis

Sr Associate Advisory, Strategy - COE, KPMG US

+1 212-954-8670