Report: Fashion firms lagging on linking executive pay to environmental action

Planet Tracker is urging financial institutions to include water risk in investment decisions.

That is according to new research from Planet Tracker.

Published late last week, the research assessed board-level responsibility for the delivery of ESG targets at 30 of the world’s largest fashion retailers, fashion brands and textiles firms.

At 17 of these firms, including Gap, Levi Strauss, Sketchers and Foot Locker, executive pay does not depend in any way on the delivery of any ESG targets. This suggests a rate of ESG-linked pay in the fashion sector of just 43% of companies, while 70% of the wider S&P 500 have made this move.

Planet Tracker also questioned whether firms are properly tracking ESG-related progress and, as such, deciding whether to award pay based on credible evidence. Concerningly, half of the companies with an ESG and pay link decide whether to award the pay based on qualitative factors. Included in this cohort are the likes of H&M Group and Nike.

The report does name some firms leading the way in setting quantitative sustainability goals, in line with climate science, and tying executive pay to their delivery. They are Ralph Lauren, Adidas, Hermes, Puma and Zalando.

Planet Tracker has stated that it is “unsatisfactory, given the importance placed on sustainability by both the companies and their multiple stakeholders,” for them not to be transparent with progress against targets.

“Every textile player we analysed 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,” said Planet Tracker’s head of textiles Richard Wielechowski.

“Given that the top 20 equity investors in these companies hold a combined $278bn of private finance is invested in the industry, shareholders have the power to incentivise management beyond purely financial performance, helping companies move towards more sustainable practices”.

The report has notably been published to coincide with annual general meeting (AGM) season. Activist investors, supported by initiatives such as Follow This and Shareaction, are increasingly airing grievances over environmental and human rights issues at AGMs through shareholder motions.

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