A recent financial think tank Planet Tracker study revealed that more than half of the fashion industry, accounting for approximately 57 percent, does not align executive pay with sustainability or Environmental, Social, and Governance (ESG) practices. The research report, titled ‘Textiles Compens 0n’, analysed 30 fashion retail companies to assess their reward systems for sustainable actions and identify areas for improvement.
The study highlights the significant environment impact of the fashion sector, which contributes around 10 percent of global Co2 emissions and is a significant water user and polluter.
According to the report, only 7 percent of the 30 companies analysed have established clear annual objectives and reporting mechanisms that link executive pay with sustainability performance — a crucial requirement for effective pay programmes. Furthermore, the approaches employed by most companies that do align compensation with ESG performance were deemed ‘insufficient’ by Planet Tracker.
Out of the companies analyzed, only two — adidas and Puma — were found to have clear annual sustainability-linked objectives and reporting for their executive pay programmes.
The research conducted by Planet Tracker reveals a significant misalignment between executive pay and sustainability performance in the fashion industry. With only a small percentage of companies incorporating clear annual objectives and reporting into their compensation structures, the study underscores the need for more meaningful and measurable targets.
