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Measuring beyond the lines – data in EDI

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Equity, Diversity, and Inclusion (EDI) practices have been adopted increasingly by businesses, especially since 2017, due to movements such as #MeToo and #BlackLivesMatter. But a growing number of companies have been under scrutiny for “diversity washing”.

Diversity Washing - could it get you into trouble?

Some companies have been accused of presenting misleading depictions of their EDI initiatives which is troubling, especially as more EDI-oriented shareholders and stakeholders depend on voluntary company disclosures to understand commitment to these core values. While some progresses are observed, for instance in some countries gender and ethnic diversity has increased in corporate boards, effective inclusion and equity remain a challenge and verification through EDI audits remains rare. A recent paper documents a significant and growing disconnect between firms' public commitments to EDI and their underlying actual EDI practices. This behaviour can be termed “diversity washing” . This study finds that “diversity washers” are more likely to violate employment equality law and incur negative EDI news coverage.

There is also a documented growing number of shareholder lawsuits involving corporate EDI practices and disclosures. In the U.S. they have spiralled into legal actions from conservative groups to stop corporate EDI initiatives in the wake of the US Supreme Court’s recent decision to curtail the use of race as a factor in college admissions.

For instance, Meta (formerly Facebook) has been sued for allegedly setting up a workplace diversity program that intentionally discriminated against White men and women. Courts have consistently dismissed these lawsuits as non-actionable, but in corporate workplaces, badly-managed or ill-intended EDI policies may bring a halt to the effective removal of real barriers, discriminations, and inequality.

Weak data in EDI

It is vital for businesses to use data to help understand the root causes, and solutions for lack of equity in organisations and what impact EDI-enhancing policies may have on employees’ satisfaction, productivity, and firms’ innovation and performance. But businesses are not always doing this well. Also, scientific production around EDI and businesses have increased over the years since EDI has ramped up in the business agendas – but growing concerns have been expressed with reference to the proliferation of weak data-driven studies around EDI and its positive impact on corporate performance.

Academia should not become a “marketing instrument” for EDI initiatives for companies unless it can provide effective and solid evidence.

Measuring beyond visible demographic lines

Most EDI discussions within companies revolves around race- or gender-based policies, to improve hiring, progression, and corporate leadership representation. But while EDI-practitioners and researchers quantify diversity along visible demographic characteristics, we know those mono-categories need to be intersected and they are insufficient to capture alone the advancement of inclusivity, belonging, and equity.

At Henley, we recently hosted a ‘Women in Business Event’ on 19 October 2023 for aspiring female leaders and highlighted the importance of considering women’s different roles, experiences, and backgrounds as a source of enhanced diversity. My own recent paper highlighted the different impact that gender diversity within executives and monitoring board roles have on firms. A more mixed approach is needed.

A recent study that uses relevant EDI-survey responses compiled for the ranking of ‘Best Companies to Work For’ shows that a positive EDI appraisal is not much related to gender and ethnic diversity in the boardroom, in senior management, and within the workforce. Demographics numbers need to meet other ‘conditions’ which one appraises by knowing, studying, and understanding better people within the organisation.

Companies (and researchers) need to realise that very little in the EDI space is 'averageable' or 'generalisable': they are not going to be able to make a true impact with weak data along separate demographic lines.

A positive challenge

Considering my everyday work EDI is more like a grass-rooted action box. I can list examples of business cases for EDI that I have personally experienced as an EDI practitioner - from re-inclusion of part-timers and increase in their productivity, to contributions of disabled colleagues into work-environment improvements. I do not know how these initiatives will be reflected into measurable financial performance and when, but I know that the ‘real’ EDI business cases are good for people and good for organisations. Proving it empirically and scientifically is the ongoing positive challenge around which businesses and academia need to work together to overcome both ‘diversity washing’ and legal battles over the years.

Dr Miriam Marra

Associate Professor of Finance
Published 5 January 2024
Topics:
Leading insights Equity, Diversity and Inclusion

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