AzkoNobel (a Netherlands-based paint and chemical company) has recently decided to give its executives bonuses based on their sustainability performance. AzkoNobel is the first company to try this publicly and several Dutch multi-national companies—including chemical manufacturer DSM, postal company TNT and energy goliath Shell—are already announcing similar policies.
Because of this new policy, the 600 top managers at AkzoNobel will now be concerned with how much they’ve done to reduce greenhouse gas emissions, waste and energy inefficiencies, fresh water consumption and workplace injuries. This system of compensation will push managers to engage employees and to develop more environmentally-friendly products that can be sold at a premium.
While 50 percent of Azko’s executive bonus is based on sustainability goals, the other 50 percent is still based on traditional financial goals. Performance is rated according to how the company is ranked on the Dow Jones Sustainability Index, which has 90 social and environmental criteria. Over the last few years, AzkoNobel has ranked within the top three chemical companies of this list.
AkzoNobel has reported that managers will get 100 percent of their conditionally granted stock options for third place in this ranking, but if they reach second or first, bonuses could rise as much as 125 to 150 percent. If they do not meet financial goals, then managers have the opportunity to be compensated for that part of the bonus by meeting the sustainability target over a three-year period.
In their 2009 annual report, AkzoNobel lays out the relevant objectives, metrics and targets that they will be using to “invent, manage and improve” their environmental, economic/governance and social performance. They have used the GRI reporting guidelines to set and manage measurable and ambitious goals for the company, and they report on progress towards 2015 targets on their report website as well.
This policy makes strategic business sense for AzkoNobel, as it does for other companies following suit. By focusing on environmental, social and economic targets, these companies will gain the competitive advantage through stakeholder and shareholder buy-in, improved operational efficiency, decreased risk and a higher premium for innovative and eco-friendly products.
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Statement from the most senior decision-maker of the organization about relevance of sustainability to the organization and the organization’s strategy for addressing sustainability
Name of the organization
Primary brands, products, and services
Location of organization’s headquarters
Number of countries where the organization operates, and names of countries with significant operations or that are specifically relevant to the sustainability topics covered in the report
Nature of ownership and legal form
Scale of the reporting organization
Total workforce by employment type, employment contract, and region, broken down by gender
Percentage of total employees covered by collective bargaining agreements
Description of the organization’s supply chain
Significant changes during the reporting period regarding organization's size, structure, ownership, or supply chain
Whether and how the precautionary approach or principle is addressed by the organization
Externally developed economic, environmental, and social charters, principles, or other initiatives to which the organization subscribes or endorses
Memberships in associations and/or national/international advocacy organizations
Entities included in the organization consolidated financial and nonfinancial reports
Process for defining report content
Material aspects identified in the process for defining report content
For each material aspect, the aspect boundary within the organization
For each material aspect, the aspect boundary outside the organization
Explanation of the effect of and reasons for any restatements of information provided in earlier reports
Significant changes from previous reporting periods in the scope and aspect boundaries
List of stakeholder groups engaged by the organization
The basis for identification and selection of stakeholders with whom to engage
The organization’s approach to stakeholder engagement, including frequency of engagement by type and by stakeholder group, and an indication of whether any of the engagement was undertaken specifically as part of the report preparation process
Key topics and concerns that have been raised through stakeholder engagement, and how the organization has responded to those key topics and concerns, including through its reporting. Report the stakeholder groups that raised each of the key topics and concerns
Date of most recent previous report
Contact point for questions regarding the report or its contents
‘In accordance’ option and GRI Content Index
Policy and current practice with regard to seeking external assurance for the report
Governance structure of organization, including committees of the highest governance body
The organization’s values, principles, standards, and norms of behavior such as codes of conduct and codes of ethics
Disclosure on Management Approach for Aspect
Coverage of the organization’s defined benefit plan obligations.
Financial assistance received from government.
Significant indirect economic impacts, including the extent of impacts.
Total number and rates of new employee hires and employee turnover by age group, gender and region.
Average hours of training per year per employee, by gender and by employee category.
Percentage of employees receiving regular performance and career development reviews, by gender and by employee category.