Why ‘Diversity Washing’ is Winning
In the era of heightened awareness around diversity, equity, and inclusion (DEI), many organisations are striving to showcase their commitment to these principles. However, amidst the flurry of initiatives and public statements, a concerning trend has emerged – ‘Diversity Washing’. As someone who has experienced being the token panel member in corporate events, I understand firsthand the extent to which organisations go to ‘look’ like they are being diverse, without deep internal action. So let’s delve into the reality of diversity washing and its implications for businesses and society.
The Rise of Diversity Washing
Recent research by Andrew Baker and colleagues (2023) has shed light on the phenomenon of diversity washing. Their study, aptly titled "Diversity Washing," analysed data from over 5,000 public companies in the U.S. The findings were both eye-opening and concerning. They found that despite outward commitments to diversity, equity, and inclusion, many of these organisations fell short in their actual hiring practices and internal culture.
These "diversity washers" strategically prioritised DEI discourse over genuine action, often reaping rewards in the form of higher scores from ESG rating organisations and increased ESG investment. However, beneath the surface, they were more likely to face discrimination violations and negative people-related incidents. It's a sobering reminder that performative allyship can have real-world consequences.
Understanding ESG and Its Social Component
To grasp the context of diversity washing, we must first understand ESG – Environmental, Social, and Governance. While environmental and governance factors have long been focal points for companies and investors (this is awesome by the way), the social aspect is something that some may still be pondering on, particularly DEI, as it has often been put in a different box.
The "S" in ESG encompasses how a company interacts with its people – customers, community members, and employees. While sustainability and good governance are laudable goals, true social responsibility extends beyond rhetoric to encompass issues of diversity, equity, and inclusion. After all, a company's greatest asset is its people, and neglecting their well-being undermines any claims to sustainability.
Combating Diversity Washing
So, how can we combat diversity washing and foster genuine DEI within organisations? While there's no one-size-fits-all solution, there are concrete steps that companies can take:
Assess the Current State: Conduct a thorough evaluation of the organisation's diversity landscape, including demographics, policies, practices, and culture.
Set Clear Goals and Targets: Establish SMART goals for diversity, equity, and inclusion that are specific, measurable, achievable, relevant, and time-bound.
Implementation: From top-down policies to bottom-up employee initiatives, ensure that DEI is integrated into every aspect of the organisation. Hold leaders accountable for driving meaningful change.
Measure and Track Progress: Regularly monitor and evaluate progress towards DEI goals using key performance indicators and metrics. This allows for course corrections and continuous improvement over time.
Diversity washing is a sobering reality in today's corporate landscape, but it's not a challenge we cannot overcome. By prioritising authenticity over optics and taking concrete actions to foster inclusivity, organisations can move beyond performative allyship to create lasting change. Together, let's strive towards a future where DEI isn't just a buzzword but a lived reality for all.
For the Nerds:
Baker, Andrew and Larcker, David F. and McClure, Charles and Saraph, Durgesh and Watts, Edward, Diversity Washing (December 15, 2023). Chicago Booth Research Paper No. 22-18, Rock Center for Corporate Governance at Stanford University Working Paper No. 151, Stanford University Graduate School of Business Research Paper No. 4298626, European Corporate Governance Institute – Finance Working Paper No. 868/2023, Available at SSRN: https://ssrn.com/abstract=4298626 or http://dx.doi.org/10.2139/ssrn.4298626
Pedro Matos (2020), ESG and Responsible Institutional Investing Around the World: A Critical Review. Link: https://play.google.com/store/books/details?id=e8nnDwAAQBAJ&rdid=book-e8nnDwAAQBAJ&rdot=1&source=gbs_vpt_read&pcampaignid=books_booksearch_viewport&pli=1
Li, T.-T.; Wang, K.; Sueyoshi, T.; Wang, D.D. ESG: Research Progress and Future Prospects. Sustainability 2021, 13, 11663. https://doi.org/10.3390/su132111663
