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Chipotle will hyperlink government pay with environmental and variety targets

Brian Niccol, CEO of Chipotle Mexican Grill

Adam Jeffery | CNBC

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

The burrito chain is following in the footsteps of Starbucks and McDonald's, both of whom 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 choosing 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 ESG performance and investor feedback was definitely the reason we decided to bring this to the public," said Laurie Schalow, who is chief corporate affairs officer and food safety officer is responsible for sustainability and ESG reporting for Chipotle.

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

"It is very important that we are transparent and accountable. We can say a lot of words, but we want to make sure that we have the measures to support this," said Schalow.

These goals include increasing the pounds of organic, local, or regeneratively grown or cultured foods from the previous year. Last year, Chipotle produced £ 31 million of local products under this umbrella, and a target of £ 37 million has been set 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 the expected publication date in 2025. Schalow announced that the company will announce new sustainability goals based on these findings when the report is released.

Chipotle is also committed to upholding both racial and gender pay equality and promoting more women and people of color above the restaurant level. A training academy has been established with online courses teaching a wide range of skills, from conflict resolution to goal setting, with the aim of helping employees of different backgrounds climb the corporate ladder. As of December 31, the company had almost 88,000 employees.

Chipotle's shares are up 91% over the past 12 months, equating to a market value of $ 39.6 billion.

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