JBS USA latest food maker to tie environmental performance goals to executive pay

Dive Brief:

• JBS USA will tie senior executive compensation considerations to the company’s ability to meet environmental goals, and align interim targets using science-based criteria, the company said in its 2020 Sustainability Report.
• The financial incentive was part of a larger report outlining the meat processor’s work in sustainability and steps it plans to take going forward. JBS’ environmental goals include achieving net zero greenhouse gas emissions by 2040, cutting water use intensity, increasing its percentage of renewable energy and investing in regenerative farming practices.
• A growing number of companies across many industries, including the food and beverage space, are tying their leaders’ compensation to their success achieving certain targets in environment, sustainability or governance as consumers put a greater importance on these issues when they decide which products to buy. 

Dive Insight:

The JBS USA report offered no details in terms of the company’s efforts to tie compensation to meeting certain environmental goals, and a spokesperson did not respond to a request for comment. But the fact that the meat processor is taking this step speaks to the growing importance of sustainability to consumers.

A recent report from Willis Towers Watson found 51% of S&P 500 companies use ESG metrics in their incentive plans, with 50% including it in annual incentive programs. In a separate report, Perillon highlighted 17 major companies linking ESG performance to executive pay, including PepsiCo, Unilever and Danone. 

Unilever, the manufacturer of Hellmann’s mayonnaise and Knorr dehydrated soups and mixes, ties part of its CEO’s annual bonus to the company’s ESG targets. Yogurt and bottled water producer Danone links 20% of its executives’ yearly variable compensation to its social, societal and environmental targets.

JBS is no stranger to sustainability initiatives with a financial component. Its majority-owned Pilgrim’s Pride unit announced earlier this year a $1 billion sustainability-linked bond tied to the company’s Sustainability Performance Target (SPT) of reducing its greenhouse gas emissions by 30% by 2030. The interest rate on Pilgrim Pride’s new bond will climb 25 basis points if the company fails to prove through a third-party verification service that it hit its sustainability targets.

PepsiCo also has done a green bond and AB InBev announced in February it had signed a new $10.1 billion sustainability-linked loan revolving credit facility, calling it the first of its kind among publicly traded alcohol beverage companies. 

Consumers are spending more on products that make a sustainability claim, according to a report from IRI and the NYU Stern Center for Sustainable Business. Even at the start of the pandemic, dollar sales of sustainability-marketed products jumped 56% during the week ending March 15, 2020, thanks to millennials, college-educated and higher-income urban buyers. And 78% of consumers believe companies can do more to explain how their products affect the environment, according to a survey from Kearney.

Companies have long been criticized for promising to achieve a certain environmental goal, only to draw criticism from those who question whether they are simply greenwashing and failing to follow through on their promise.

The bonds and executive compensation measures help create some legitimacy to corporate initiatives and give companies and their C-suite leaders more incentives to act. As consumers and investors place an increasing importance on ESG issues, more companies across the food and beverage space are likely to make these practices an integral part of their operations.