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Zegna Group is taking a bold stance on climate. The new ESG commitments will be overseen by the Board of Directors and executive bonuses, including for the CEO, will be linked to the achievement of these goals.

It’s a rare move for fashion. Nike is one of the only other high-profile fashion companies to tie executive bonuses to ESG goals.

The climate commitment does not mean that sales growth is not on the agenda for Zegna. The group has announced its new medium-term objective of exceeding 2 billion euros in annual turnover, compared to 1.3 billion euros in 2021. Five months after the IPO of the Italian luxury company with a special purpose acquisition company, Gildo Zegna, Managing Director and third Generation X family member said that the ESG goals announced today “reaffirm our commitment to responsible growth and we boldly lead us into the future. We have rooted our financial objectives in our values, which makes me confident in our ability to achieve the ambitions set out in our business strategy.

Sustainability experts widely welcomed the move, but warned that ESG goals are complicated and the path to achieving them cannot lie in simply increasing executive pay. “ESG objectives can be useful in encouraging a focus on non-financial factors that will affect long-term value, but may conflict with short-term earnings. But also, especially with long-term goals such as net zero commitments, including executive compensation targets, can be a catalyst for breaking down those long-term goals into shorter-term goals,” says Tom Gosling, executive member of the finance department at London Business School.

Fashion’s sustainability goals are often opaque, with little visibility on whether brands are setting ambitious enough goals to adequately respond to the urgency of climate change. Tying executive pay doesn’t necessarily help close that loophole, Gosling says. “Targets are hard to calibrate because it’s hard to know what a hard target is. In this context, boards generally set compensation objectives consistent with a strategy that they fully expect to achieve. So there is a risk that ESG compensation goals will lead to more compensation, not more ESG.

Zegna’s commitments include the production of the majority of goods in Italy and plans to trace the origin of more than half of the “priority” raw materials by 2026. “The three big commitments are part of who we are and something we’ve been doing since the beginning. 1900 from our grandfather,” said Edoardo Zegna, Director of Marketing and Sustainability.