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Employee Engagement Around Sustainability: Why Evaluation and Compensation Are Necessary
July 18th, 2012
The key to reaping the benefits of sustainability implementation over the long-term is to ensure that sustainability performance is tied to evaluation, and compensation.
A survey by Accenture and the UN Global Compact of 766 CEOs in 2011 found that 96 percent of CEOs believe that sustainability should be fully embedded into a company’s strategy and daily operations; nothing is more critical to making this happen than integrating the metrics, evaluation and compensation systems needed to track and record progress.
Moreover, coming out of the financial crisis, employees are more overworked than ever. So while the passion for implementing sustainability is often there, employees today are already overworked and feel like it’s just another thing on their plate; they don’t see management support or have the support of their boss, they don’t know what to do or feel empowered, or they just simply see it as not part of their job.
As Peter Drucker so famously is quoted of saying “what gets measured, gets managed” – sustainability performance is no different. In order for employees to be held accountable for their sustainability performance, it must be part of their evaluation and compensation at all three levels of the company - corporate, departmental, and individual.
Sustainability performance at the corporate level should be measured so that employees know how the company is performing, what their individual and departmental efforts add up to, and to see that management is being evaluated on their sustainability performance as well. Nothing can be more demoralizing than a company setting out goals for all employees to implement, with management receiving no evaluation or consequence if these goals are not met.
In fact, if you look at most GRI-based Corporate Social Responsibility (CSR) reports, you’ll notice that boards and management most often fall short where evaluation and compensation around sustainability is concerned.
Next is the departmental or division level, which is key because this is so often where the breakdown actually occurs. Department and division heads can be very territorial and protective, not only of their employees’ time but of their budget. So if they or their teams are not being evaluated or receiving more/less budget based upon sustainability performance, a breakdown in support will occur here – undermining both employees’ and management’s best intentions.
Most importantly, individual employees need to understand how sustainability fits into their day-to-day jobs and how they will be evaluated and rewarded for their performance. For example, a client recently mentioned that many of their employees are evaluated on sustainability performance, but that it’s “one of 35 or so” criteria. Well if it’s one of thirty-five, then it really isn’t one at all.
So who is doing it well? Intel, Shell, and Vancity are three of the most successful companies in terms integrating sustainability performance into evaluation and compensation systems.
For the past 4 years, Intel has linked the compensation of the CEO and top executives to the company's sustainability achievements and improvements in environmental leadership reputation. Rank-and-file employee bonuses also are tied to these goals.
Shell uses its corporate scorecard to assess nearly all Shell staff environmental and social performance against this scorecard, which affects the level of their annual bonuses. Employees are rewarded for both personal performance and team achievements.
Performance reviews and profit sharing are based on both financial and non-financial goals for many employees. At the end of the year, individuals are rated and ranked in terms of their individual performance against the established objectives & targets, and bonuses and salary improvements are linked to how well they performed. The same is true for many senior managers at the Director level and up.
These companies have found success, and as more companies look to embed sustainability into their operations and have enduring employee engagement programs, linking evaluation and compensation to sustainability performance will be essential.