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Corporations and multinational companies operating in India are actively seeking senior female professionals to occupy key leadership positions. Many organisations have initiated targeted searches specifically aimed at recruiting women for roles such as CFO, COO, CHRO, CMO, CTO, CLO and even the CEO position. A strong focus on environmental, social and governance (ESG) standards as well as pressure from company boards to increase diversity among top executives are the driving forces behind this trend. Additionally, investors are increasingly inclined to invest in companies that prioritise both financial performance and social impact, with gender diversity being a significant factor in their decision-making process.
Gender stereotypes have far-reaching consequences, impacting economies globally. According to the World Bank, gender disparities in the workplace can result in significant economic losses, amounting to $23,620 per person on average worldwide.
Addressing gender equality in the workplace and fostering a diverse workforce, including board gender diversity, is imperative. Empowering women entrepreneurs and employees is essential for societal progress and business success. Here's how it can be achieved:
1. Economic Advancement
Increasing female participation in the workforce enhances economic decision-making, leading to sustainable economies and societal benefits. Women contribute to productivity growth, economic diversification, and income equality. For instance, aligning female employment rates with Sweden's levels in OECD countries could boost GDP by over $6 trillion, as per UN Women. This not only benefits companies by offering more employment and leadership opportunities for women but also enhances organisational effectiveness and contributes to achieving UN Sustainable Development Goals (SDGs).
2. Inclusivity and Diversity
A diverse workforce brings varied perspectives, skills, and strengths, fostering collaboration and creativity. Gender diversity stimulates innovation and problem-solving, ultimately improving business performance. Effective diversity management is key to a company's success.
3. Positive Corporate Reputation
Promoting gender equality enhances a company's reputation, attracting top talent. Job seekers value diversity, with 76% considering it important when evaluating companies and job offers. Companies aligning with the interests of the younger workforce and marginalised groups, including women, bolster their brand reputation.
4. Employee Retention
Retaining top talent is crucial for business continuity. Gender-inclusive policies and practices ensure the engagement and retention of women employees. Offering flexibility and equal opportunities for leadership roles fosters diverse leadership and long-term retention.
5. Enhanced Customer Targeting
Involving women in decision-making processes improves customer targeting, leading to more successful product launches and services. Diverse perspectives ensure effective engagement with various customer bases, ultimately driving profitability.
In summary, promoting gender equality in the workplace not only aligns with societal progress but also contributes to business success, fostering innovation, reputation, and customer satisfaction.
The impact of women's employment on ESG scores
Women play a crucial role in both society and corporate environments. According to ESG guidelines, companies are required to disclose information related to environmental, Social and Governance (ESG) aspects, with diversity and inclusion being key components. The representation of women in corporate settings is a vital aspect of such reporting, reflecting the commitment to gender equality. It is imperative for companies to actively promote the inclusion of women, not only for societal well-being but also because it positively influences ESG scores, attracts investors and enhances the long-term value of the organisation.
The Business Case for Gender Diversity: Leveraging ESG for Strategic Growth
According to a study by the International Finance Corporation, private sector players are increasingly working together in global initiatives to identify best practices and doable solutions that businesses can use to improve women's inclusion in governance and the economy—not only because it is the right thing to do, but also because it makes business sense. According to World Bank Group research, involving more local women in projects can boost firm productivity and help private enterprises innovate, grow, and perform better (World Bank Group, Gender Equality, Poverty Reduction, and Inclusive Growth, n.d.). According to McKinsey, organisations with greater gender diversity are 21% more likely to achieve above-average profitability (Hunt et al., 2018). Hiring women is beneficial because firms gain access to a pool of talent that will herald creativity and productivity, have multitasking ability, superior people and soft skills, are sympathetic, and so are less likely to be in conflict.
ESG, which stands for Environment, Social, and Governance, is a key aspect of sustainability reporting. ESG reporting is required in India as part of Business Responsibility Reporting (BRR). According to the findings of the CRISIL ESG compendium, investors view ESG reporting as a vital risk management tool and thoroughly research it before making investment decisions.
BRR Principle 3 requires firms to report on how they promote the well-being of all employees, including the overall number of employees and the total number of female employees. Companies must recognise that having more female employees on board is more than just a tick in the box or a Business Responsibility Reporting practice; it is critical to the company's growth, value, and competitive advantage.
Gender diversity in leadership roles brings a distinct blend of skills and perspectives that enhance the decision-making process comprehensively. Numerous studies consistently demonstrate that organisations with diverse leadership teams, including women in executive positions, tend to excel in various financial indicators. This correlation between diversity and financial performance highlights the criticality of nurturing an inclusive workplace ethos.
In recent years, India's corporate landscape has witnessed substantial advancements in augmenting the presence of women in executive capacities. Companies increasingly recognise that a diverse leadership cadre is better equipped to confront intricate challenges, foster innovation, and fortify organisational resilience. The advocacy for gender diversity transcends perfunctory compliance; it emerges as a strategic necessity for firms aiming to prosper in an era where ESG considerations hold paramount significance.
Elevating women to executive roles extends beyond meeting diversity quotas; it signifies a dedication to leveraging the latent potential of a significant portion of the workforce. Women bring a diverse skill set encompassing adept communication, collaboration, and a holistic problem-solving approach, aligning seamlessly with the broader objectives of ESG, which underscore social responsibility and effective governance.
Furthermore, the accentuation on gender diversity resonates with the evolving expectations of stakeholders, spanning investors, customers, and employees alike. Investors increasingly factor in ESG criteria when making investment choices, with companies boasting robust diversity initiatives being more appealing to socially conscious investors. Moreover, customers prioritise patronising businesses that champion social responsibility and sustainability.
The recruitment and retention of women executives necessitate a multifaceted strategy. Companies must cultivate a supportive and inclusive workplace ambiance conducive to the growth and advancement of women within their ranks. Mentorship schemes, leadership development programmes and flexible work arrangements constitute pivotal components of this approach. By mitigating obstacles to career progression and fostering a culture of equity, businesses can ensure that women in executive roles contribute meaningfully to organisational triumph.
How can companies with strong ESG policies close the gender wage gap?
Companies with robust ESG policies can address the gender wage gap by prioritizing Diversity, Equity and Inclusion (DEI) as core values and ensuring fair and equitable outcomes for all employees. By implementing ESG policies and initiatives, companies can contribute to fostering a more inclusive and transparent work environment, thereby tackling salary inequality effectively.
Recently, the European Commission proposed measures to mandate businesses with over 250 employees to disclose data on gender pay disparity. The aim of this proposal is to promote equal pay for men and women in the EU by enhancing pay transparency. It includes provisions for disclosing salary information to job seekers, granting employees the right to access pay levels for similar roles and imposing reporting obligations on large corporations regarding gender pay differentials.
Moreover, the proposal enhances access to justice and empowers workers to assert their rights by ensuring that employers provide anonymized pay-related data upon request instead of inquiring about applicants' prior salaries. This initiative equips organisations with the necessary tools to address pay discrimination within their workplaces and empowers women by increasing awareness of pay disparities within the company.
ESG helps in promoting talent and a good company culture
ESG initiatives play a crucial role in fostering talent and cultivating a positive company culture. Toxic work environments and unfair practices often lead to employee burnout, decreased productivity, and emotional distress, with women being disproportionately affected by such issues and experiencing job loss as a result.
According to a report from Oxfam International, the COVID-19 pandemic resulted in a global loss of USD 800 billion in income for women. This underscores the importance of implementing equitable ESG programmes within businesses. Beyond holding companies accountable for their environmental sustainability efforts, ESG practices contribute to creating a supportive workplace environment where talented employees can thrive.
A diverse workplace not only enhances creativity and productivity but also ensures equitable labour practices and upholds employee rights. Research by Marsh & McLennan Advantage revealed that companies with highly satisfied employees tend to perform 14% better in terms of ESG metrics. These companies often prioritise diversity, have lower carbon emissions, and demonstrate a heightened awareness of their employees' emotional well-being.
In a similar vein, a survey on employee engagement and ESG by the Society for Human Resource Management (SHRM) revealed that 86% of workers in organisations with ESG-related objectives reported feeling happier, more fulfilled in their jobs, and more likely to stay with their employer as a result of the company's commitment to ESG goals.
ESG promotes gender equality through a positive brand image.
Potential investors, clients, and shareholders are all familiar with the term ESG, and many institutional investors are evaluating companies with a gender-diverse workforce to see how they will handle ESG risks and possibilities. In this approach, ESG helps to promote gender equality by ensuring that women are represented at all levels of executive leadership, from entry-level positions to seats on corporate boards.
This not only advances women's rights in the workplace, but it also helps the company build a strong brand image, attracting and maintaining brilliant employees. Businesses should develop gender equality policies and procedures to encourage more women to stay involved for the long term. Giving women the same managerial options and flexibility as men encourages more diverse leadership and boosts long-term retention.
ESG offers women equal health and work policies.
ESG is critical in improving fair labour standards, employee rights, corporate transparency, executive compensation, gender and racial equity, as well as making companies accountable for their environmental actions and sustainability plans.
Businesses can use ESG ratings to focus on all three categories, including promoting women's rights in the workplace and implementing practices and policies that help women obtain paid employment. Flexible work schedules, family leave, menstruation leave, and robust anti-sexual harassment regulations are just a few ways to guarantee that women work in a safe and healthy environment where they may be fully productive.
Conclusion
For businesses to function sustainably in the long run, ESG policies and strategies are as important for guaranteeing fair and just social and governance policies as they are for monitoring their environmental responsibilities to the earth.
To ensure that corporate activities function easily, successfully, ethically, and financially around the world, all three of these elements must be situated so that they do not conflict with one another. This is where ESG as a whole comes into play, and it can give a framework for long-term, inclusive growth that is assessed not just by profitability, but also by equitable opportunity for both genders, as well as personal development, talent, and emotional intelligence.
Our Directors’ Institute- World Council of Directors can help you accelerate your board journey by training you on your roles and responsibilities to be carried out in an efficient manner helping you to make a significant contribution to the board and raise corporate governance standards within the organization.