Sustainability matters are an integral component of the remuneration of our Executive Board. Specifically, the performance of the Executive Board is assessed based on GHG emission reduction targets as reported under E1-4.
The Long-Term Incentive Plan (LTIP) incorporates a sustainability factor that adjusts the target achievement based on the performance of our three strategic sustainability goals (“dedicated to human progress”, ”partnering for sustainable business impact” and ”reducing our ecological footprint”) over a three-year period. This adjustment can increase or decrease the variable remuneration of our Executive Board members by up to 20.0% depending on the achievement of these sustainability goals. Additionally, in the profit-sharing scheme for the Executive Board, bonus criteria for increasing profit sharing are based on extraordinary contributions to our three strategic sustainability goals including metrics such as CO2 reduction. Conversely, malus criteria for decreasing profit sharing apply in cases where the sustainability goals are not reached.
In the current reporting period, a percentage of the variable remuneration was directly linked to climate-related considerations. This includes the ongoing integration of sustainability targets into the LTIP for executives including the Executive Board. This first LTIP target including GHG emissions was set as of fiscal 2022, focusing on Scope 1 and 2 emissions, with an evaluation timeframe covering 2022, 2023 and 2024. In fiscal 2023, we established a new LTIP target for the period of 2023 to 2025, and in fiscal 2024, we set another target for 2024 to 2026. Each target aims for absolute GHG emission reductions, with the target values being tightened annually. We are currently discussing the proposal for the 2025–2027 targets. The potential payout for the first evaluation timeframe for the Executive Board should take place in 2026 after an additional one-year holding period and will be performed accordingly going forward.
The climate-related considerations factored into the remuneration include specific targets for reducing Scope 1 and 2 GHG emissions, which contribute to achieving our climate targets by 2030. These targets are aligned with our commitment to the Science Based Targets initiative (SBTi) to limit global warming to 1.5°C. The Executive Board is responsible for overseeing the implementation of targets for climate change mitigation. The Group’s Sustainability Board regularly reviews progress toward implementing the targets. This board, led by the Chief Sustainability Officer, should ensure that the corporate sustainability strategy and the individual business strategies are aligned, with the aim of reinforcing the commitment to climate-related performance.
The integration of climate-related targets into the remuneration framework reflects our commitment to sustainability and the importance of leadership accountability in achieving our climate objectives. For 2024, the climate-related remuneration of the Executive Board could not be determined as LTIP 2022 will only be paid out in 2026.
Further information on the integration of sustainability-related performance in incentive schemes of our Executive Board members can be found in our “Compensation Report” (not audited as part of the audit of the Sustainability Statement).