Three ways you can incorporate diversity, equity and inclusion into your sustainability agenda to enhance your environmental and social transformation

Integrating the transformation of diversity, equity, and inclusion in your business, alongside other aspects of ESG, will put your business in a better position to successfully face the demographic, social, economic, and environmental challenges the world faces. Here are three things that I have been thinking a lot about a lot lately. What would you add to the conversation? Please comment, share, and get in touch if you want to discuss.

1.     Integrate, don’t separate

Organisations need to integrate environmental and social considerations into everyday business experiences and operations, not treat them in isolation. As the broader sustainability agenda becomes mainstream, DEI will be a critical enabler of sustainable transformation.

Every business has environmental, social, and governance (ESG) concerns. By nature, they are interwoven into the fabric of a company and increasingly influential on how a business creates value in the world. When customers, suppliers, and employees choose to buy, supply, and work at sustainable, ethical, and inclusive companies, ESG is no longer just a reporting exercise. It’s about adapting how our businesses operate, how we show up in the world, and the genuine impact we make. Much of the focus on ESG has been on regulation and reporting, but this is changing. As businesses face a spectrum of demographic, social, economic, and environmental challenges, the corporate world is increasingly recognising that it will not meet these challenges without integrating ESG into the core of what we do every day and how we do it.

Just as ESG is part and parcel of how you do business, the individual elements are inextricably connected. For example, it recognises that we need to look not just at environmental impact but also at the social justice issues created by climate change's disproportionate impact on low-income populations. Systemic in nature, ESG requires an integrated approach to management where the entire leadership team, including the Board of Directors, takes ownership and sees it as an integral part of their business strategy and operations. Sustainability leaders interviewed for a recent article by EY’s Chief Sustainability Officer, Steve Varley, acknowledged that directors could do more to provide “strategic interconnectedness” on ESG, including considering issues beyond climate change. They also recognised how critical it is that boards educate themselves on ESG. As Mihaela Stefanov, Director, Corporate Social Responsibility, Boralex, puts it: “The world of ESG is complex and rapidly evolving. It requires a growth mindset: the Board need to continuously update their knowledge, not just as individuals but also as a unit.”

2.     Set bold social responsibility strategies and deliver

Social responsibility should not be downplayed or deprioritised. It should be a critical part of achieving your overall sustainability ambitions.

It is not an 'E' vs. 'S' or either/or choice. Social responsibility requires businesses to address the social issues within their organisation, for and with their employees. It also involves managing the company's broader impact on society at large. Businesses were tested with COVID, marking an ‘awakening’ of social responsibility as a core business requirement and shining a light on a deeper and broader scope of social responsibility than previously widely acknowledged. Social-related risks increased in urgency over the COVID pandemic. The war for talent also shifted gears, with employees wanting to work for employers who treat their staff and the broader community with care and fairness. Many businesses responded admirably and expected their investors to take social and environmental responsibility seriously. Indeed, the crisis prompted a response that the likes of the Business Roundtable, B Lab, and the Council for Inclusive Capitalism have been calling for action on for years. For many, the ‘S’ in ESG represents a critical element of building trust. According to an EY survey on corporate reporting, around 84% of Chief Finance Officers (CFOs) and finance leaders said the pandemic increased expectations from stakeholders that their company will drive societal impact and inclusive growth. A 2020 survey found that nearly three-quarters (71%) of individual investors globally want to make a positive social impact as part of their investment objectives, with the response rate for millennials even higher (75%).

An integrated approach to ESG recognises interconnectedness and addresses concerns systemically. The risk of making positive claims but not doing the difficult work is becoming increasingly important, as made very clear by those wary of social and greenwashing. This has become starkly clear in the last few years from a Diversity, Equity, and Inclusion perspective. Those who made meaningful responses to the killing of George Floyd and the Black Lives Matter movement made internal and external commitments, putting their money where their mouth was. The internal piece requires hard work and is critically important, requiring a business to regulate and set standards and then do the work to meet those expectations. In this sense, social responsibility in today’s world means taking a long, hard look in the mirror and trying to understand, for example, how your business may reflect a society that is systemically racist – and what you are going to do about that.

3.     Increase diversity across senior leadership

A corporate response to any ESG consideration faces the inherent challenge of how the corporate world operates, traditionally perpetuating environmental degradation and social injustice. Cracking this requires diversity of thought and cultural change. 

Let's consider where power and influence lie in most large organisations. We see that lack of diversity at the Board level and C-Suite continues to permeate the corporate world. The world's demographic, economic, and environmental challenges will not be met without listening to, understanding, and satisfying a wide range of stakeholders. A Board that is not diverse will not be able to do that.

The social contract between business and society has evolved, and to meet the demands of that contract, companies need to have the bravery to disrupt and deconstruct systems that will have helped them get to where they are today. Deconstructing systems can feel scary and counter-cultural for those who have power and influence within the existing system. Still, the cultural norms need to be broken down and evolved to enable the diversity of thought in leadership and senior decision-making. It is equally vital that a consciously inclusive culture supports that. Businesses need to address the underpinning culture and behaviour change, targeting individual and organisational action and supporting it with the operational infrastructure to sustain the change.

Summary

It is easy to lose sight of the inherent interconnectedness and the benefits of different aspects of ESG supporting one another. The rise of ESG and sustainability on the corporate agenda should strengthen the progress in DEI, not weaken it. Continuing to progress DEI and create a consciously inclusive culture should be considered an integral part of your broader ESG efforts and a critical enabler of environmental and social transformation.

How are you harnessing DEI to drive your sustainability and ESG agenda forwards?

We would love to hear about your organisation’s journey with DEI and ESG. What would you add to this conversation? Please comment, share, and get in touch if you want to discuss.