Diversity, Equity and Inclusion (DEI) are crucial to corporate sustainability for several reasons.

Firstly, they promote innovation and creativity through diverse perspectives and experiences. Secondly, they strengthen employee engagement and reduce turnover, which promotes business continuity and efficiency. Thirdly, they improve the image and reputation of the company, which supports customer loyalty and brand loyalty. Finally, they contribute to creating a more equitable and inclusive society, leading to more stable and resilient communities in the long term.

Good reasons to delve deeper into the subject matter in this blog post based on the following key questions:

  • Where are DEI aspects addressed in ESRS S1?
  • What insights can be gained from analyzing these aspects?
  • Why is inclusive leadership in DEI so important?

DEI aspects in ESRS S1 – Own workforce

With the aim of promoting diversity and equality, companies that fall within the scope of the CSRD and employ at least 250 employees must also disclose certain diversity metrics and indicators in accordance with ESRS S1-9. “Diversity” as defined by the ESRS is defined as the representation of

  • Women and/or
  • ethnic groups or minorities in the workforce,
  • Age distribution in own workforce,
  • Percentage of people with disabilities in the workforce.

However, according to ESRS S1-9, specific information is only required on the gender distribution at top management level and on the age distribution within the workforce.

Selected interesting findings on gender distribution:

Selected interesting findings on age distribution:

  • According to research by Stela Lupushor, companies that embrace an age-diverse workforce position themselves for long-term success and competitive advantage for three main reasons: (1) More productive teams – increasing overall productivity by up to 12 percent! (2) Better decisions – in 73 percent of cases! (3) Higher employee retention.
  • A study by Bain & Company shows that in the G7 group of countries, older employees will make up more than a quarter of the working population by 2031 (see slide 3 in the attached presentation). According to the study, only a few companies currently have programs in place to integrate older employees into their talent systems.
  • Back then …: In 2006 or 2007, almost 20 years ago, I worked on a Human Capital Effectiveness Report at PwC. One of the findings was: Older employees (55+) achieve a significantly shorter “time to full productivity” and at the same time a significantly higher “retention rate”. Unfortunately, I could no longer find a link to this report.

Insights from data analysis

(1) An organizational network analysis (ONA) is not only useful for hybrid work models. ONA can be used to answer questions such as:

  • Are men more connected with senior managers than women?
  • Do white employees have more interactions with their managers than non-white employees on the same team?
  • Do Gen-Z employees have close relationships with their Millennial or Gen-X managers?

One service company used such an analysis to find that women were largely excluded from networks for decision making, idea sharing and emotional support (see slide 4 in attached presentation).
In this context, Paul Rubenstein suggests expanding the scope to include ethnic groups or minorities and to people with disabilities.

(2) Many companies conduct A/B tests to determine the effectiveness of DEI initiatives. The following steps are recommended:

  • Determine your goal. What is the problem you want to solve? Example: Reduce gender and racial bias in the promotion process.
  • Find out how to measure success. You should take stock of all steps in the process, not just the end result, so that you can identify sticking points. Focus on outcomes that allow you to quantify behavioral changes, not just feelings or intentions.
  • Randomize. Randomly assign a few employees to the DEI initiative. This will allow you to compare between groups.
  • Evaluate your DEI initiatives. Compare your treatment group to the control group using the measures you provided and then see if your initiative made a difference on your metrics.

(3) The transition to a skills-based organization can lead to a far more inclusive and diverse workforce. Generative AI can help alleviate labor shortages by identifying more qualified candidates, regardless of gender and age.
Rather than focusing on education and experience requirements, generative AI can search large databases of resumes or social media profiles to find candidates who have the skills and competencies required for a particular role.

Regardless of the methods and procedures outlined, it is important to be clear about the “WHY” of DEI initiatives. Based on this, Shujaat Ahmad presents his plan in a well-read article that is intended to help managers evaluate progress in the “WHAT” and drive meaningful changes.

Importance of inclusive leadership

The fourth report in McKinsey’s “Diversity Matters” series presents so-called “levers” for moving from engagement to action to achieve the intended business benefits (see slide 5 in the attached presentation). The levers include embedding the strategy into company-wide business initiatives while adapting to the local context, providing adequate resources and support, and responding to feedback; including dissenting opinions.

These levers act as leading indicators and have an impact on outcome variables or ESRS data points. Managers should also practice such an approach to DEI, gain insights and align their actions accordingly.

A McKinsey example of using quantitative analysis to gain more clarity on DEI initiatives can be found on slide 6 of the attached presentation.

Inclusion is particularly important for managers. According to a Bain survey, this can essentially achieve three goals:

  • Employees whose companies have invested in inclusion are three times more likely to feel fully integrated compared to those whose companies have not made such investments.
  • The combination of diversity and inclusion maximizes a company’s ability to innovate fourfold!
  • Employees with inclusive leadership are nine times more likely to feel fully included at work (see slide 7 in attached presentation)

In an article for HBR, Kimberley Lewis Parsons and Shea O’Neil Adelson present their concept of inclusive teaming. The most effective starting point is to become aware of the team’s detractor patterns, discuss them openly, and specifically select the appropriate amplifier pattern to address the detractor pattern. An overview of the five patterns most frequently observed among customers can be found on slide 8 in the attached presentation.

DEI-ESRS-Apr24-EN-Bild1
DEI-ESRS-Apr24-EN-Bild1
« ‹ of 9 › »

Conclusion

With the aim of promoting diversity and equality in the workforce and in management and supervisory bodies, companies must disclose diversity parameters defined in accordance with ESRS S1-9. These supplement the disclosure requirements in ESRS 2 GOV-1, in particular ESRS 2.21.

While the aspect of “people with disabilities” is subject to the disclosure requirement according to ESRS S1-12, the disclosure of information on “ethnic groups or minorities” is not required according to ESRS S1.

The formulation of measurable, quantitative targets for key diversity aspects generally promotes a gender- and diversity-oriented corporate culture. A multidimensional and intersectional management approach proves to be particularly suitable for capturing and effectively managing the potential and impact of the various dimensions of diversity.

DEI is particularly important in the topic of environmental, social and governance (ESG), as it touches on various aspects of a company’s social responsibility. A diverse workforce represents a wide range of perspectives, backgrounds and experiences, which can lead to better decisions and long-term value creation.