Diversity Works Blog
Take Control of Your Destiny
Posted by Holly Wittenberg on May 03, 2021.
We’re hearing from companies that one or some combination of these external stakeholders is asking American CEOs about their strategy to improve diversity, equity, and inclusion at their companies. Whether you run an advertising firm in New York City or a small manufacturing plant in Southern Indiana, the operating environment has changed permanently. We believe the best course of action is to take control of your destiny with a thoughtful, mission-driven approach. No fads and no gimmicks. Here's how Diversity Works sees different stakeholders' demands playing out.
For decades, large investors (e.g., pension funds, endowments) have invested in responsible corporations to drive positive environmental and societal impact. But how do they measure performance? Some of the measures are quantitative and even deemed financially material. The Sustainability Accounting Standards Board, a nonprofit that developed sustainability accounting standards, has defined thirteen DEI standards in three categories: Employee Health & Safety, Labor Practices, and Employee Engagement, Diversity & Inclusion. These DEI material measures include monetary losses from lawsuits, employee turnover, and the percentage of gender and racial/ethnic group representation at all levels in the organization. With these measures defined, other stakeholders can evaluate a company's DEI performance.
Source: SASB Website
Customers both large and small are demanding change from their suppliers for a number of reasons, including a desire to leverage their balance sheet to drive social change and to reach their investor-mandated targets. These large companies will require their vendors to start reporting their DEI performance and make public commitments to meet measurable goals.
• REI, the outdoor clothing, and equipment company, recently announced that their 1,000+ vendors will be held accountable for new climate and inclusion expectations.
• Unilever, the consumer goods company, requires all 60,000 of its suppliers to pay a living wage.
• The Billion Dollar Roundtable is a group of companies that commit to directing at least one billion in Tier 1 spend to women-owned and minority-owned businesses.
Diversity Works counsels its clients to take a close look at their supplier network as it can provide a great opportunity to have a short-term, substantial impact on an organization’s DEI performance.
COMMUNITY AND REPUTATION
Communities expect their corporate neighbors to be socially responsible "citizens." Companies will communicate their values and their DEI-related actions as a way to improve their brand and drive revenue.
Yet, every day we hear about the public calling out a company for "bad" behavior or incident (see Starbucks story). One bad tweet about company misbehavior can inflict as much damage as a negative newspaper story and companies must be ready to respond. These reputational body blows can negatively affect how individuals and business partners make purchasing decisions. But organizations can take control of their destiny by taking inventory of their efforts and making a plan to improve. Action today combined with a set of communication materials can create resilience in the face of a crisis. Without a plan, unexpected costs can mount quickly such as public relations or legal counsel and lost revenue.
Three significant efforts currently apply only to publicly traded companies but will inevitably drive expectations that impact private companies. First, twelve state legislatures have passed or are evaluating laws requiring at least one woman on boards of directors, and five of them have included penalties for non-compliance. Second, the Securities and Exchange Commission recently adopted a new human capital management disclosure requirement detailing data on items such as voluntary and involuntary turnover. Third, NASDAQ will require companies listed on their exchange to include at least one woman on the board or explain why they don't.
Although the pressure can feel overwhelming, the answer is clear. Organizations must take inventory and develop a plan. We recommend evaluating your performance beyond the traditional talent management metrics to capture all the opportunities and risks. In short, to capture the opportunities and manage the risks, companies should develop an intentional, formal DEI strategy that includes the business case, the roadmap for improvement, and a communications plan.
ABOUT DIVERSITY WORKS
Diversity Works is a consultancy that helps employers shape their workplaces better to reflect their communities and their most important audiences. We identify and address structures and practices that prevent companies from hiring and promoting a more diverse workforce. Our team and advisory committee come from various professions and have a shared passion for workplace diversity, equity, and inclusion.