GCs need to make sure they are out on the front foot and be ready to discuss and advocate D&I strategies in the governance and sustainability context, writes Katie Williams.
In the modern age, an understanding is building among corporates of the benefits that come with developing diversity and inclusion (D&I) strategies. From ensuring that they are harnessing diversity of thought to introducing company policies that better foster inclusive team working, most businesses are now accepting the fact that these things not only have a material impact on employee engagement and satisfaction, but also productivity and the company’s overall bottom line.
Recent research by Forrester for example, found that diverse organisations were not only more profitable and innovative, but were also better at retaining top talent. And experts at Gartner have claimed recently that companies in a wide array of sectors have now tied D&I goals into employee compensation, pipelines and supply chain partnerships. The world of business is demonstrably changing now rather than just paying lip-service.
This was evident in a recent report created jointly by the Bankwest Curtin Economics Centre (BCEC) and the Workplace Gender Equality Agency (WGEA). This was the world’s first causal study in the area, finding that board membership is now gaining greater momentum with women constituting around 30 per cent of board members. Additionally, the larger the market value of a company, the more likely it now is for a woman to be at the helm. One in eight ASX 50 companies – the top 50 organisations in Australia by market value – now have a female chief executive. Around a third of those members serving on ASX 50 boards are women, and nearly three in 10 top-tier managers in ASX 50 companies are women. While more work clearly needs to be done, these results are compelling and offer a good look at the direction of travel for the Australian business community.
What’s less obvious however, is exactly who within companies should take ownership of embedding D&I, how they should go about it, and why.
On this point, general counsel have a pivotal role to play.
The role of the GC in making change
Companies that ignore the need for meaningful diversity and inclusion strategies – for example by allowing unconscious bias to remain in talent management processes, not being quick enough to tackle discriminatory behaviour in their workplaces, failing to address the complexities at play in the gender pay gap etc. – are not just at risk reputationally.
Reputational risk is still a major concern. However, there are some compelling reasons why GCs should place D&I into the overall context of the organisation’s governance and sustainability.
The ASX Corporate Governance Principles and Recommendations direct companies to implement a diversity policy and set measurable targets for gender diversity in the organisation. In addition, companies should have in place an effective risk management framework, and disclose any material environmental and social risks and how the company is managing them.
We know from research that CEOs are increasingly citing the company’s social impact, including environment, inequality and diversity, as their number one issue. We also know that this is a key concern for investors and shareholders, as articulated most recently by Larry Fink in his letter to CEOs of 2021.
The attention paid to ESG has evolved into a broader and deeper evaluation of social impact and sustainability. This is manifested by the fact that sustainability reporting is now the mainstream practice for corporates in Australia. Within this practice, there is also a growing commitment to the UN Sustainable Development Goals (SDGs). A company’s strategy for D&I forms an essential part of operationalising the SDGs, in particular SDG 5 (gender equality), SDG 8 (decent work and inclusive economic growth) and SDG 10 (reduced inequality).
GCs need to make sure they are out on the front foot and be ready to discuss and advocate for D&I strategies in the governance and sustainability context. This represents a step change from the conventional approach, which has tended to position D&I as a stand-alone issue and/or one that falls solely under the remit of the HR function. GCs should work with other business leaders, including the HR Director and Sustainability Committee to identify the opportunities for meaningful D&I actions to form a key part of the organisation’s approach to governance, social responsibility and sustainability.
Effective and meaningful D&I strategies can be a key element of a company’s positive social impact. In turn, this can drive business value through constructive relationships with employees, customers, shareholders and investors. GCs have an opportunity to embed D&I as an imperative to good governance and sustainability. The overarching message for GCs is to speak up, be heard by your colleagues and the board, and anchor your advice in the governance and sustainability context. Neither you, nor your colleagues, will regret it.
Katie Williams is a consultant at Brook Graham APAC for Vario by Pinsent Masons.