European employers remain committed to driving environmental, social and governance (ESG) goals within executive incentives, despite global headwinds, according to research by Willis Towers Watson (WTW).
Its WTW 2025 ESG incentive metrics study, which is based on analysis of 1,070 public employer disclosures in Belgium, France, Germany, Italy, the Netherlands, Spain, Switzerland and the UK, also found that within the top 300 employers in European stock indices, 94% of respondents incorporated at least one ESG metric in their executive incentive plan, similar to last year. A total of 86% used ESG measures in their short-term incentive plans, while 70% used ESG measures in their long-term incentive plans (L-tips).
Almost three-quarters (70%) reported carbon emissions reduction metrics as their most prevalent ESG metric, with a six-percentage point increase in the last year within European L-tips.
Human capital metrics were reported in 81% of incentive plans in Europe, with metrics linked to diversity, equity, and inclusion (DEI) within management accounting for 44% and others linked to employee engagement accounting for 31%.
The prevalence of DEI-related metrics has slightly dropped across Europe by three percentage points, impacted by regulatory pressure and reporting frameworks such as the European Union’s Corporate Sustainability Reporting Directive and Pay Transparency Directive.
While 56% of respondents continued to use at least one DEI metric in their executive incentive plans, 9% of those that used a DEI metric in their 2024-2025 fiscal year plan said they plan to remove it in the future.
Hannah Summers, board advisory director at WTW, said: “The broad use of people metrics is consistent with the focus of boards as they continue to prioritise their role in the oversight and governance of human capital risks, investments and opportunities. They are concentrating on developments in labour markets, skill shortages, employee retention, and labour costs, all of which they view as critical to company strategy and competitive advantage amid geopolitical shifts and technology-driven business transformation.”
