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Diversity & Inclusion: A Catalyst for Corporate Sustainability

What does sustainability have to do with inclusion? A question rarely raised by companies who tend to forget the importance of people in their efforts towards sustainability. However, plenty of companies have realized that sustainable practices are not just ethical but also give a huge competitive advantage. Sustainability is defined in many ways, but the most common one is based on the Brundtland report 1987: 

“Development which meets the needs of current generations without compromising the ability of future generations to meet their own needs.”

Most often, we refer to sustainability as environmental sustainability. However, the concept of sustainability consists of three pillars:, economic, environmental and social, also referred to as profit, planet and people. Sustainable development happens only when we have a perfect balance between all three pillars of sustainability. In this blog, we will discuss how diversity & inclusion within organizations are linked to the three pillars of sustainability and how D&I initiatives can drive sustainable results within companies.

Some companies have already identified the benefits of being sustainable. Kering Group, a luxury brand from France hailing 60% women on their executive board, is referred to as one of the most sustainable luxury brands in the world and has been on the Global 100 list for years. Along with being one of the most sustainable luxury brands, Kering was also ranked fourth in sales in the top 100 luxury good companies of 2019. Neste, an energy company from Finland, has been ranked the third most sustainable company in the world consecutively for the third time. Until recently, Neste was a fossil fuel company but now the firm shifted to greener alternatives and has seen a 300% rise in their share prices in the last five years.

The recent changes in consumer habits have also contributed to the higher return of sustainable companies. As per the CGS’s 2019 Retail and Sustainability Survey, a third of consumers are ready to pay 25% more for sustainable products. However, Gen Z, comprising of 32% of the global population, is willing to pay 50-100% more compared to other age groups. The shift in consumer choices have largely impacted the FMCG (fast-moving consumer goods) companies. Despite this, more than half (56%) of the Food & Beverage companies have no targets to become more sustainable. Only a few companies like Danone, Unilever, Nestle are prepared to take up these challenges. The trend of sustainability is just at its beginning and companies need to adapt more rapidly if they want to survive in the market.

Consumers are not the only ones more responsible in their behaviors. More and more investors screen their potential investments based on ESG (Environment, Social and Governance) or SRI (Socially Responsible Investment) scores. These metrics are used to measure a company's sustainable footprint. Environmental criteria considers how a company performs in terms of nature. Social criteria examines how it manages relationships with employees, suppliers, customers, and the communities where it operates. Governance deals with a company’s leadership, executive pay, audits, internal controls, and shareholder rights.

Europe has traditionally been the leader in ESG but now the other parts of the world including the U.S. and Japan are catching up quickly. As per the Global Sustainable Investment report launched in April 2019, global sustainable investing has reached 30 trillion dollars, a 34% increase from 2016 and is estimated to grow exponentially.

“Unquestionably we are seeing more ESG demand worldwide and probably the biggest net changes in demand in the U.S.” – BlackRock Chairman & CEO Larry Fink

Let’s now examine each sustainability pillar in more detail and see how diversity and inclusion (D&I) can be an asset for organizations to have a better ESG score, making them more attractive to the investors, as well as their customers.

1. Environment Pillar: This is the most common pillar referred to when discussing sustainability. Companies are making efforts to reduce their carbon footprint, waste, water usage, non-environmentally friendly packaging and the overall negative impact on the environment. In order to perform well in this pillar, companies must consider their global operations, supply chain, factory or office locations, communities they operate in and so on. To succeed in this task, they must effectively communicate and collaborate with a diverse range of individuals. 

How is a diverse and inclusive workplace an asset to improve the environmental impact of a company?

i) Leaders in diverse & inclusive workplaces possess higher cultural intelligence and skills to manage diversity: To improve the environmental footprint of a company, leaders need to effectively communicate with many diverse individuals externally as well as internally. It is essential for them to understand how to manage diverse individuals and possess cultural intelligence to succeed in their goals.

ii) Diversity helps build better strategies: Having employees representing diverse communities or locations the company operates in, helps to better understand the environmental impact of the company's operations, building more trust and better strategies.

iii) Diverse teams are more innovative and better prepared to take bold actions: Environmental efforts often require bold actions like rethinking the product design, supply chain, changing behaviours within the organization towards more sustainable choices. It has been proven that ethnic and gender diverse companies are 20% more innovative and 35% more likely to outperform homogenous teams (McKinsey & Company); when the time comes to take bold actions and solve challenges diverse teams are more productive.

2. Social Pillar: One of the most underestimated pillars while developing sustainable strategies. It is measured by the concept of social license, meaning that the company and its measures should be supported by its employees, stakeholders and the community it operates in. To have a social impact, companies need to work on treating their employees fairly, a non-discrimination policy, flexible working hours, investing in local communities, fair wages, ethical sourcing, understanding the supply chain, and so on.

How is a diverse and inclusive workplace an asset to improve the social impact of a company?

i) Inclusive culture enables equity, making sure that everyone has access to the same opportunities and treatment. It helps prevent discrimination at workplace, creates more empathy, and the social impact of the company is much higher.

ii) Inclusion leads to better decision making: Understanding unconscious bias and privilege help leaders to make fair decisions.

iii) Inclusive workplaces have better psychological safety enabling employees to take risks: Employees feel safe within the company, this enables them to take risks to improve the other required aspects to promote social impact of the company.

iv) Inclusive teams are not scared to share vulnerabilities, this helps the people to be more transparent to share difficult challenges blocking their sustainability goals without the fear of losing face. Overall, it promotes a good organization culture and improves the social license score.

3. Economic Pillar: This pillar is not just about being profitable, but about good governance within the company. This means that the management and other stakeholders like end-users, value chain and so on, are aligned on common interests. The company is transparent and avoids conflict of interests. The companies are most interested in developing the economic pillar and are often the first step towards their sustainable measures.

How is a diverse and inclusive workplace an asset to improve the economic impact of a company?

i) Diversity is profitable for the business: Culturally diverse boards worldwide make 43% higher profits than homogenous boards. This shows a direct correlation of why diversity is profitable for the business.

ii) Inclusive organizations promote transparent communication: Inclusive organizations promote equal opportunities and a safe space for everyone, this ensures transparent communication leading to good governance.

iii) Empathetic teams are better equipped to avoid conflict of interests essential to maintain a fair governance.

iv) Diverse and inclusive teams promote a trustworthy brand image: More diversity and representation within the company means that it is better able to understand different opinions from stakeholders, end-users, value-chain, customers etc. It is, therefore, easy to maintain trust and gain support from others.

Organizations want to be ethical and sustainable and much effort is put towards it, but the first step to take is to work on their own people, the employees in the company. Diversity and inclusion are huge assets to your sustainability efforts. They are beneficial for companies in general to improve their productivity and efficiency and also give a base to make new and critical decisions. Your employees are satisfied and have an environment to grow, making it easier to undergo big structural changes and required behavioral shifts. It is needless to say that diversity and inclusion are, in fact, the never mentioned cornerstones of sustainability.

Author: Priyanka Banerjee, Inclusion Coach/CEO & Co-founder BusinessWiz Priyanka's experience of managing international tech companies for many years inspired her to improve the state of diversity & inclusion in organizations. She founded BusinessWiz with a mission to create an inclusive future of work and is helping organizations to develop their workplace culture one step at a time.

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