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The State of Social in ESG

Data & Insights:

Diversity, Equity, and Inclusion

Introduction

The racial injustice reckoning that started in 2020 led to new dialogues about the role of businesses in combatting systemic racism and supporting diverse, inclusive and equitable workplaces. Many organizations pledged to act either individually or through collaborations such as the BlackNorth Initiative, the Canadian Investor Statement on Diversity & Inclusion, and the (U.S.-based) Investor Statement of Solidarity to Address Systemic Racism and Call to Action. The increased focus on DEI issues created new expectations for employers: It was time to move beyond rhetoric and take meaningful action to create safe and inclusive workplaces for all. In this section, we examine several actions that organizations have been taking on this front including DEI policies/programs, diversity targets, DEI training, third party DEI assessments, and measuring inclusion in the workplace.  

Figure 19: Formal policy/programs dedicated to DEI

Does your organization have a formal policy/program dedicated to diversity, equity and inclusion?

Following the racial injustice reckoning of 2020, members of the business community in Canada and the U.S strengthened their efforts to promote DEI through the development of DEI policies and programs. We asked survey participants whether their organization has developed a formal DEI policy or program to understand where the market is at in 2022. 

As shown in Figure 19, approximately two-thirds of participants (68%) have a formal DEI policy or program. Approximately one-quarter (23%) are considering implementing such a policy or program in the future or describe it as a work in progress, and only 8% of participants do not have a formal DEI policy or program and are not presently considering it. 

Collectively, 91% of participants either have a formal DEI program/policy or are planning/considering implementing one. This suggests that formal DEI policies and programs are becoming an established norm within the business community. Organizations that have not yet taken action on this front may find it challenging to attract and retain diverse talent, and they may also be exposed to elevated reputational and liability risk if, for example, recruitment practices are not inclusive.   

0 %

of participants either have a formal DEI program or policy or are planning/considering one.

speaker speaking to enthusiast attendees

Figures 20 and 21: Diversity targets for boards and senior management

20: Has your organization established diversity targets for the board of directors?
21: Has your organization established diversity targets for senior management?

Setting diversity targets for boards and senior management is one of the major steps that organizations can take to demonstrate a commitment to diversity at the top of the house. We asked participants whether their organizations have established such targets.  

As shown in Figure 20, 41% of participants have established diversity targets for the board of directors while 21% are considering it or describe it as a work in progress. Thirty-eight percent of respondents have not established diversity targets for the board and are not presently considering it.  

With respect to senior management, Figure 21 shows that one-third (33%) of participants have established diversity targets for senior management and 22% are considering it or working on it. Nearly half (45%) of respondents have not established diversity targets for senior management and are not presently considering it. 

The divergence between diversity targets established for boards (41%) and senior management (33%) may be attributed to a few factors. First, shareholders’ voting and engagement priorities tend to focus on board diversity since investors have more influence on board governance than management appointments. This puts more pressure on boards to take action. Although the shareholder angle only applies directly to public companies, it also applies indirectly to private companies, non-profit organizations, and others since shifting societal norms are not confined to an asset class. It also applies indirectly to institutional investors themselves since they must “walk the talk.” Furthermore, boards may be more likely than management teams to set diversity targets because boards that lack diversity may respond to shareholder pressure by introducing a target to demonstrate a future commitment. 

Another contributing factor may be the ways in which board and senior management positions are filled. Whereas senior managers often climb the corporate ladder through internal promotions, boards typically cast a wider net when searching for independent directors, and they do so on a schedule defined by the length of directors’ terms. Such conditions may provide more fertile ground for the establishment of targets, especially in the context of shareholder pressure.  

Finally, we observe that 15 out of 30 participants with board diversity targets are members of the 30% Club, a network of executives that pledge to champion the representation of women on boards and in executive positions within their spheres of influence. This suggests that the 30% Club, and perhaps other non-profit networks, are having a meaningful impact in the market. 

Figure 22: DEI Training

Has your organization provided training to employees on diversity, equity, and inclusion?

Education is a key component of realizing a diverse, inclusive, and equitable workforce because learning enables awareness, understanding, and allyship amongst peers with different backgrounds and identities. Anecdotally, we have seen a growing commitment to DEI education within our network since the racial injustice reckoning of 2020, and the new survey data now suggest that most organizations are doing internal DEI training.  

As shown in Figure 22, a majority of survey participants (60%) have provided training to employees on diversity, equity and inclusion while 30% of organizations are considering it or describe it as a work in progress. Only 10% of participants have not provided training to employees on DEI and are not presently considering it. 

Overall, 90% of participants have either implemented DEI training or are planning/considering doing so. This signals that internal DEI training is likely becoming a new norm for the business community. Organizations that are not considering DEI training at this time may eventually change course as it becomes clear that such training is becoming standard practice at most organizations.  

0 %

of participants have either implemented DEI training or are planning/considering doing so.

people working on a computer

Figure 23: Third Party DEI Assessments

Has your organization performed an independent audit or third-party assessment of its practices related to diversity, equity, and inclusion? (e.g. racial equity audit)

Third party assessments of DEI practices, such as racial equity audits or civil rights audits, are relatively new in the business landscape. Such assessments gained momentum in 2020 as businesses faced pressure to address racial disparities in the workforce. 

The newness of these audits may help to explain why relatively few organizations have adopted them. As shown in Figure 23, only 21% of survey participants have performed an independent or third-party assessment of their practices related to DEI, while an equal number of participants (21%) are considering it or describe it as a work in progress. Most participants (59%) have not performed an independent audit or third-party assessment and are not presently considering it.  

Given the upward trajectory of DEI policies and practices more broadly, we will likely see greater adoption of third-party assessments of DEI practices over time. However, the pace and scale of that adoption will likely be driven by shareholder engagement. If more investors apply pressure to companies in this area, we will likely see more activity. Conversely, if investor support for racial equity and civil rights audits stagnates, then adoption of these assessments will likely stagnate as well.  

0 %

of participants have performed a third-party assessment of their DEI practices.

0 %

of participants have not performed a third-party assessment of their DEI practices and are not presently considering it.

Figure 24: DEI Measurement

Has your organization surveyed employees to measure. inclusion in the workplace?

As we saw in Figure 19, most participants (68%) have established DEI policies or programs. Once a policy is in place, the logical next step is to measure its outcomes. Therefore, we asked survey participants if they have surveyed their employees to see if their policies are creating inclusive work environments.  

Figure 24 shows that a majority of survey participants (53%) have indeed surveyed employees to measure inclusion in the workplace, while about a quarter (23%) of respondents are either working on it or considering it. About one-quarter (23%) have not surveyed employees to measure inclusion in the workplace and are not presently considering it.  

Is measuring inclusion in the work place another emerging norm? The data suggests so.

These data indicate that a slight majority of participants are now measuring inclusion in the workplace. However, the combined number of participants who measure inclusion or are either working on it or considering it sums to a strong majority of approximately three-quarters (76%) of participants. Similar to other observations in this report, these data suggest that we may be seeing an emerging norm with respect to the measurement of inclusion in the workplace.  

The employee perspective on DEI:

Performance Meets Expectations, so far

Based on our research, it would appear that employers are responding in alignment with the level of importance employees are placing on DEI as an issue. Further, it appears that they are doing a fairly good job at matching employee expectations for performance. 

The vast majority of employees in both Canada and the U.S. regard demonstrating a commitment to diversity, equity, and inclusion as somewhat or very important to organizational success (Canada: 78%; USA: 76%). Among both Canadian and U.S. employees, individuals who identify as Black, Indigenous, or a person of colour (BIPOC) are even more likely to rate this issue as somewhat or very important as compared to their Caucasian peers. 

Of note, approximately three-quarters of both Canadian and U.S. employees believe their employers are doing either somewhat or very well in demonstrating a commitment to DEI. When we look at Canadian employees, that sentiment is shared fairly equally between BIPOC and Caucasian respondents. 

Interestingly, among U.S. employees, BIPOC individuals rate their employer’s performance significantly higher on this front than their Caucasian peers. It is hard to explain this finding in the absence of additional research. It is possible that U.S. organizations are more in tune with the needs of BIPOC employees and responding in a way that is particularly meaningful and noticeable to them. However, it is also possible that U.S. organizations had a larger gap to close on DEI issues, and thus changes on this front felt more significant to employees (particularly BIPOC employees, who would be most impacted by changes). In either case, this will be an important trend to follow in the years to come.    

Figure 25: US and Canadian employee perceptions of their organization’s performance related to DEI

How well is your employer performing in terms of demonstrating a DEI commitment?

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