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Linking CSR to reward strategy

When it comes to CSR, are you putting your money where your mouth is? That doesn’t just mean donating to charity or investing in community initiatives, but linking your reward strategy to CSR.

According to Business in the Community’s (BITC) CR Index 2014, which surveyed 98 companies, including CSR targets in remuneration is becoming increasingly popular.

In 2014, 46% of respondents said they were linking CEO remuneration to the company’s CR performance, up from 24% in 2002. And 40% said that if corporate responsibility targets are missed, the CR component of the remuneration package is withheld.

Examples of companies taking this approach include Dairy Crest, where 25% of the CEO’s bonus is based on personal performance, of which CR is an integral part, and 10% of the long-term alignment plan is directly linked to CR performance. At The Southern Co-Operative, 40% of the CEO’s long-term incentive plan is linked to CR.

At Manchester Airports Group (MAG), the largest UK-owned airport operator, all senior leaders are required to demonstrate how they make a personal contribution to the groups’ CSR agenda in order to receive their full bonus.

“In simple terms, our leaders are encouraged through their incentive plan to contribute actively to and deliver our CSR agenda, through taking leadership roles in organisations like BITC, sponsoring and mentoring at local education establishments and volunteering in the community,” said group HR and transformation director Collette Roche.

The aim of doing this is to promote long-term strategic objectives that ensure leaders act responsibly, align reward with shareholder and wider stakeholder expectations and promote collaboration across the leadership team.

“We believe by basing our reward policy on these principles, our leaders will be motivated to do a great job today while ensuring a sustainable business strategy for tomorrow,” Roche said.

MAG targets and measures areas like volunteering hours (throughout 2013-14, employees racked up 8,549 hours of volunteering, an increase of 27%), the percentage of employees involved in CSR initiatives and carbon emissions.

It also looks at the levels of people employed through its airport academies, which aim to break down the barriers to local unemployed people getting jobs at the airports.

Participants take part in 20-week paid work placements, gaining valuable skills and confidence to improve their employability.

“Being a major employer in the communities we operate in, with more than 30,000 people working across our airport sites, we take our corporate responsibility seriously,” Roche said.

“Our community members are often our employees and customers, so building long and meaningful relationships with them makes business sense.”

At the other end of the scale from executives, providing the living wage, going beyond the minimum legal requirement for pay, is surely part and parcel of being a responsible business.

According to BITC’s report, 80% of participating companies monitor and review the pay of employees to ensure it meets the living wage, but only 40% ask suppliers and contractors to do the same.

Gemma Reucroft, UK & Ireland HR director of Tunstall Healthcare, said being a living wage employer is about more than good employment practice.

“It’s making a promise to your employees about their pay not just this year, but on an on-going basis,” she said. “It’s about saying: ‘We could choose to pay less but we are not going to.’’’

“In terms of taking a real step towards CSR, that really matters,” Reucroft added. “CSR is so wide now in terms of what it covers, all of which can be beneficial to organisations or society, but the living wage makes a real difference to real people in a way that volunteering or environmental programmes, no matter how engaging, simply can’t.”