Large Companies More Likely to Use ESG Metrics, Says Study

 

Findings included the following:

• ESG Metrics. D&I is the most common ESG metric, used by 28% of the S&P 500, with safety a close second at 24%. Other common metrics were talent development (22%) and turnover/retention (17%). Overall, human capital metrics were found at 41% of companies.
• Climate. Environmental metrics are still only found at a minority of companies, with emissions topping the list at 7%. However, this could change given increased focus by the SEC and investors.
• Diversity and Inclusion. D&I metrics increased by almost 20% this year, not including go-forward 2021 metrics (a recent Center survey found that 15% of Subscribers plan to add metrics for 2021). 
• Safety. Safety metrics jumped by 36% this year, largely due to the impact of COVID-19. However, they were mostly included in the individual component of the annual bonus, so the change may not be permanent.
• Size Matters. Larger companies were more likely to use ESG metrics with 62% of larger companies including them versus 55% of smaller companies within the S&P 500. In particular, 38% of large companies use D&I metrics in the incentive plan now, compared to only 22% of smaller companies – a trend we expect to change as diversity metrics become more common across the market. 

For companies considering a change to include ESG metrics, most experts advise moving ahead – but with caution. The unintended consequences of adding ESG metrics where a company has not prepared the way through strategic goals and cultural improvements could be problematic. In addition to the survey linked above, we recommend Semler’s report on “Moving Cautiously on ESG Incentives in Compensation” for suggestions on how to begin.