Apple drops ESG performance metrics from executive pay packages

Two years ago, many of America’s largest companies began stripping diversity targets out of executive pay packages. Now, environmental measures—including goals tied to climate emissions—are beginning to face a similar fate. 

Apple Inc. quietly dropped a so-called “ESG modifier” from its 2025 pay packages for Chief Executive Officer Tim Cook and other top executives, according to a corporate filing last month. The provision, in place since 2021, had allowed Apple’s board to adjust annual bonuses up or down by as much as 10 per cent depending on the company’s performance on a variety of measures, including greenhouse-gas reductions and renewable energy use among suppliers.

 

 

Apple’s move follows similar decisions at dozens of companies, including Starbucks Corp., Salesforce Inc., Mastercard Inc. and Procter & Gamble Co., which have recently weakened or severed ties between environmental performance and the size of their executives’ paychecks.

 

The shift is beginning to show up in the numbers. The share of S&P 500 companies tying executive compensation to environmental metrics fell to 46.7 per cent in 2025, down from a peak of 52.6 per cent two years earlier, according to figures from The Conference Board and analytics firm ESGAUGE.

 

The decline is modest compared to the stampede away from diversity metrics, which appeared in nearly three-quarters of S&P 500 pay plans in 2023 before plummeting to 34 per cent last year. Still, recent high-profile retreats from climate-linked pay could embolden other companies to follow suit, according to Brian Bueno, sustainability practice leader at Farient Advisors, an executive compensation consulting firm.

 

“We’re seeing that public walkback a little more overtly on the DEI side, but certainly it’s changing on the climate side, as well,” said Jannice Koors, senior managing director at executive compensation consulting firm Pearl Meyer.

 

Officials at Apple, Starbucks  and P&G declined to be interviewed, but emphasized that they remain committed to their environmental goals. Mastercard also declined to talk and said they’ve made significant progress on their targets. Salesforce didn’t respond to several messages.

 

The retreat is a setback for a mechanism once viewed as a promising driver of corporate action on climate and water conservation, among other issues.

 

Linking pay to performance makes sense to many experts because environmental risks can turn into financial headaches. A warming planet can disrupt supply chains, deplete water resources or spur costly regulations. Connecting a portion of executive pay to these metrics ensures that they will get discussed during operating reviews and capital allocation decisions, said Namrita Kapur, a lecturer at the Yale School of Management.

 

“If something isn’t reflected in compensation, it rarely gets sustained attention at the leadership level,” said Kapur. “Linking pay…signals that these outcomes are core to performance, not side projects.”

 

Michael Garland, who spearheads corporate governance and responsible investment at the Office of the New York City Comptroller, which oversees $311 billion in pension funds for city workers, likes to see these links to ensure companies aren’t sleeping on the climate transition. “People do what they’re paid to do,” he said.

 

But political opposition has grown fierce. Conservative activists have long criticized corporate climate and diversity efforts as “woke.” After the Supreme Court’s 2023 ruling striking down affirmative action in college admissions, many companies removed DEI-linked pay metrics. (That trend will likely continue after it was revealed this month that the US government is probing Nike Inc.’s diversity efforts, including its ties to executive compensation.)

 

Now, with President Donald Trump obliterating climate regulations and deriding emissions-reduction efforts as “the green new scam,” some companies may be fearful of maintaining visible links between pay and environmental targets.

 

With fewer climate regulations on the horizon, investor pressure has also cooled. Shareholders prod companies less frequently over environmental concerns than they did a couple of years ago, said Bueno of Farient Advisors. “That makes it so these issues are a little less top of mind for the company and for the board,” he said. “If there’s just not that much focus on it, then that’s just what drops off.”

 

The pullback also indicates that some companies never fully integrated environmental goals into their business strategy, according to Koors of Pearl Meyer. “We saw a lot of bandwagon effects,” she said, including companies adding these metrics because everyone else was doing it and they thought it would make them look good. “So, when the winds blew back in the other direction, they’re like, ‘Okay, I guess we’ll take it out now.’”

 

Even before the retreat, however, some ESG-linked pay plans packed a meager punch. Many used targets that were too easy to reach, according to a 2024 paper from law professors at the University of California at Berkeley and Stanford University. They found that S&P 500 companies missed on all their ESG-linked metrics only 2 per cent of the time—far less than the 22 per cent who missed on all their financial targets. This sparked concerns that executives were getting fatter paychecks for scant environmental progress.

 

In many cases, the environmental metrics also carried limited weight. Apple’s ESG modifier, for instance, increased Tim Cook’s pay by $747,450 in 2023. That’s a tidy sum, but just 1.2 per cent of his total compensation that year.

 

Still, some companies say the link between environmental performance and pay is here to stay. Xcel Energy Inc., a Minneapolis-based utility company, has tied executive compensation to environmental goals for the past two decades. Its greenhouse gas target accounts for about 20 per cent of its top executives’ potential pay.

 

The company operates across eight states, including three  with mandates for steep emissions cuts. Several municipalities in their territory have also enacted ambitious climate goals. 

 

“Those states and those communities have asked for us to have these environmental goals, targets and metrics for a very long time,” said Jeff Lyng, Xcel’s vice president of external affairs and policy. “For us, environmental and performance metrics are totally connected.”