New research by financial think tank Planet Tracker reveals that many of the world's largest textile companies are failing to link executive pay to environmental, social, and governance (ESG) performance, a key driver of credible action.
Planet Tracker's Textiles Compensation report analysed 30 top textile brands and finds that over half of these companies, including Anta Sports, Gap, Levi Strauss, Nordstrom, Under Armour, and Victoria's Secret, lack any link between pay and ESG metrics. Only 7 percent have a link that includes clear annual objectives and reporting, a necessary requirement for effective pay programs, according to Planet Tracker.
No link between pay and ESG metrics
The research shows that 57 percent of textile companies do not have a link between sustainability practices and executive compensation, yet the textiles industry accounts for 10 percent of global emissions. Furthermore, the top 20 equity investors in these companies hold a combined USD 278 billion. Planet Tracker calls on investors to extend pay performance policies beyond purely financial metrics and include sustainability-linked elements.
The research also finds that the approaches of the majority of companies that do align compensation with ESG performance are insufficient. To ensure remuneration programs create meaningful change, companies should set clear, quantitative annual targets linked to sustainability improvement. Only two companies - Adidas and Puma - have clear annual sustainability-linked objectives and reporting for executive pay programs.
Richard Wielechowski, Head of the Textiles Programme at Planet Tracker, comments, "Every textile player we analyzed is publicly committed to embedding sustainability into their operations and growth, yet these pledges are mere window dressing if the leaders of these companies are not held accountable for delivering sustainability goals."
The report calls on investors to uphold effective sustainability-linked performance pay, by ensuring that performance-linked pay is material, targets and results are independently verified, targets are quantitative, targets are annual as well as long-term, sustainability targets are independent from financial targets, and achievements are clearly disclosed.