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ESG-based executive compensation and waste management: Global evidence
Ammar Ali Gull1, Aitzaz Ahsan Alias Sarang2, Irfan Haider Shakri3
1De Vinci Higher Education, De Vinci Research Center, Paris, France; International School, Vietnam National University, Hanoi, Viet Nam.
Journal of Environmental Management
|September 28, 2025
Summary
Executives' environmental, social, and governance (ESG) compensation significantly reduces corporate waste generation and boosts recycling. This highlights the power of linking executive pay to sustainability for better environmental outcomes.
Area of Science:
- Environmental Science
- Corporate Governance
- Sustainability Studies
Background:
- Global solid waste generation exceeds 2 billion tons annually, projected to increase by 70% by 2050.
- Escalating waste poses severe threats to human habitats, environmental quality, and public health.
- Effective waste management is crucial for mitigating global warming and promoting sustainability.
Purpose of the Study:
- To investigate the impact of executive environmental, social, and governance (ESG) compensation on corporate waste management practices.
- To analyze the relationship between ESG-linked executive pay and firm-level waste reduction and recycling efforts.
- To explore how environmental sensitivity, regulatory stringency, and corporate governance quality moderate this relationship.
Main Methods:
- Utilized a global dataset of 17,443 firm-year observations from 43 countries (2002-2019).
- Employed the system generalized method of moments (GMM) for robust econometric analysis.
- Examined the association between ESG compensation and waste management metrics, including waste generation and recycling rates.
Main Results:
- Executive compensation tied to ESG performance is significantly associated with reduced total waste generation (1.07% reduction per std. dev. increase in ESG pay).
- ESG compensation also correlates positively with increased recycling initiatives.
- The positive impact of ESG compensation on waste management is more pronounced in environmentally sensitive industries, low-stringency regulatory environments, and firms with lower corporate governance quality.
Conclusions:
- Linking executive compensation to ESG performance is an effective strategy for improving corporate waste management.
- Policymakers and stakeholders should consider integrating ESG factors into executive contracts to drive sustainable practices.
- Incentivizing executives through ESG compensation can lead to significant environmental benefits, including waste reduction and enhanced recycling.
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