Executive Bonuses Based on Sustainability

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.