Decarbonisation Should Be Linked To C-Suite Pay

Decarbonisation Should Be Linked To C-Suite Pay

May 18, 2023

A new report by Schneider Electric has found that Singapore’s business leaders are ready for greater accountability for their company’s decarbonisation goals, with almost all (99%) believing that C-suite remuneration should be linked to decarbonisation goals and targets.

The report titled “Ready for Net Zero Responsibility: How Singapore’s Business Leaders are Embracing Decarbonisation”, presents and analyses the findings of a survey of 212 board members, C-suite executives, and senior business leaders at organisations based in Singapore that have decarbonisation plans in place. The study was conducted between March and May 2023 with leaders from small, medium, and large organisations in a range of industries. The participants surveyed represent a broad range of industries in Singapore: Consumer Goods; Construction; Energy; Finance; Food & Beverage; Education; Government; Hospitality & Tourism; Industrial & Manufacturing; IT, Technology & Telecoms; Healthcare; Media; Non-profit; Professional Services; Real Estate; Retail and Apparel; IT; Transportation; and Utilities.

Singapore’s C-suite executives recognise the challenges and are ready and willing to be accountable for decarbonisation

It was found that CEOs (32%) are the most likely C-suite members to be leading an organisation’s decarbonisation strategy in Singapore, followed by COOs (27%) and CSOs (15%). Business leaders identify slow adoption of technology and a weak regulatory environment as the top two obstacles to decarbonisation. As for enablers, business leaders cite linking decarbonisation progress to executive pay, and embedding decarbonisation strategy into corporate strategy as most

Yoon Young Kim, Cluster President, Schneider Electric Singapore, Malaysia, Brunei, said: “It is encouraging to see Singapore’s business leaders willing to take on strong accountability for decarbonisation. Corporates play a crucial role in advancing Singapore’s net zero ambitions and to achieve greater progress, business leaders must have the right strategies and technologies, and forge impactful partnerships.”

Knowledge gaps, stakeholder confusion and high-pressure impacts confidence

Less than half (48%) say their leadership team has a strong understanding of decarbonisation, and the steps required. Where stakeholder engagement is concerned, no respondents believe they have the right balance, with only around half feeling there has been an appropriate level of engagement with
stakeholder groups.

Three quarters (75%) believe their organisation was rushed to set decarbonisation targets too quickly, while 86% also face pressure from internal stakeholders based outside of Singapore. As a result, only 41% believe their organisation’s decarbonisation strategy is highly achievable.

Regrets abound as working realities act as constraints, but greater focus is coming

While 90% of business leaders are proud of their organisation’s decarbonisation targets, the same number also believe their organisation should have more ambitious targets, and 92% believe their organisation should be acting faster to decarbonise.

More than nine out of 10 (91%) are also concerned about the legacy of decarbonisation challenges they will pass on to their successors, and 87% regret not acting sooner or playing a larger or more positive role in decarbonisation in their careers. However, positively, despite economic headwinds on the horizon, nearly three quarters (74%) forecast that decarbonisation will become a bigger focus area in the next 12 months.

Future leaders will need to be better equipped to manage the challenges ahead

82% say that it is likely that future leaders in their business will change current plans and targets. Business leaders believe their successors will face challenges such as having to grapple with adapting decarbonisation strategies due to overly ambitious targets (37%), having to navigate trade-offs between environmental and socioeconomic considerations (37%), and not being able to successfully execute
decarbonisation strategies in full (36%).

A range of skills will be increasingly important for future leaders in relation to planning and executing successful decarbonisation plans. These include ESG and sustainability knowledge (81%), and data analysis (75%).

Investment in technology and data is critical

While business leaders widely agree that technology (96%) will be key in driving their sustainability strategies, only around half (49%) are fully utilising it. A further half (54%) noted that they have an appropriate level of data to manage and track decarbonisation efforts. Technologies seen as important to decarbonisation efforts include energy management solutions (95%), carbon capture and storage
(94%), and electric vehicles (92%).

Ed.  Infographic courtesy of Schneider Electric. Photo by Benjamin Child on Unsplash.

Editor’s Note: By linking KPIs to executive compensation, there is a clear system in place to hold C-suite executives accountable for their performance, which can in turn foster a performance-driven culture, increase transparency in the performance evaluation processes and values and boost stakeholder confidence in an organization.

However, while there are many benefits to linking KPIs to C-Suite pay, it is worth noting that these type of executive KPIs should be chosen carefully from a mix of financial and non-financial metrics and should be tied to an organization’s long-term goals in order to avoid excessive and detrimental risk-taking.


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