What is responsible reward and why does it matter? What current research is showing

This year alone, two key reports have been published on the topic highlighting that, when firms identify their ESG priorities and align them to their business strategy, they reap the benefits of increased long-term financial return.

Responsible reward fulfil your environmental, social and governance promises through performance and pay was published by PeopleNet, in collaboration with CASS Business School, in June. It outlines how employers can help to counteract the long-term detrimental effect our current ways of living are having on our planet, society and the economy. One of the most effective ways of doing this is to ensure we incentivise and reward people for what they do and, perhaps most importantly, how they do it.

Yet, for all the evidence that sustainable business actions drive investment – Schroders’ Global Investor Study (2017) found that the majority of its 22,000 individual investors consider sustainable business actions as being both philanthropic and an opportunity to generate profit – few businesses are operating responsible reward policies.

The Integrating ESG Issues into Executive Pay report from Principles for Responsible Investment, shows that the integration of ESG issues into executive pay is in its infancy. It found that, of the 70 companies that incorporated ESG issues into their executive pay plans, 84 per cent incorporated ESG factors into short-term compensation plans, rather than long-term incentives.

Clearly there is still a way to go, and balancing ESG issues with wider business and reward concerns is not an easy task. However, not only are the moral reasons for implementing responsible reward compelling, but the business ones are even more so.

The REBA Reports Library has hundreds of reports, surveys and other handy documents pulled together from a myriad of government departments, academics, independent organisations and suppliers. We have pulled them together for our members to use to find the data they need to support business cases, presentations and other reward work.

Dawn Lewis is content editor at the Reward & Employee Benefits Association.