Almost all state-owned companies reward management and personnel for sustainability
Of all state-owned companies, 90 per cent have sustainability objectives in their remuneration programmes. According to a survey conducted by the Ownership Steering Department at the Prime Minister’s Office, corporate sustainability incentives account for about one quarter of the total remuneration paid by companies. The most common sustainability incentives were related to emissions reductions and job satisfaction among the personnel.
A survey conducted in May asked state-owned companies how corporate sustainability was reflected in their remuneration. Of the companies that responded, 90 per cent reported that they had integrated corporate sustainability objectives into remuneration policies.
Respondents whose companies did not yet have sustainability objectives in their remuneration policies stated either that the companies did not have a reward scheme in place or that sustainability indicators were under preparation and would be included in remuneration for 2022.
As stated in the Government Resolution on State Ownership Policy, the State as an owner expects companies to integrate sustainability into remuneration, particularly the remuneration of management. The survey conducted in May 2022 examined at the level of the whole company portfolio whether companies had integrated corporate sustainability objectives into remuneration and what these objectives are.
State-owned companies are required to integrate corporate sustainability into their business and strategy. The State as an owner expects companies to be at the forefront sustainability.
“One of the most effective and impactful ways to incorporate sustainability into companies' operations is to include sustainability objectives in the remuneration of management and personnel,” says Kimmo Viertola, Director General of the Ownership Steering Department at the Prime Minister’s Office.
According to the survey, the sustainability objectives typically apply to the remuneration of both management and personnel; 71 per cent of respondents stated that this was the case at their companies. Conversely, 27 per cent of respondents reported that their sustainability objectives applied only to management.
When it comes to the share of corporate sustainability incentives in the company’s total remuneration, there is great variation between companies. Sustainability-based remuneration accounted for a minimum of 5 per cent and a maximum of 90 per cent of total remuneration. On average, the sustainability objective accounted for 29 per cent of remuneration.
Most popular incentives include emission reduction targets and wellbeing of personnel
The most common sustainability incentives reported by companies were related to reducing the carbon footprint or emissions, wellbeing at work, satisfaction among personnel and occupational safety.
“The most popular corporate sustainability objectives in the companies’ remuneration programmes were environmental objectives. In total, 78 per cent of state-owned companies reported that they had introduced them. Environmental objectives usually have to do with reducing the carbon footprint, emissions or energy consumption,” says Ministerial Adviser Katariina Sillander from the Ownership Steering Department at the Prime Minister’s Office, who specialises in sustainability issues.
Almost equally popular are indicators related to social sustainability, most commonly ones that measure the personnel’s wellbeing at work, job satisfaction or commitment.
Boards of directors need more and more comprehensive expertise in corporate sustainability
As an owner, the State requires remuneration at its companies to be reasonable, fair and transparent. In the spirit of good governance, the State does not dictate remuneration objectives to its companies; instead, remuneration is a tool for boards of directors.
“Integrating corporate sustainability into companies’ strategies and remuneration schemes requires new kinds of understanding and expertise from boards of directors. It is particularly important for boards to identify which corporate sustainability themes are essential for the company’s business and how to set ambitious long-term objectives for them,” says Katariina Sillander.
Altogether 51 state-owned companies responded to the online survey, which was sent to 58 companies in May 2022. The response rate was 88 per cent. The 12 listed companies under Solidium’s management were excluded from the survey.
Inquiries: Kimmo Viertola, Director General, Ownership Steering Department, Prime Minister’s Office, tel. +358 29 516 0026; Katariina Sillander, Ministerial Adviser, Ownership Steering Department, Prime Minister’s Office, tel. +358 29 160 030, [email protected]