Chipotle's Executive Compensation Now Based On Sustainability And Diversity Goals

The famous Mexican Grill, Chipotle, said Thursday that the compensation of its executives is now linked to accomplishing the company's goals on diversity and environmental sustainability. 10% of the annual incentives of their executives are tied to the steps taken toward achieving its annual organizational goals.

One of those targets set by the company is to increase the pounds of organic, local or regeneratively grown or raised food from the previous year. Chipotle, last year alone, hit 31 million pounds of local produce and is aiming to raise it to 37 million pounds by the end of 2021.

The chain is also planning to publish its carbon footprint at the year-end, including all indirect emissions along its value chain, faster than its prior expected publication date of 2025.

"It’s very important for us to be transparent and to be held accountable. We can say a lot of words, but we want to make sure that we have the actions to back it up,” said Laurie Schalow, the corporate affairs chief and food safety officer, who leads sustainability and environmental, social, and governance (ESG) reporting.

Chipotle also seeks to uphold both racial and gender pay equity. They continue to do so by promoting more women and people of color above the restaurant level. Online courses that teach corporate soft skills are also provided at the company's training academy to help all employees of different backgrounds to climb the corporate ladder.

The taco chain is not the first in the fast-food industry to implement these new changes in their business framework. Starbucks last year pledged to have 30% of its corporate workforce identify as a minority by 2025. This initiative comes from their commitment to diversity, which includes mentorship and outreach programs in partnership with United Way, an international network of local nonprofit fundraising organizations. More importantly, the coffee chain also linked executive compensation to inclusivity and diversity like that of Chipotle.

On the other hand, McDonald's in February has announced its targets in 2025 to include historically underrepresented groups as at least 35% of its senior-director and higher leadership roles. The company also aims to push women's representation in its top ranks to at least 45%, a massive 8% increase from 2020. For its compensation, the bonuses of its executives will be based on human-capital metrics starting this 2021.

All of these efforts towards sustainability and inclusion are very much urged by individual investors and large asset managers like BlackRock that have continued to choose stocks with strong plans for environmental, social and corporate leadership changes.

“I think the increased focus on performance around ESG and investor feedback was definitely behind our decision to go public with this,” Schalow supported.

This humane characteristic of companies has become increasingly attractive throughout the years hence, the shares of various sustainable brands, specifically Chipotle, have soared 91% in the last 12 months. The chain has been enjoying a market value of $39.6 billion.