Planet Tracker’s research titled Textiles Compensation analysed 30 fashion retail companies to understand whether the sector is rewarding positive sustainable action and if not, what can be improved.
The report included fashion brands and retailers Levi Strauss, Nordstrom, Under Armour, Victoria’s Secret, Fast Retailing, Gap, Ross Stores, Hanesbrands, Burlington Stores, TJX, Skechers, Anta Sports and American Eagle.
Planet Tracker explains fashion companies account for around 10% of global CO2 emissions as well as being significant water users and polluters.
It also states that for companies in the sector, addressing sustainability issues, including those related to upstream supplier activity, should be a priority.
The research reveals only 7% of the 30 companies analysed have a link that incorporates clear annual objectives and reporting – a necessary requisite for effective pay programmes.
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However, it also points out the approaches used by most of the companies that do align compensation with ESG performance are “insufficient.”
Planet Tracker advises such companies to set clear, quantitative annual targets linked to sustainability improvement to ensure remuneration programmes create meaningful change.
The report calls on investors to uphold effective sustainability-linked performance pay, by ensuring:
- Performance-linked pay is material – companies should set a meaningful (10%+) percentage of compensation at risk based on sustainability performance
- Targets and results are independently verified – companies should align with initiatives such as the Science Based Targets initiative (SBTi), which requires companies to set and disclose specific targets
- Targets are quantitative – sustainability targets should be clear and quantitative, similar to profit targets
- Targets are annual as well as long-term – targets should be annual, rather than vague indications of the direction of travel
- Sustainability targets are independent of financial targets – targets should be independent of rather than subordinate to profitability targets
- Achievements are clearly disclosed – companies should disclose what has and has not been delivered, rather than reporting on the direction of travel only
Richard Wielechowski, head of the textiles programme at Planet Tracker, explains: “Every textile player we analysed is publicly committed to embedding sustainability into their operations and growth, yet these pledges are mere window dressing if the leaders of these companies are not held accountable for delivering sustainability goals.
“Given that the top 20 equity investors in these companies hold a combined $278bn of private finance is invested in the industry, shareholders have the power to incentivise management beyond purely financial performance, helping companies move towards more sustainable practices.”
Planet Tracker found that only two companies – adidas and Puma – have clear annual sustainability-linked objectives and reporting for executive pay programmes.
What are the fashion brands saying?
Commenting on the claims made in the report, Fast Retailing, said: “With clear targets and KPIs, heads of departments in charge of store and e-commerce sales and supply chain management, including production and logistics, are tasked with implementing sustainability initiatives such as reduction of greenhouse gas emissions and waste and pursuing traceability. More information about it is also available on our website.”
Just Style emailed the other brands named in the report for comment but there was no response at the time of going to press.
