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A guest post by compensation expert, Margot Campbell:

If you’re a corporate board member, an executive, a compensation expert or an HR advisor – this report is for you.

Coro Strandberg’s leading-edge report, Sustainable Pay: How TSX 60 companies compensate executives for sustainability performance examines the linkage between executive compensation and sustainability performance. This unique analysis based on 2011 data, shows that only 43 per cent of TSX 60 companies bonus for sustainability performance and none bonuses executives for long-term sustainability performance. Yet, growing evidence suggests that companies that invest in sustainability practices, including linking sustainability metrics to executive pay, outperform competitors. Strandberg’s findings will help pave the way for the future development of universal standards and ultimately create a roadmap for new directions in executive compensation and sustainability.

Here’s who will benefit from reading this report:

Boards and compensation committees will:

• Learn about emerging sustainability and compensation trends.
• Be equipped to design enhanced incentive packages going forward.
• Understand how the right combination of sustainability metrics (in addition to current financial metrics) can enhance sustainability/pay practices.
• Discover a new way to increase shareholder value for investors.

Boards/compensation committees will get a snapshot of the 2011 sustainability compensation practices of 60 public companies. The report also provides the baseline to help boards and compensation committees enhance sustainability practices to better manage risks and create opportunities from emerging trends to maximize future performance.

Executives will:

• Be prepared for a potential new focus by boards and compensation committees on sustainability pay linkages.
• Learn how metrics associated with their own pay may shift to a greater focus on sustainability measures.
• Be equipped to support board and compensation committee dialogue and questions regarding sustainability pay linkages and future trends.

This report will give executives a better understanding of how metrics associated with their own pay will eventually move towards a greater number and weighting of sustainability measures and, over the long run, shift the existing mindset away from the traditional financial focus. In the short-term, it will prepare executives for any questions boards or compensation committees might have about trends in this area. It also will allow them to initiate dialogue at the board level before questions are raised by the board.

Compensation advisors will:

• Get timely data and trends.
• Be prepared for information requests from boards or compensation committees regarding sustainability pay practices.
• Learn how to complement traditional financial/business metrics with a mix of sustainability metrics.

The information this report synthesizes from the sustainability pay practices of the TSX 60 companies will help compensation advisers construct better benchmarks to improve an organization’s competitiveness and, ultimately, its bottom-line.

HR advisors will:

• Learn about emerging sustainability pay practices.
• Anticipate new metrics and weightings that may evolve in their organizations or in competing companies.
• Be equipped to proactively introduce this emerging trend and initiate dialogue with senior management and boards or compensation committees.

The study provides HR advisors with up-to-date information about sustainability pay practices so they can be ahead of the curve with respect to board, compensation committee and/or executive requests and even kick-start the dialogue.

As Toby Heaps (co-founder and CEO of Corporate Knights, the company for clean capitalism) concludes in the report’s foreword, readers will “undoubtedly find Strandberg’s first-of-its-kind systemic study into the sustainable pay practices of TSX 60 companies a welcome injection of coherence. . . While sustainable pay is still a wild west, this report contains many sensible recommendations for harnessing its power to build better companies and a better world”.

Further, Mr. Heaps rightly observes that “. . . pay remains a powerful motivator. What we pay people to do really matters and is at the absolute core of corporate governance. So it stands to reason that we should make sure we are paying people to do what really matters.” The findings of this timely, one-of-a-kind study definitely will enlighten all stakeholders about how to pay executives to do what really matters.

About Margot Campbell
Margot Campbell is a seasoned human resources leader with over 35 years of progressive experience in the Vancouver business community. She is a principal with the human resources consulting firm, Quintin Campbell & Associates, which provides advice in the areas of compensation, employee benefits and general HR. Campbell honed her well-rounded compensation and benefits experience as a consultant, an insurer and as a seasoned in-house manager. With her focused, no-nonsense approach and considerable expertise in the field, Margot has provided consistent and measurable outcomes for organizations including direct, bottom-line, year-over-year net savings as well as significant improvements in administrative efficiencies and productivity.

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For this stop on the Social Sustainability Roadmap, we’re going shopping. Or to be exact, we will consider how social purchasing can support positive local and global development. Compared to its cousin, green procurement, social purchasing or social procurement is a new kid on the block. As new territory for company buyers, social purchasing is not well-defined. Through work with the BuySmart Network and a number of clients, I have developed a framework for social purchasing that includes:

• Sourcing from suppliers with good social practices
• Sourcing from suppliers with social attributes
• Sourcing products with superior social attributes

Good social practices include:

Suppliers with social attributes include:

Products with superior social attributes include:

• Fair trade
• Universal design
• Healthy and safe

In addition if you’re interested in metrics that companies use to measure their social sourcing progress, see this research I conducted for a client.

For more information see: Social Purchasing on the Social Sustainability Roadmap.

The Qualities of a Transformational Company
I hope this series of posts has given you an idea of the power that CSR has to address some of the toughest social issues of our time. When used strategically as a tool for social innovation – for doing things differently – CSR can tackle issues such as poverty and create more accessible, inclusive, fair and healthy communities.

As we face dramatic global challenges, companies will realize that not only do they need to adapt to the times, but that they need to play a proactive role to foster a sustainable future. They need to be agents of change, to catalyze social transformation. Through research I did for Canadian Business for Social Responsibility, I identified the qualities of The Transformational Company, and created a tool you can use in tandem with the Social Sustainability Roadmap to activate your social contributions and build your own brand of social innovation.

If your company is interested in funding future development of this work, specifically a guide to the social performance of companies, please contact me at coro@corostrandberg.com.

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Companies have a lot of relations: employee relations, community relations and now for the 4th stop on the Social Sustainability Roadmap – customer relations. As with their other relationships, companies with progressive CSR/sustainability strategies address consumer issues holistically.

They think about product education, accurate information and fair, non-discriminatory marketing practices. They also consider affordability, accessibility, customer privacy and product health and safety.

More and more companies will engage customers on healthy and sustainable lifestyles. For instance Unilever’s LifeBuoy Campaign aims to change the hand-washing behaviour of one billion people by 2015. Or P&G commits to convert 70 per cent of wash loads to cold by 2020 through its Tide’s Cold Water Campaign. Both campaigns encourage customers to save money and conserve the environment.

Recently talk has focused on how to promote sustainable consumer lifestyles. More people are asking: How do we maintain a high standard of living while limiting our consumption to just what we need? Or how do we shift western consumer models away from consumption of things and toward consumption of experiences? Or how do we redefine “the good life” to be about health and happiness rather than material wealth acquisition?

As companies wrestle with rising commodity prices and declining access to resources, they will be compelled to rethink their customer value proposition. There is great turbulence ahead. Companies need to refresh their business models in response to the social and environmental mega trends we will face over the coming two decades. If they do, they’ll be better positioned to build customer loyalty and grow market share.

As you travel along the Social Sustainability Roadmap you may find yourself face to face with big mega-trend consumer issues such as the growing gap between rich and poor, or aging populations – societal sea changes that will require equally as dramatic changes in how companies operate. If so, don’t dismay. Instead explore The Transformational Company qualities I developed for Canadian Business for Social Responsibility and learn how your company can join others in leading the way to a socially sustainable future.

For more information see: Customer Relations on the Social Sustainability Roadmap.

I welcome Toby Heaps, CEO of Corporate Knights to my blog page. As a leading Canadian and international voice for clean capitalism and business sustainability, Toby provided insightful feedback to my recently released report, Sustainable Pay: how TSX 60 companies compensate executives for sustainability performance. I am honoured that Toby has taken time to provide his perspective in this post. I hope you enjoy it. Please send us your thoughts.

Guest blog by Toby Heaps:

April 20th, 2010 was the ‘deepwatergate’ moment for corporate governance. That was the day when BP’s Deepwater Horizon drilling rig exploded, killing 11 people, spilling millions of barrels into the Gulf of Mexico, causing untold environmental harm and ultimately costing BP tens of billions of dollars in damages. Six months later, Bob Dudley, BP’s newly minted group chief executive, wrote an internal memo to his staff declaring that safety would be the sole criterion for rewarding employee performance in its operating business for the fourth quarter. One wonders what would have happened had a savvy institutional investor taken a look at BP’s financial sanctions from the US Environmental Protection Agency (EPA) and the Occupational Safety and Health Administration (OSHA) before the Deepwater Horizon explosion. In the five years leading up to the incident, BP had been hit with more EPA and OSHA fines and penalties than Shell, Chevron, Exxon Mobil and ConocoPhillips combined. If BP had felt heat from its investors and moved earlier to realign compensation incentives, could the lives lost, ecosystem damage and balance sheet destruction have been prevented?

Pay remains a powerful motivator
We will never know for sure, but we do know that despite the predictable irrationality of humans in many contexts, pay remains a powerful motivator. What we pay people to do really matters and is at the absolute core of corporate governance. So it stands to reason that we should make sure we are paying people to do what really matters.

80 per cent of share price related to reputation
We live in a globalized era in which natural resources and reputation matter like never before. On the backs of the burgeoning billions of middle class consumers, real commodity prices have rocketed by 147 per cent in just the past 12 years, making natural resource productivity increasingly relevant to a company’s ability to create value. In stark contrast to just a few decades ago, the majority (80 %) of a company’s share price is now based on a bubble of intangible assets, which expands or contracts largely based on reputation. As a result, natural resource use and the social and environmental factors that impact reputations are strategic imperatives for public companies. That’s why investors are beginning to demand that companies better align relevant sustainability factors with compensation.

Sustainable pay still wild west but harnessing its power will build better companies
Against this backdrop, Coro Strandberg’s first-of-its-kind systematic study into the sustainable pay practices of TSX 60 companies is a welcome injection of coherence. Her finding that 57 per cent of companies already consider sustainability factors in the annual incentive plan shows that the Rubicon has been crossed. While sustainable pay is still a wild west, this report contains many sensible recommendations for harnessing its power to build better companies and a better world.

Toby Heaps is the co-founder and CEO of Corporate Knights, the company for clean capitalism. Corporate Knights publishes the world’s largest circulation magazine focused on business sustainability, empowers investors with quantitative sustainability insights, and co-ordinates the Council for Clean Capitalism, a CEO-led group catalyzing smart and efficient public policy.

Facebook – www.facebook.com/corporateknights
Twitter – www.twitter.com/corporateknight
YouTube – www.youtube.com/corporateknights

See an infographic snapshot of the report findings or read the full report Sustainable Pay: how TSX 60 companies compensate executives for sustainability performance. We welcome your feedback.

Download the complete report (1.7 MB PDF)

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Twitter: Study on Sustainable Pay for Cdn Execs finds most companies incl #sustainability performance in incentive comp http://wp.me/p1Dr7N-xb #csr

Facebook/LinkedIn: Sustainable Pay: how TSX 60 companies compensate executives for sustainability performance is a first-of-its-kind report on the sustainable pay practices of the TSX 60 companies. It contains detailed research and recommendations for harnessing the power of compensation incentives to advance sustainable business practices. http://wp.me/p1Dr7N-xb

Copy the code below to embed the infographic on your own blog:

<a href=”http://corostrandberg.com/publications/sustainable-pay-tsx60-executive-compensation”><img style=”border: none;” title=”Sustainable Pay: how TSX 60 companies compensate executives for sustainability performance” alt=”Sustainable Pay: how TSX 60 companies compensate executives for sustainability performance” src=”http://corostrandberg.com/wp-content/uploads/2013/03/Sustainable-Pay.jpg” width=”460″ height=”1061″ /></a>
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<a href=”http://corostrandberg.com”>Courtesy of Coro Strandberg, Sustainability Consultant</a>

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In my last post I discussed two focus areas to build positive community relations – social hiring and accessibility. Now I’ll talk about a more familiar focus area for many companies – community contributions. But just because it’s familiar doesn’t mean it’s static. Leading companies practise a progressive range of programs. Here is a taste of different types of donation programs that generate contributions from others:

• Enabled employee donations (e.g. payroll giving) and customer, public or supplier donations
• Matched employee, customer, public or supplier donations
• Employee volunteer grants (dollars for doers)

LBG Canada, a community investment benchmarking group, refers to this as “leveraged resources” and encourages its member companies to measure and track the contributions leveraged from external sources, including government funding. By leveraging resources from others, your business can catalyze greater community benefits.

These are some of the traditional donation themes found within your typical company donation program:

I see emerging interest in donation programs targeted at:

In addition, now more companies align their community contributions to their business strategy and core competencies – all positive trends.

Properly designed, your community investment program could have far-reaching impact. When you develop your program, consider taking a “whole enterprise” approach to your community investments. We can learn from leaders such as Vancity Credit Union and Mountain Equipment Co-op. They use a holistic approach that leverages a full suite of contributions. These could include grants, sponsorships, products and services and employee contributions. They also embrace technical support, procurement/patronage, public policy advocacy and ongoing strategic partnerships. As well, they proactively pursue strategic public research, thought leadership, customer and supplier engagement and multi-stakeholder collaborations related to top priority issues for their customers and employees.

If you are inspired by this kind of progressive, holistic and strategic community investment activity, your company might also be interested in the qualities of a Transformational Company I developed for Canadian Business for Social Responsibility. These qualities position a company to contribute solutions to large scale social problems such as poverty, social unrest, obesity, hunger and chronic disease. It sounds daunting but it is possible to embed net positive social benefits into products and services; to have diverse, thriving and equitable workforces; and to expand opportunities for all population groups to become employees, suppliers, distributors or customers.

A community investment program is an excellent launch pad for companies that want to be transformational in the marketplace and in their communities.

For more information see: Community Giving on the Social Sustainability Roadmap.

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Companies operate with and in many communities. Last post I talked about employee relations, a company’s internal community. This stop on the Social Sustainability Roadmap focuses on the external community. Businesses that take an active interest in community well-being can generate positive results both for the business and for the community. Good corporate citizens attract support, loyalty and good will. Progressive socially sustainable companies design their programs to prevent or solve problems, foster social partnerships and generally contribute to the community quality of life.

Your community-relations priorities will depend on your company’s local circumstances and its business strategy, competencies and assets. In my next post I share my thoughts on the traditional practice area of community giving or community investment. This post highlights two lesser known areas of community relations practice: accessibility and social hiring.

Accessibility

As our population ages, we’re bound to see more disabilities amongst employees and customers. These could be anything that cause a person to have difficulty with daily living activities such as a physical or mental condition or a health problem.

First, it’s important to ensure your business is physically accessible. Although this may mean improvements beyond the minimum building code requirements, your customers and employees will demonstrate their appreciation through their business and loyalty.

Think about your products too. Are they fully accessible? You may want to investigate “universal design principles” – a design approach to products and environments to make them usable and effective for everyone. Some businesses become “disability confident,” by adopting and implementing commitments to advance social inclusion for people with disabilities.

Accessible businesses are more caring and welcoming for all people. And there’s a bottom-line benefit too. Given technology advances and population demographics, people with disabilities are living longer and becoming a greater presence in the marketplace. Companies that capitalize on this trend with accessible premises, products and communications will secure future market opportunities and see their business grow.

Social Hiring

Here’s a concrete way for a company to reduce poverty and promote economic and social inclusion. Look for ways to hire people who face labour market barriers. These barriers could be a physical, mental or developmental disability. They could be mismatched or limited skills, lack of work experience, age, culture or language. Initially, additional support may be necessary since people with employment barriers often have been out of the workforce for a number of years.

“Social hiring” is an employer’s commitment to recruit employees with employment barriers. For example, BC-based Key Food Equipment Services, a repairer of commercial food equipment in western Canada, hired a person with a developmental disability who started filing customer invoices and moved up to inventory management.

By leveraging a traditional business function such as employment, businesses can enhance social inclusion and help reduce local poverty. By focusing on accessibility and becoming “disability confident,” businesses can help people with disabilities to live satisfying lives.

For more information see: Community Relations on the Social Sustainability Roadmap.

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The first stop on the Social Sustainability Roadmap is employee relations. Why? Because engaged employees contribute to company and community success. A well-structured employee relations program can contribute not only to your company’s well-being but also to the overall health of the community in which you operate.

Research I conducted on the business case for sustainability confirms that corporate social responsibility (CSR) /sustainability is a top driver of employee engagement and that there is a tight link between CSR and workplace productivity. So it’s not much of a leap to understand that engaged employees contribute to firm value.

How that contributes to community health I’ll explain later. But first, here are some of the essential elements of healthy employee relations. In addition to CSR, employees want a fair, respectful, healthy and democratic workplace that values their participation. Specifically they care about:

• Pace of work and work stress
• Opportunities for input
• Job security
• Work-life balance
• Workplace relationships
• Individual development
• Physical working conditions

Consideration of these needs contributes to healthy employee relations, which in turn can benefit your business with:

• Reduced turnover and recruitment costs
• Reduced absenteeism, injuries and disability costs and lower fines and insurance premiums
• Larger talent pool and more unsolicited applications

Employers who treat their employees well can outperform their peers in customer satisfaction, revenue growth and overall profitability.

I’ve noticed in my work with clients that the HR department is not always engaged and the executive team often doesn’t understand why employee relations or employee well-being is included in CSR. I find it helps to engage with HR directly and share with HR managers a framework I developed on the “CSR-HR” connection.

Once your company “gets” the HR-CSR connection, you can begin to build the employee well-being pillar of your strategy. You’ll want to identify top employee priorities such as:

• Work-life balance
• Health and safety
• Employee diversity

An emerging area of focus for employers is the “living wage,” as I profiled in an earlier post. Companies that adopt a living wage policy, and that require their suppliers to do so, will play a direct role in reducing child poverty and poor educational attainment. This helps break the pattern of future job insecurity, under-employment and poor health. By offering wages that cover basic living costs, an organization can better attract employees, reduce turnover and absenteeism and build the firm’s community reputation.

A robust employee relations program, as part of your social sustainability plan, will enhance not only employee well-being, but also family welfare and, by extension, the community quality of life. These are just some of the positive social benefits your company can foster through your direct operations.

For more information see: Employee Relations on the Social Sustainability Roadmap.