Opinion | Here's how companies can get ESG right and avoid the trap of a misleading debate
Updated: Jun 28, 2022
An old debate is beginning to rear its ugly head with a new and dangerous spin.
It’s about the role that companies should or should not play in supporting objectives other
than profit.
Today, it takes the form of corporate investors who want to halt progress by corporations to
protect the environment, encourage social progress, and improve their own governance.
Some big-name investors, who should know better about the keys to business performance,
are inciting new pushback. Blackrock, one of the most influential, recently described shareholder proposals on climate disclosures as too “constraining” and “prescriptive.”
And, according to a recent report in The New York Times, a new financial firm, Strive,
backed by billionaire investors who support the most conservative political causes and
candidates, would go a step further, inciting companies not to get involved at all in
environmental, social, or governance (ESG) issues.
As a specialist in cultural diversity - one of the ‘social’ elements under the ‘S’ in ESG—I find
the current campaign for corporate backsliding disturbing. It should be an urgent wake-up
call for the global corporate world. Because the reality is that corporations and all their
stakeholders, including stockholders, only gain from policies and practices that value people and their environment.
The pushback is counterproductive, and its timing couldn’t be worse. Companies are
generating big benefits for themselves and their stakeholders, as they put into place best
practices in the ESG domains.
Based on my work in this area, I can affirm unequivocally that a diverse workforce is not just a “nice-to-have”. Rather, it has become a critical success factor for companies and public organizations today. And its benefits flow to all of a company’s stakeholders, including employees, customers, business partners, stockholders, the public at large. Indeed, that is one reason why there is growing expectation from all these stakeholders for companies to show cultural diversity.
The numbers tell the story: According to a report from Deloitte, organizations with diverse
and inclusive cultures are six times more innovative and more likely to anticipate change and react quickly. According to McKinsey & Company, they are 35 percent more likely to perform better and to have an improved return on investment. And a study by Glassdoor reveals that 67 percent of job seekers view a diverse workforce as important.
What explains this ‘diversity dividend’ to companies?
It’s generated by two complementary sources—higher productivity and an enhanced ability to focus on customer needs.
First, productivity is improved by inclusion of employees from different backgrounds, races, sexual orientations, and religious and political views. The more ideas, experiences and perspectives circulate from a more diverse workforce, the greater is employee engagement and the lower personnel turnover.
Second, without a properly managed multicultural employee base, companies stand little
chance of grasping the complexity of the world needed to meet the expectations of their
customers. Increasingly, to be “customer-centric” means having culturally diverse and
internationally minded employees. As organizations compete for the best talent, they are
becoming aware of the competitive advantages of having a diverse workforce.
In my own company, we tapped into the linguistic, religious and cultural diversity of our
employees to develop our Diversity Atlas platform, the world’s first data analytics tool for
measuring and understanding cultural diversity in organizations. Diversity Atlas is now being successfully used by numerous medium size and large international companies worldwide but also public entities to map their global workforces.
In the US, what was originally called the “Great Resignation” - the post-COVID economic trend in which employees left their jobs - turned out to be the “Great Reshuffle” , in which they sought more rewarding employment. Clearly, employees today want to be accepted and respected. Companies can show their respect by their commitment to cultural diversity.
Where companies need help is how to put these principles into practice. That’s because
workplace diversity needs to be correctly measured before it can be managed, and it has
been a challenge to obtain the right kind of complex and insightful data.
That is where new diversity, equity and inclusion methodologies come in - effective, proven, data-driven approaches to measuring diversity and its value for all stakeholders.
To help companies, a number of tools have been developed to measure diversity in a precise
and useful way.
Once an organization understands this, it can put into place the policies that will support their employees, clients, and other stakeholders.
Often, companies understand the environment they are operating in, but they don’t invest in understanding their own human resources. They need to start taking a deep dive, and once they do, the value of this effort will be clear to all corporate stakeholders and, especially, those who are once again pushing an old and discredited view of the corporate responsibilities. For they will see that getting cultural diversity right can be done effectively and efficiently to improve corporate performance in all domains and to enhance corporate profits at the same time.
About the Author
Peter Mousaferiadis has had an extensive career in the arts as a music director, creative producer and is recognized globally as a champion of culture and diversity as a driver of sustainability, opportunity, peace and innovation. As the founder of Cultural Infusion, Mousaferiadis has developed award winning digital platforms including Diversity Atlas, a data-driven tool for measuring and understanding cultural diversity in organizations.