What can DEI learn from ESG?

Understanding the drivers of action

The ESG agenda has quickly gained momentum within business and is reshaping organisational strategy, stakeholder engagement and resource allocation. Although diversity and inclusion sits within the ‘S’ of ESG, environmental sustainability often dominates ESG-related conversations and initiatives.

However, there’s much DEI professionals can gain through understanding the qualities that have made ESG such a driving force within business.

Understanding the drivers for action

There is recurring debate over whether the commercial argument for DEI is the correct one to put at the forefront of conversations – many think this financial focus could have negative effects. However, ESG originated as an investor-led initiative with its main driving force being capital and risk management. Very few would question ESG is the ‘right thing to do’, and indeed it is generally seen that businesses with poor ESG performance are poor long-term investments, putting ESG straight to the top of many boardroom agendas.

DEI professionals would therefore benefit from this appreciation of the investment landscape and the role of risk management in decision making. Non-inclusive cultures present a significant risk to businesses when it comes to poor decision making, legal risk of litigation, loss of talent and reputational damage. A culture of diverse voices mitigates broader risks to the business when it comes to adapting to market changes and capitalising on opportunity. Aligning DEI with sustainability and governance at board level makes a business an attractive, standout long-term investment.

Working and reporting to a framework

Investor-driven and aligned with global climate action objectives, ESG demands a uniform evaluation approach for sustainability activity and disclosures. This has made standardisation pivotal for accurate cross-company comparisons, and while there are multiple ESG frameworks such as the TCFD and Global Reporting Initiative (GRI) standards, they are all moving towards an alignment. Adhering to these standards enables organisations to gauge performance comprehensively and be held accountable for any performance gaps compared to industry leaders.

A clear and bold mission

Most ESG strategies centre on a clear, measurable mission: net zero. It’s concise, ambitious, and serves as a North Star for substantial business transformation. Many are actively tracking progress, holding themselves accountable, and investing in necessary changes to stay aligned.

DEI often has no such clearly stated objective. While some argue it’s too complex to condense into a single mission like net zero, it’s crucial to recognise that even within ESG, environmental efforts encompass various areas beyond just carbon emissions. Setting a bold ambition for DEI, while seemingly challenging to reach, can drive commitment, action, and accountability, echoing the ripple effect of net zero in shedding light on broader societal issues.

Despite the challenges with setting and publicising just a few bold objectives on DEI, doing so can catalyse fundamental cultural changes and ensure social ambitions aren’t overshadowed by better-defined environmental objectives in the increasingly interconnected realms of ESG and DEI.

Transition Plans

ESG has recognised the vital role of formal transition plans to achieve objectives. In both ESG and DEI, the pursuit of perfection often hinders progress, leading to gaps in knowledge and fear of criticism stalling actions. Transition plans break down larger goals into manageable steps, overcoming inertia and providing a roadmap for tracking progress. Published transition plans enhance transparency, enabling employees to not only see overarching targets but also understand specific actions, fostering trust in the organisation’s commitment to deliver on its promises.

Embracing technology and innovation

ESG, a relatively new discipline, has gained momentum in addressing the climate crisis only recently. Despite widespread acknowledgment of technology’s role in achieving net zero, uncertainties persist regarding the specific technologies, their impact, and timelines involved. This pursuit has fuelled an innovation-driven approach in ESG, marked by a surge in technology start-ups offering diverse solutions, catering to ESG stakeholders at various organisational levels.

In contrast, DEI is often hesitant to implement new technology, given valid concerns about sensitive employee data and potential legal and security complications. AI’s reputation for biases within datasets further complicates adoption, compounded by limited DEI budgets and the risk of investing in unproven technology.

However, balancing these concerns against the potential of technology is crucial for accelerated progress, particularly in data analysis, scaling interventions, and increasing engagement with DEI-centric resources. As diversity remains a prominent topic, staying vigilant about developments in such technology can supercharge planned activity or open new avenues for progress.