How does D&I drive sustainable growth? Did you know that the second most talked about ESG topic after climate change is Diversity & Inclusion (D&I)? Interestingly, D&I is a significant factor that is considered when making an investment decision. The meaning of sustainability in its broader sense can be summarised as the 3 Ps- Planet, People and Profits. All these aspects are interlinked with each other and should be worked upon collectively to help organisations attain sustainable growth in a true sense.
Earlier, one would bump into a lot of news articles which highlighted racial discrimination in the workplace, women being paid unfairly, men being given preference over women and similar issues. However, over the course of time, a lot of improvement can be seen. Developed countries are making a lot of efforts to boost D&I while developing countries are gradually trying the same.
There is also an emerging regulatory landscape around D&I disclosures for companies globally. For example, the UK requires companies to disclose gender pay gap ratios. India requires top-listed companies to disclose data on gender ratios and disabled individuals in the company. The EU looks forward to introducing Social Taxonomy where companies shall be required to disclose their socially responsible actions. Similarly, other nations also have rules and regulations in place to make companies act upon D&I.
Companies should focus on building an appropriate D&I policy not only to cater to the market and regulatory demand but also to its sustainable future. D&I is a practical aspect that can help a company build a culture of inclusivity and acceptance.
Benefits of D&I
1. Novel perspectives and strategies
Having people from diverse backgrounds and communities in a company brings new ideas and helps put perspectives to the table. It is often said that the best decisions are born out of novel ideas. Ideas often are a product of hearing several opinions and approaches. Therefore, having people from distinct backgrounds is a must. It can help a company build the best strategies for its sustainable growth.
2. Better ESG score
The ESG score of a company is not arrived at only by looking at the environment-friendly actions taken by a company but also the social and governance actions form a vital aspect as well. D&I is an integral part of the social aspect of ESG. If a company does not perform well on the D&I parameter, its social score can reduce considerably, ultimately reducing its overall ESG score.
3. Attracting the best talent
Today’s generation is said to be extremely sensitive towards the concerns that surround D&I. Education and awareness have made them intolerant towards issues of racial discrimination, pay disparities, inequality and other discriminatory behaviours. A company’s policy regarding D&I is reflective of its culture. This culture thus has become an important aspect of its decision-making. The best talents around have ample opportunities in their bag and they can thus choose according to their preferences today. There is no good reason why they would join a discriminatory workplace. Thus, to retain and attract the best talent, workplaces should ensure an inclusive and non-discriminatory atmosphere. A company can grow and sustain in the long run only if it has the best bunch of loyal and talented employees.
A diverse workforce benefits a company in unimaginable ways. One such value that it could bring to a company is innovation. Diversity unlocks innovation. A workplace comprising a significant number of male and female employees, people from diverse cultural backgrounds and experiences and minorities are said to be home to a room full of innovative ideas. This is because everybody has their share of experiences, knowledge, outlook and approach that bring along cultural intelligence which can help a company understand the varied interests of different stakeholders and cater to the market at large.
5. A sign of ‘being responsible’
D&I is one of the United Nation’s most talked-about sustainable development goals worldwide. Global developments can be witnessed on the subject as nations and companies realise its importance. It is a company’s responsibility to support and promote D&I and augment the nation’s sustainable goals.
6. Boost a company’s environmental goals
ESG is so interlinked that nothing can be achieved in isolation. A company’s increasing focus to reduce its carbon footprint can best be attained through interaction with a diverse workforce. Having individuals with diverse expertise in offices, factories and supply chains can help a company to achieve its environmental goals effectively.
7. Risk-taking capabilities
According to research by McKinsey in 2017, a heterogeneous workforce is bolder than a homogenous workforce. If a workplace comprises distinct individuals, a company is simply more equipped to take challenges head-on. The risk-taking capability is high which is the need of the time.
Having D&I in place helps a company get a social licence to operate in the eyes of stakeholders and communities. Fair wages, fair treatments, equal opportunities and non-discrimination policies are ethically the correct things to do for a company which can take them very far.
9. Better financial outcomes
Even if we talk about profits, McKinsey research shows that a diverse and inclusive board can help a company earn more profit. Investors believe that D&I drive better financial outcomes. It guarantees better financial outcomes than a homogenous board because of good governance. Supporting D&I creates a positive image of the company for the world which eventually attracts more business and generates profitable numbers.
Forward-thinking companies understand the importance of D&I in a company. It can help build the best sustainable strategies on par with global developments for a company. After all, building a safe and accepting environment in a workplace is bound to have positive consequences.
You can become an ESG expert and raise awareness on this subject through CPD-Accredited ESG Expert Certification from Directors’ Institutes, which is one of the leading organisations in the ESG space.