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Diversity And Inclusion: From Nice To Have To Mission Critical – Diversity, Equity & Inclusion

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Diversity and Inclusion (D&I) has risen on the agenda of
companies as pressure from various stakeholders to pay closer
attention to the topic increases. Investors, employees and
consumers are three key stakeholders demanding such a focus.
Institutional investors are increasingly incorporating D&I
criteria into their manager selection1, pushing GPs to
demonstrate how they promote D&I within their firm and amongst
their portfolio companies. Talent shortages and the Great Resignation are being driven by a
variety of factors. One of them being an increasingly selective
workforce that refuses to work for a company that does not
prioritise employee diversity and inclusive work practices. On the
consumer side, we are seeing individuals increasingly choosing to
buy from companies which actively take a stance against social
injustices2. In this article, we outline why we, MJ Hudson’s ESG & Sustainability team,
believe that D&I has moved from being a ‘nice to have’
to a ‘must have’. We explain the business case for D&I
and how we help companies and investors progress through their
D&I journey.

Foster innovation and talent attraction

1200646a.jpg

Figure 1: MJH framework for D&I
business case. We believe that focusing on D&I enhances
business resilience by attracting and retaining diverse talent and
resulting in diversity of thought

Diverse and inclusive companies solve problems with high levels
of innovation and attract and retain the best talent in their
industry, altogether enhancing their business resilience. There is
substantial evidence to support that diverse companies have 19% higher innovation revenues. A key reason
for why Diversity and Inclusion improves innovation levels is
because when diverse perspectives are heard and included in
decision-making, they can combat ‘group-think’ which occurs
when a group of individuals reaches a consensus without critical
reasoning or evaluation of the alternatives. Group-think often
leads to a continuation of the status quo as current processes go
unchallenged. This happens frequently in workplaces made up of
homogenous teams or where a non-inclusive environment forces people
with different perspectives to conform to the mainstream viewpoint
for fear of conflict. A workplace which performs well on D&I is
therefore more likely to combat this phenomenon and enable debate
and discussion, resulting in creative problem solving and
innovation. This is also known as the ‘Diversity
Bonus
‘, a term coined by Scott Page (2017) to
highlight how various types of cognitive
diversity—differences in how people perceive, encode,
analyse, and organize the same information and
experiences—are linked to better business outcomes.

Become the employer of choice

Another compelling reason for businesses to invest in good
D&I practices is to become THE employer of
choice in their industry. D&I has a significant impact on
employer brand and how prospective applicants view the company they
choose to work for. As companies battle through ‘The Great Resignation‘, those who can tap
into previously underrepresented pools of talent and create
inclusive workforces which ensure existing talent is retained, will
win talent over their competitors. Around 76% of jobseekers and employees currently
report that a diverse workforce is an important factor when
evaluating companies and job offers. Non-monetary benefits like
culture, diversity and inclusion are increasingly important to
Millennials and Gen-z employees, with many stating that they would
be happy to take a pay cut in order to work in a diverse and
inclusive environment3.

The message is clear: companies must begin collecting diversity
metrics (where permitted) and focus on making their workplaces more
inclusive in order to hire and retain top talent, as well as
increase engagement and wellbeing amongst all employees.

Boost brand value

At a societal and consumer level, the COVID-19 pandemic and
social movements including Black Lives Matter and #Metoo have shed
light on the systemic inequalities which exist around us and the
responsibility and capability of businesses to take a stance on
social justice issues. Increasingly, consumers expect the
businesses they buy from to be aligned with their own
values4. Research is showing that up to two thirds of
consumers are ‘voting’ with their wallet5 by
actively looking to put their money in businesses that demonstrate
they are tackling social inequality. A study by Kantar Global
Monitor6 found that 65% of consumers state that their
purchasing decisions are influenced by the Diversity and Inclusion
practices of a company. Therefore, to connect with consumers,
companies must consider how to incorporate a wider representation
of age, sex, disability, race, ethnicity, origin, religion and
economic status in their messaging and storytelling to better
reflect the markets they serve.

In the context of rising pressure from investors and consumers,
companies are being pushed to develop their house view on the topic
and most importantly to prove through their actions, that they do
indeed empower diverse talent and create a culture of inclusion
where all employees can thrive. This is a topic that is only set to
increase in the future as investors, consumers and employees demand
more from the businesses they invest in, buy from and work for. In
the background, we also see D&I-related regulation increasing,
through the growing presence of gender pay gap reporting
legislation and the publication of the EU’s social taxonomy which outlines D&I as a
topic ‘relevant to all sectors’. There is a clear first
mover advantage to being prepared for these future regulations.

Diversity is about the different ways of
thinking which individuals embody, based on their different life
experiences which are influenced by factors such as their
ethnicity, disability, educational background, a list which is
non-exhaustive. To reap the benefits of this diversity, it is
essential that companies create a workplace culture of
Inclusion, enabling employees to bring their
authentic selves to work, without fear of this causing conflict or
feeling forced to conform to the dominant culture. This powerful
combination creates businesses which provide innovative solutions
to problems and are a magnet to attracting and retaining top talent
in the industry.

Footnotes

1. ESG Investor: EUROPEUK
managers challenged to disclose and demonstrate
D&I

2. Ben & Jerry: Issues
we care about

3. SSRN whitepaper: Do
jobseekers value diversity information? A mixed methods
investigation

4. World Economic Forum:
People prefer brands with aligned corporate purpose and
values

5. Business Wire: Majority
of consumers buying from companies that take a stand on issues they
care about and ditching those that don’t, Accenture study
finds

6. Kantar: The power of
inclusion and diversity in advertising

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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