A CEO in goblin-mode aside, the removal of Tesla from the S&P 500 ESG Index is a textbook illustration of how DEI performance hits the bottom line. A product may solve an environmental problem, but if you have a toxic workplace rife with safety issues, you have a fundamental disconnect between your values and your actions. A Diversity Works assessment examines that intersection and helps organizations align for long-term success.
Tesla was removed from the S&P 500 ESG Index because the company is exposed to outsized risk in social governance in the eyes of the index provider. Employee lawsuits and government investigations may have the direct negative financial impact of increased costs and lost productivity, as well as indirect costs of poor employee engagement and damage to brand reputation. This affects the firm’s ability to attract workers and customers, respectively. In short, lower ESG scores could mean the likelihood of poorer financial performance. And theoretically, higher risk could take the form of higher cost of capital for the firm.
In 2021, Tesla was fined for eight separate health and safety violations. Workplace health and safety violations tell us a lot about the culture of an organization. While Tesla CEO Elon Musk may consider these a cost of doing business, they usually indicate that workers don’t feel like they can speak up about the presence of health and safety risks. It’s not a surprise that Tesla is facing a major lawsuit alleging widespread racial discrimination in its plants – these issues are all connected.
Some CEOs may feel that you don’t have to treat workers well to create products they think will save the world. But the strategic leader understands the connection between their workforce and the world and will seek to create a culture where everyone feels welcome and safe.
About Elizabeth Curwen
Elizabeth is a veteran communications and public affairs strategist who developed a keen interest in workplace diversity, equity, and inclusion as an opportunity for employers to improve their reputation, performance, and social impact.