A Radical Move? Mastercard’s Employee Bonuses Will Be Linked To ESG Goals

May 4, 2022
The payments giant has boosted its environmental, social and governance (ESG) credentials by expanding an earlier scheme for senior executives to all staff bonuses.

The payments giant has boosted its environmental, social and governance (ESG) credentials by expanding an earlier scheme for senior executives to all staff bonuses.

Mastercard, one of the world’s largest payment processors, has said that, going forward, all employee bonuses will be subject to meeting ESG goals.

“As a company, we are committed to doing well by doing good. It’s something that makes us unique,” Michael Miebach, the company’s chief executive, said in a blog post. “It’s core to our values and we expect it of ourselves.”

Last year, the company introduced a new compensation model for executives at the executive vice president level and above.

Their bonuses were determined in part by the company’s performance on three ESG priorities: carbon neutrality; financial inclusion; and gender pay parity.

“Because of their work and yours, we either met or exceeded our goals,” said Miebach.

This model is now being extended to the company’s annual corporate score, as well all employees globally, meaning shared accountability and progress to the next level, in a move that has been greeted by the industry.

“Incentivisation is a key element of what we call the sustainability DNA,” said Dominic King, senior principal at Accenture Research, explaining that this is the tangible practices that leading companies use to transform ESG from being bolted on to built-in.

He continued: “Building concrete reward structures helps to build accountability for sustainability performance at all levels of an organisation and it’s a clear sign that companies are committed to walking the talk.”

However, some sustainability consultants have warned that although the ESG targets are a welcome move, this may not be the green credentials that some headlines suggest.

"I think that this is a positive move, but question is, what are their ESG targets?” asked Gavin Lendon, a sustainability consultant and founder of Sustainology UK.

In its latest sustainability report in 2020, the biggest areas of impact were diversity, equity, talent, recruitment, retention and wellbeing, he pointed out. “However, there was no mention of the environment. If they are just targeting those impacts, there is a possibility that they could be accused of greenwashing."

It is good publicity, said Illana Adamson, founder of Be Better Sustainability. “But linking KPIs to your targets is the important part if you look at this from a macro perspective.”

“There is a risk of short-term thinking and greenwashing with this strategy but if Mastercard has set out a credible long-term pathway that risk is reduced. We need a shift in focus so that outcomes are not just based on returns but on whether companies have really been responsible to their stakeholders," she suggested.

Meanwhile, fellow sustainability consultant Jessie Frahm argued: "We need to start at the right place when we do sustainability and sustainability strategy. If you are to deliver a successful, sustainable organisation then you actually need to start looking at how to embed it into the business DNA, starting with the mission."

Mastercard has already made bold ESG announcements and commitments in recent years.

Last November, for example, it accelerated its net-zero timeline by a decade, from 2050 to 2040.

In addition, in February this year, the company announced it would provide consultancy services in areas including ESG through its Priceless Planet Coalition.

The Priceless Planet Coalition is dedicated to planting 100m trees and Mastercard has initiated the project with other companies such as American Airlines, Barclays and Santander.

When it comes to ESG, there is a question of how radical Mastercard and other card schemes can actually become of their own accord, considering the fact that they technically encourage excessive consumption through the fact that they provide consumers with a way to pay.

“Mastercard benefits from excessive consumption, which is a problem for society, but they don't necessarily have a responsibility to deal with this,” said Lendon.

What Mastercard is doing is providing a means of payment, he said. “For example, a Mastercard issued credit or debit card could be used in America to buy a weapon. Changes like this have to come from the government. You are not going to get Mastercard saying that consumers can't buy a single-use plastic."

There are ways around this, however, according to Frahm.

"As a business, you can't say to customers they are unable to spend money on this or that,” she said. “Yet, what Mastercard could do is take advantage of schemes and credits, with consumers able to buy biofuel while on international trips for example."

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