Managing ESG risk

The business case for boosting diversity and inclusion (D&I) is very strong. A 2020 study by McKinsey & Company showed that from 2014 to 2019 firms with higher levels of gender, ethnic, and cultural diversity were more likely to earn higher profits than those with lower diversity.

AVOIDING GROUPTHINK Organizations with more than 30 per cent female executives outperformed less gender-diverse ones, while the most ethnically and culturally diverse firms were 36 per cent more profitable. D&I helps organizations avoid “groupthink” and to connect with a wider customer base. 

KEEPING GOOD PEOPLE But it’s about more than hiring diverse talent. It’s how people from underrepresented backgrounds feel about their workplace that affects if they stay and advance. Even in diverse firms, managers face challenges in creating equal and open working environments that instil a sense of belonging. 

How do you boost inclusion? Businesses with a more diverse culture recommend taking these three steps: 

• Create a level playing field of opportunity. Use analytics to show that the processes for deciding promotions and salaries are transparent and fair. Eradicate bias from performance reviews. 

• Promote a culture that allows people to speak up. Discuss issues and provide support. Uphold a strict anti-discrimination policy, and tackle microaggressions. 

• Combat bias at the personal level. No one is immune from unconscious bias and it can shape views on ethnicity, religion, age, gender, disability, and more. Unconscious bias training can raise awareness, better aligning words and actions with our conscious values.

BE HONEST Research by New York University’s Stern School of Business shows that employees who hear the message “diversity is good, but also really hard” both support D&I more and put in more effort to develop it than those who only hear that “diversity is good.”