Linking Executive Remuneration To Environmental Measures – Environmental And Social Performance Indicators

Summary

Discuss about the Linking Executive Remuneration To Environmental Measures.

The social and environmental issues are very critical in the success of any form of the business organization whether it may be small or big. The main aim of this report is to provide insights as to how the executive remuneration of the company shall be linked to the achievement of the social and environmental objectives. The second main aim of the report is to identify the indicators which helps in measuring the performance related to the social and environmental issues. With these two aims the overall report of the have been framed into major two headings describing the indicators for environment and social separately.     

The environmental performance indicators are defined as the factors which will help in determining as to how the performance shall be measured and evaluated Vis a Vis the factors. The indicator has been bifurcated into the three major headings. One is management performance indicators, second is operational performance indicators and the third is environmental condition indicators. These are detailed as follows:

Management Performance Indicators – It consists of the policies and procedures adopted by the company, activities defined by the company, decisions taken by the management of the company and the various actions taken by the management of the company. These are as follows for the given manufacturing company:

• First indicator is the comparison of the actual expenditure incurred towards the environmental safety with the budgeted environmental cost. If it is within the limit then it will be classified as the positive indicator otherwise will be rewarded as the negative indicator (Azzone, 2010).
• Second indicator is ascertaining the number of employees that will be trained or have been trained.
• Third indicator is to ascertain whether there has been any audit observations during the year and what steps have been taken by the management in regard to remove or rectify that observation. The major indicator is that how much time the management has taken to rectify that audit finding.
• Fourth indicator is the number of complaints that the company has received from the public and the employees of the company.
• Fifth indicator is to ascertain the levels of the management with respect to the environmental responsibilities (Henri, 2008).

Operational Performance Indicators – It consists of the performance of the various inputs and the input services and the functioning of the operational facilities, etc. These are as follows:

• The first measure is to identify as to how much raw material is being used for the production of per unit of the finished goods (Jasch, 2000).
• The second measure is to know as to how much energy is consumed per unit of finished goods and similarly how much energy is conserved during the particular period of time.
• The third measure is as by how many times there has been the situation which has led to the closure of the business and shutdowns.
• The fourth measure is to calculate and ascertain as how much hazardous waste is generated per unit of the finished goods.
• The fifth measure is the basic measure as it informs as to what kind of specific pollutants are generated during the operations and its proportion on yearly basis.
• While carrying on any operations the waste water is charged and the next measure deals with the ascertainment of the waste water discharged per unit of the finished product.
• Lastly the emissions are measured as exceeding days per year (De Benedetto, 2009).

Environmental Condition Indicators – It consists of the condition prevailing at domestic level, national level, international level and the global level. These are as follows:

• The first basic measure is that how much the contaminated concentration has in the air of the state and the country.
• Then the frequency is measured of the presence of the photochemical smog in the air.
• The next basic measure is that how much the contaminated concentration has in the surface or under ground level of the state and the country (Hermann, 2007).
• The most important measure under this head is the ascertainment of change in groundwater level as it helps in measuring the concentration of the hazardous waste in the water.
• Another important indicator is the ascertainment of the level of contaminated concentration in the soil (Jamous, 2013).
• The ascertainment of the population of the specific specie also helps in measuring the performance as less the species more will be assumption that the operations are generating more hazardous waste or pollutants.
• The measurement of the level of the employees blood lead will act as the good indicator.
• If the operations are generating any waste in the water, then the next measure will is the identification of the deaths of fish happened in the water on periodical levels (Whitford, 2001).

In this way, the aforesaid indicators will helps in measuring the environmental performance of the company.

The social performance is mainly related to the end users of the company’s products and the information. These indicators are explained below:

• The first indicator is the measurement of how far the company is able to retain its customers. This depends on the market share that the company has acquired during the year and also in comparison to earlier year. The more the company will be able to retain its client and the customers, more will be the positive indication that the company is performing good socially (Preston, 2007).
• The second indicator is how far the company has been able to generate the employment opportunities for the people of the respective country and state in which the company is operating. More the employment opportunities created more will be the reputation of the company in the market (Wood, 2005).
• The third indicator is the feedback received from the customers. It is the company’s policy to have the feedback from the customers. If the feedback is positive, the customers will seems to have been satisfied. More the customers are satisfied more will be the company’s health in terms of the market share.
• From the management point of the view, the best indicator is the comparison of the budgeted social costs with the actual social costs. If the budget is exceeded then the management will become more cautious and will try to employ such resources which can help them to cover the social costs and in case the budget is met with surplus then it be considered as the positive fact (Brammer, 2006).
• The next indicator is whether the company has been providing the wide range of products or services as many of the companies are always found engaged in the creating the innovative products or innovative services. If the company is also following the same then it shall be treated as the company is working positive towards the society otherwise the negative image will be developed (Ullmann, 2015).
• The next indicator is the quality of goods and services delivered and provided respectively to the customers. The goods so provided shall be of the good quality and also the services provided to the customers shall be up to the mark otherwise the indicator will declare the company as liquidated company (Waddock, 2007).

Thus, in this manner, the social indicator helps in evaluating the performance of the company.

Conclusion And Recommendation

Every company is required to meet the environmental and social expectations that have been laid down as per the environmental guidelines and the corporate social responsibility as per the corporations’ act 2001. The manufacturing companies are required to keep in consideration the various factors that will help in measuring the performance of the company in terms of the environment and the social. These two has been described as the planet and people of the world of the operations of the company. Each of the indicators explained in the report states that the company is required to maintain its conduct in an efficient and effective manner and shall not engage in any activity which can lead to negative image in the market. To conclude, the report has provided with all the indicators required for manufacturing companies.

It is recommended for the manufacturing company to take care of all the indicators and measures for the better evaluation of the company’s environmental and social aspects.

References 

Azzone, G., (2010), “Defining environmental performance indicators: an integrated framework”  Business Strategy and the Environment, 5(2), pp.69-80

Jasch, C., (2000), “Environmental performance evaluation and indicators”. Journal of Cleaner Production, 8(1), pp.79-88

De Benedetto, (2009), “The Environmental Performance Strategy Map: an integrated LCA approach to support the strategic decision-making process”. Journal of Cleaner Production, 17(10), pp.900-906 

Whitford, V., (2001) “City form and natural process”—indicators for the ecological performance of urban areas and their application to Merseyside, UK. Landscape and urban planning, 57(2), pp.91-103 

Hermann, B.G., (2007), “Assessing environmental performance by combining life cycle assessment, multi-criteria analysis and environmental performance indicators”. Journal of Cleaner Production, 15(18), pp.1787-1796 

Henri, J.F, (2008), “Environmental performance indicators: An empirical study of Canadian manufacturing firms” Journal of environmental management, 87(1), pp.165-176.

Jamous, N., (2013). “Environmental performance indicators”. In Organizations’ Environmental Performance Indicators (pp. 3-18). Springer Berlin Heidelberg.

Preston, L.E, (2007), “The corporate social-financial performance relationship: A typology and analysis”. Business & Society, 36(4), pp.419-429.

Brammer, S, (2006), “Corporate social performance and stock returns: UK evidence from disaggregate measures”. Financial management, 35(3), pp.97-116.

Waddock, S.A., (2007), “The corporate social performance-financial performance link”. Strategic management journal, pp.303-319. 

Wood, D.J., (2005), “Stakeholder mismatching: A theoretical problem in empirical research on corporate social performance”. The International Journal of Organizational Analysis, 3(3), pp.229-267.

Ullmann, A.A., (2015), “Data in search of a theory: A critical examination of the relationships among social performance, social disclosure, and economic performance of US firms” Academy of management review, 10(3), pp.540-557.