Why Seventh Generation ties bonuses to sustainability goals

Why Seventh Generation ties bonuses to sustainability goals

Corporate leaders learned long ago that a fully engaged workforce is a boon to a company's bottom line. Many businesses use the annual bonus process to link employee compensation to the company's financial performance.

So why aren't more companies using this proven tactic to drive behavior toward sustainability goals? Some are, of course, but it's still the exception rather than the rule.

While most practitioners agree that establishing clear accountability for sustainability goals boosts a program's likelihood of success, few have brought money into the equation. A notable exception is Seventh Generation, which launched an experiment in 2011 linking four one-year sustainability goals to employee bonuses. The company plans to extend the program into 2014.

The Vermont-based maker of household and personal care products (Disclosure: The company is a client of Pure Strategies) has long been a sustainability leader with a focus on healthy products, on-pack ingredient disclosure, high recycled-content plastic bottles and strong commitment to corporate responsibility. The company went through a period of upheaval a few years ago with leadership changes at the top and the departure of many employees.

"With half of our company joining us in the past two years, setting goals that everyone owns helps connect new employees to our mission in a concrete way," says Reed Doyle, director of corporate consciousness.

The impetus for the program came from the top.

"CEO John Replogle wanted to develop a mechanism that would embed sustainability in a more tangible way than it had been in the past," explains Ashley Orgain, manager of mission advocacy and outreach.

The program applies to every employee, including Replogle himself. The initial sustainability allocation was 10 percent of the Annual Incentive Plan (AIP), increased to 20 percent in 2013. That's a good chunk of change even for a small company with 114 employees.

The company's Roadmap 2020 Goals link to four aspirations that articulate the company's vision to nurture nature, enhance health, transform commerce and build communities. The goals tied to the bonus are one-year goals that support these longer-term targets. All employees can influence the engagement and volunteering goals. The other 2012 goals are under the control of specific teams: reducing virgin plastic use by 10 percent and achieving USDA BioPreferred Certification for all eligible products.

In 2012, the company met all of its sustainability incentive goals, as outlined in its 2012 Corporate Consciousness Report. But do the bonuses deserve the credit for this?

"Absolutely," says Orgain. "The incentive was instrumental in helping us achieve our volunteering goal of 100 percent participation. Our program is ambitious, with employees receiving 20 paid hours each year to support worthy organizations. While we closed the office for two companywide volunteer days at local organizations and posted additional opportunities on our Intranet, the bonuses helped tip the balance in getting us to 100 percent."

The story is more nuanced when it comes to the goals that affect specific teams. The 2012 plastic goal was formalized too late in 2011 to be integrated fully in relevant operations plans. The company decided to set a goal that was an "achievable reach," Orgain explains. Nevertheless, the introduction of the sustainability goals at a companywide meeting and their high visibility throughout the year created interest, pride and ownership in the goals throughout the business.

Seventh Generation continues to refine the program and is introducing goals earlier in the previous year to drive planning decisions that will support the changes it seeks. A test of the community's support of the program may occur this year. The company's 2013 goal of reducing rigid plastic use by 25 percent is a definite reach.  

"We've always tried to push ourselves," says Doyle. "As a company, we've always been interested in the right solutions, not the easy ones."

Concern about meeting this goal may be behind discussions about possibly changing the bonus structure from the current all-or-nothing approach to one that aligns more closely with the way bonuses for meeting financial goals are structured.

"We've always been a company that considers the next seven generations in our every deliberation," Orgain says. "Unless you build that philosophy into the decision-making process and incentivize that vision, you're not going to reach your full potential."