Weekly Dose of ESG — Liberté, Égalité, Diversité
Liberté, Égalité, Diversité
Friday, 25th January 2022
What is going on?
“Fewer large companies are run by women than by men named John”
Stated a shocking headline from NY Times in 2015, pointing to the incredible lack of diversity in US companies. And as you probably know, it’s not just women that have been historically marginalised in the corporate world. It has also been individuals from different ethnic, racial, gender or disabilities backgrounds.
So how is diversity doing in 2022? Well, there is notable progress as investors and employees are pressuring companies to consider Diversity, Equity and Inclusion (DEI) in their business models. And indeed, we have already see some results. Last week Netflix announced that women and racial or ethnic minorities represent over 50% of its US workforce and that women also hold more than half of director or higher management roles at the company. Financial bodies are also eying this topic as last year the SEC approved Nasdaq’s new listing standards to include a minimum of two diverse board members and to publicly disclose board-level diversity statistics. While it might not sound like much, the sentiment around DEI is shifting… and hopefully towards a more inclusive future?
Why is diversity important?
Diversity is the fabric of society, nurturing creativity, collaboration, challenging the status quo of a homogeneous environment. It can reduce discrimination, improve customer engagement and employee well-being.
Beyond moral obligation to implement DEI, it is also a business imperative and simply the smart thing to do:
- McKinsey report suggests that top-quartile companies with a focus on racial and ethnic diversity are 35% more likely to have financial returns above their respective national industry medians;
- Harvard Business Review writes that teams solve problem faster when they are cognitively diverse (i.e. differences in perspective or information processing styles);
- According to Deloitte, employees from diverse backgrounds can improving innovation by 20%.
And let’s not forget appropriate reporting:
- Just Capital’s analysis states that companies embracing disclosures on workforce diversity outperform their peers that do not disclose.
What is the takeaway?
Diversity is the foundation of thriving companies and ought to be considered seriously in the corporate context. However, investors still need better disclosures and data around diversity metrics. Data allows us to make DEI tangible, provides accountability and enables monitoring developments. There has been progress with data standardisation and availability, with SASB’s human capital assessment initiative and with more than half of the US largest companies now reporting workforce diversity data.
Overall, DEI incorporation and reporting still have a long journey to go. With the 2022 proxy voting season around the door, we expect to see a diversity and climate crisis discussions at the forefront of proxy topics. Stay tuned …
See you next week!
Paula & Philipp
