There has been more recent attention given to the mystery of environmental, social and governance standards.
Part of the challenge is there are very few financial studies that give clarity to what really matters most when planning for the social piece of ESG. While there are positive correlations among diversity, equity and inclusion, as well as the returns on equity and assets, stock performance, operational efficiencies and lower costs of capital, few people really understand what ESG is – especially the “S” piece. At least in my perspective, ESG remains unclear to many, outside of big finance, or it is completely unknown.
But it can’t be overlooked. DEI creates social and economic impact.
The Institute for Operations Research and the Management Sciences published a study of over 1,000 public companies across 35 countries and 24 industries, and it proves when they embrace gender diversity within their organization and leverage their diversity, the companies experience higher market valuation. You can have a diverse employee population, but if you fail to leverage their diverse experiences and ideas, people leave. The “Great Resignation” is proof the “S” matters a lot.
DEI also includes society, suppliers, investors and public-facing relationships.
I contend the most pressing issue is the failure of DEI programs to meet expectations.
New York University’s Stern School of Business revealed in its most recent aggregate of over 1,000 ESG studies between 2015 and 2020 that ESG is a long game, and many DEI initiatives are missing the mark. You can hire diversity, but if you don’t leverage diverse minds and ideas, you will miss the mark on the long game, increasing stock value.
So, how can you impact the “S” within ESG – while keeping DEI at the forefront? There are three ways:
DEI, done well, directly impacts ESG, and investors are paying more attention today than before. Leaders must get better at creating social impact with their DEI program, if they desire long-term sustainability, and it’s never easy.
We need each other to learn new ways of thinking for solving the right problem, building off new ideas and individual contributions before change can happen. We need to be constantly learning.
Dina Readinger is CEO of Diagnostic Thinking and creator of a leadership system to develop executives, particularly in employee retention and diversity, equity and inclusion. She can be reached at firstname.lastname@example.org.
Seth Britton aims to bring Branson+ into homes and beyond.