ESG goals and CEO pay: 81% of European firms link them, versus only 44% in the US. A growing gap in sustainable corporate governance
Europe is leading the way in linking executive compensation to sustainability targets, with 81% of its companies tying CEO pay to ESG goals. In contrast, only 44% of companies in the United States have adopted this approach, highlighting a widening transatlantic gap in sustainable corporate governance.
According to a recent KPMG report analyzing 375 companies across 15 countries, 78% of major global firms have already integrated sustainability metrics into board-level compensation packages. Aligning ESG goals and CEO pay is now seen as a central component of corporate governance, driving a broader shift toward sustainability within the private sector.
ESG goals and CEO pay: KPMG findings
The KPMG analysis reveals that a majority of companies – including industry giants in energy, finance, tech, and consumer goods – have introduced variable compensation models tied to ESG targets. Notable findings include:
- 78% of the companies surveyed consider sustainability in executive pay structures.
- Of those with clearly defined ESG targets, 88% align them with material issues relevant to their business.
- The most common ESG focus areas in incentive plans are climate change (particularly greenhouse gas emission reductions) and workforce metrics (employee engagement, diversity, injury rates).
- In terms of time horizon, 37% use ESG metrics in both short- and long-term incentives, 40% focus only on short-term goals, and 23% exclusively on long-term ones.
Europe vs. US: a growing divide
Geographically, the data show a stark contrast. On average, 81% of European companies link executive compensation to sustainability goals, compared to just 44% in the US. France, Germany, and the United Kingdom lead the charge, with nearly all surveyed companies in each country adopting this model. The US, on the other hand, ranks last among the 15 countries analyzed.
The gap isn’t just in adoption rates. European firms are more likely to link incentives to long-term ESG performance – as seen in Italy and France – while US companies largely favor short-term metrics. In fact, 10 out of 11 American firms studied do not include long-term ESG targets in their compensation strategies.
There’s also a difference in how well these targets align with business priorities. In Europe, over 85% of companies show full or partial alignment between pay incentives and material ESG topics. In the US, that figure drops to 60%.
