Diversity and Inclusion Are More Than the "S" in ESG
Diversity and Inclusion Are More Than the "S" in ESG
Diversity and inclusion can strengthen each of the three components of ESG.
Environmental A diverse pool of employees is more likely to be aware of how environmental issues affect different areas and communities, which enables the business to introduce strategies that reflect local needs. In-depth, first-hand knowledge is vital when designing innovative solutions for reducing a business’ carbon footprint.
Social This aspect of ESG focuses on how a company manages its relationships both internally and externally. It looks at work conditions, health and safety and diversity. Companies who actively recruit people from a range of ethnic and social backgrounds score high in this area of ESG. Research has shown that 35% of an employee’s emotional investment in their work and 20% of their desire to stay within their existing company is down to how included they feel in their workplace. Therefore, D&I undoubtedly results in more loyal, hard-working and dedicated employees.
Governance This examines executive decision-making and leadership style. It considers factors such as equal pay, equal opportunities and potential corruption. Inequality and ethical leadership behaviour underlines every D&I strategy. Employees -and other stakeholders- know they can voice their concerns and that problems are quickly dealt with.
Repeated research has shown that gender-diverse boards are linked to improved investment efficiency, better engagement between board members as well as less fraud cases and operations-based lawsuits. The inclusion of women on corporate boards also increases the likelihoods of discussion on social issues, climate change and work/life balance.