President Trump’s recent executive order to remove Diversity, Equity and Inclusion (DEI) initiatives within US federal government has created significant debate and outrage around the world. The rationale put forward by the Trump administration is that the change better promotes merit-based opportunity, but doesn’t that miss the point: that the playing field isn’t level in the first place?
Worryingly, it also appears to have created a ripple effect with organisations like McDonalds, Meta and Amazon quickly latching on and following suit. Some firms in the UK are notably taking a different stance, Deloitte for example distancing itself from its US arm citing continued commitment to diversity initiatives, but others are reviewing their commitment to DEI. BT recently announced they are dropping diversity measures from bonus metrics and, while a spokesperson said this didn’t indicate a step back from DEI, we all know that removing DEI metrics from a bonus scheme potentially sends a message that their importance is waning.
DEI measures driving change?
Although progress is slow, setting targets and keeping a spotlight on diversity is driving change. According to the FTSE 350 Women Leaders Review, women now hold 43% of roles on boards and 35% of leadership roles, so companies are seeing equal opportunity as an important factor in improving productivity and growth. The target set by the Parker Review in 2017 for FTSE 100 companies to have at least one minority ethnic director on their board has been largely met: 96% met this target by the end of 2022, and nearly half have beaten the target by having more than one minority ethnic board director.
Still there is progress to be made. At the current rate it will take 33 years for the UK to close the gender pay gap and Baroness Lane Fox, chair of the British Chamber of Commerce, recently pointed out that there is only one disabled person on the board of a FTSE 100 company.
The case for DEI
Various bodies of research show that there are tangible business benefits to be gained from greater diversity and inclusion:
- The race equality thinktank Runnymede Trust cites strong evidence that “DEI policies implemented thoughtfully actually improve productivity, performance and financial returns”.
- McKinsey found in a recent study that organisations in the top quartile for “gender diversity in executive teams” were 25% more likely to have above average profitability than businesses in the bottom quartile.
- Korn Ferry and the Global Black Economic Forum found that organisations who commit to DEI experience 19% higher innovation revenue, and their teams are 75% more likely to successfully execute ideas.
- According to a study by TechTarget’s Enterprise Strategy Group sponsored by Amazon Web Services, DEI initiatives can enhance a business’s competitive position, agility, innovation and brand:
- Of the organisations with the most mature DEI programmes, 75% reported that they had a very positive impact on their competitive position, 71% report typically beating competitors to market and 36% reported beating revenue expectations by more than 10%.
- By contrast, organisations without those strong DEI initiatives were less likely to report the same benefits: only 28% said they have a very positive impact on their competitive position, 34% reported beating competitors to market and only 14% reported beating revenue expectations by more than 10%.
- On the flip side, there are potential losses for businesses seen to be turning their backs on DEI. The HRC Foundation 2024 Annual LGBTQ+ Climate Survey found that 80% of LGBTQ+ adults would boycott a business who backtracked from DEI initiatives, with a potential impact of billions in lost sales.
Diversity, Equity and Inclusion policy is about more than just numbers and targets. It is about tolerance, opportunity, psychological safety in the workplace and consumer behaviour. While Trump’s directives may not change UK legislation and targets, the danger is that they alter attitudes around what is accepted and tolerated, and signal a return to the acceptance of the unacceptable.
For advice around DEI policy please contact Cathryn.Edmondson@innecto.com
