National Grid has today become arguably the highest profile firm to date to tie environmental performance to staff remuneration packages in a move that will see executives financially rewarded based on the emission reductions their departments deliver.
The company announced today that it would implement carbon budgets across its entire operations from next month and incorporate compliance with those budgets into the performance management criteria it uses to gauge executives' salaries and bonuses.
Speaking to BusinessGreen.com, Karen Jordan, head of UK climate change policy at the company, explained that under the initiative carbon budgets would be set for each line of business and meeting those budgets would underpin all key management decisions.
The budgets follow a year-long project to develop a detailed emissions inventory that allows senior management to track the carbon footprint of each division within the organisation.
Jordan added that while the company's remuneration committee had not yet decided the extent to which performance against carbon budgets would inform bonuses, it was likely to become increasingly significant.
"We have a performance management regime for everything else we think is important, so it make sense to integrate carbon into that," she said.
The concept of bonuses based on environmental performance has grown in popularity in recent years. However, while senior civil servants officially have to meet environmental targets as part of their performance reviews, relatively few companies have yet put such initiatives into practice right across their operations.
National Grid's new budgets were announced on the same day the company set itself an additional interim target to cut emissions from its operations by 45 per cent by 2020. This is designed to help it meet its overarching target, announced last year, to cut emissions 80 per cent by 2050.
Jordan said that the company had also instigated a new policy that will see it apply the shadow carbon price recommended by Defra of £27.60 per tonne to future investment decisions, including electricity and gas network construction projects and the management of its vehicle fleet and facilities.
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