Chipotle will link executive compensation to environmental and diversity goals

• Chipotle is tying executive compensation to annual targets aimed at improving the company's internal diversity and sustainability.
• Investors have been pushing publicly traded companies to make more commitments to improve their environmental, social and corporate governance.
• Chipotle plans to publish its carbon emissions footprint by the end of the year.

Chipotle Mexican Grill said Thursday that executive compensation will now be linked to hitting targets tied to the company's environmental and diversity goals.

The burrito chain is following in the footsteps of Starbucks and McDonald's, both of which recently announced that performance for racial and gender diversity goals will impact executive compensation plans. Individual investors and large asset managers like BlackRock are increasingly picking stocks with strong environmental, social and corporate governance in mind, pushing companies to make changes to become a more attractive investment.

"I think the increased focus on performance around ESG and investor feedback was definitely behind our decision to go public with this," said Laurie Schalow, who oversees sustainability and ESG reporting for Chipotle in her role as corporate affairs chief and food safety officer.

Starting this year, 10% of Chipotle executives' annual incentives will be tied to their progress toward achieving company goals.

"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," Schalow said.

Those targets include increasing the pounds of organic, local or regeneratively grown or raised food from the previous year. Last year, Chipotle hit 31 million pounds of local produce under this umbrella, and it's set a goal of 37 million pounds by the end of 2021.

The company plans to publish its carbon footprint, including all indirect emissions along its value chain, by the end of the year, faster than its prior expected publication date of 2025. Schalow said that the company will announce new sustainability goals stemming from those learnings when the report is released.

Chipotle is also seeking to maintain both racial and gender pay equity and promote more women and people of color above the restaurant level. It's created a training academy with online courses that teach a wide range of skills, from conflict resolution to setting goals, with the aim of helping employees of all backgrounds climb the corporate ladder. The company employs nearly 88,000 people, as of Dec. 31.

Shares of Chipotle have risen 91% in the last 12 months, giving it a market value of $39.6 billion.

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