Gues post by: Scott Lane, Founder & CEO of Speeki
Sustainability-linked executive pay became a phenomenon in the early 2020s. Fortune 500 companies made public commitments to their green goals, and whether they met them directly affected CEOs’ year-end bonuses.
I thought this might make meaningful progress towards tackling climate risk, but for all the good intentions behind these pay schemes, they failed. Spectacularly so, in fact. ESG targets are regularly hit at a rate of 128%, but we’re still on course to break the seventh of the nine planetary boundaries.
So, if we’re overachieving against these targets but our planetary impact is becoming more and more negative, the question has to be asked: where did it all go wrong?
It all begins with the targets themselves. In a bid to make them applicable to businesses across industries, they’ve been watered down into a generic checklist, which means a professional services firm and an oil company are often working to the same guidelines despite their environmental impact being vastly different.
This generality makes these targets far too easy to hit – it could even be argued that they were designed to be achieved without much effort. One prime example is training completion; if employees sit through a set number of PowerPoints, a business can chalk that target off as a success. If it takes one afternoon to hit an annual ESG target, it’s no wonder we’re careering towards climate disaster.
Another reason why ESG-linked executive pay is failing is that the executives it was meant to incentivise haven’t spent much time thinking about hitting these targets. I’m not saying CEOs don’t care about the environment, but when the pay-out for hitting the goals is just 5% of the total bonus pool – and that’s on the high end – it’s not enough to influence decision-making on a scale that delivers tangible change.
All of the above is a fatal mixture for sustainability-linked pay in its current state, but there is a solution. We need a new metric, one I’m naming Return on Planet (ROP).
The reason I’ve decided to call this new measurable ROP is that it’s built on the same architecture as financial metrics such as Return on Investment (ROI). Much like ROI measures how effectively invested capital generates a return, ROP would measure how effectively a company can transform its environmental footprint into a positive planetary impact.
Not only is the framework instantly recognisable for CEOs and businesses that build entire strategies around these guidelines, but it transforms ESG targets from fluffy and easy-to-hit pledges into auditable and verifiable numbers.
The new metric would also allow businesses to tailor ESG targets to their unique circumstances and strategies for the year ahead. ROP means the professional services firm previously working towards the same goal as the oil company can now focus its efforts where it makes the most environmental impact.
That not only moves the dial on improving planetary outcomes, but also gives executives even more skin in the game. The targets would have a direct impact on the business’s strategic priorities, shifting how CEOs see them; now they are meaningful goals that carry weight and make an actual difference when achieved.
There’s no denying that they would be tougher to meet, which is why I’d suggest that they account for 15% to 25% of the total bonus, rather than the standard 3 to 5%. That’s important, because HEC Paris found that when ESG was weighted trivially, it had little influence on the short-term incentive pay of these executives. If we want CEOs to change their priorities and put ESG matters higher on their to-do lists, it has to matter financially.
Implementing ROP would prove to be a net positive for businesses too, not just their CEOs. By following stricter guidelines and meeting higher targets, businesses would inevitably diversify their supply chains, increase resource use efficiency, and strengthen climate resilience – three things that would shore up any business’s bottom line.
And now is the perfect moment to make the change. Companies might have started to ditch the ESG label, but adoption of long-term sustainability goals in incentive plans grew from 64% to 70% across European firms between 2024 and 2025. There’s still some appetite for these kinds of schemes and ESG progress, and ROP gives us a second chance to capitalise on it. We must learn from the mistakes of the past – if we do, we have a chance of securing the results pay structures like these were originally designed to achieve.
For too long, ESG targets have played second fiddle because they haven’t been rooted in hard numbers that actually move the dial towards positive planetary outcomes. But we have an opportunity to redesign the system and change that – we must grab it with both hands.
