How ESG Reporting Drives D&I

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What are ESG and D&I?

If there’s two things that we’re passionate about at DNI, it’s sustainability and D&I. There’s no doubt that over the last few years, acting sustainably has become a global trend, whether it’s through individual act like veganism (*guilty*) or through global mandates like ESG reporting.

 

What’s exciting is the potential for ESG to not only positively impact environmental sustainability but also to deliver better outcomes around D&I. Before we dive into how, first, a few definitions.

 

Environmental, social, and corporate governance (ESG) is essentially an assessment of a company's collective social and environmental consciousness.

 

Diversity & Inclusion (D&I) is an organisational function that is part of the HR department. The goal of D&I functions is to guarantee that the company comprises of different individuals with different qualities, values, beliefs, and histories so that a respected and welcoming environment is created for everyone.

 

Key Benefits of ESG and D&I

As per a recent survey conducted by PwC, it was found that ESG and D&I are now key aspects for accessing finance. The Big Four surveyed 400 businesses along with 15k investors regarding their views on how ESG and D&I have benefited them.

  • With improved ESG credentials, 68% of the companies in the UK said that it helps them access better financing.
  • Almost half (49%) of the surveyed companies see ESG as an important tool to attract future talent for their company.
  • 73% of the companies said that D&I is among the top three benefits of their firm. They prioritize D&I as a vital tool in change management or restructuring programs as it improves the overall growth of the company.
  • 72% of investors in the UK believe that a clear ESG proposition has increased their capability to extend financing, that is more than seven in ten investors.
  • 66% percent of firms also believed that change programs, such as D&I, are more effective.

 

How ESG leads to more D&I?

After the pandemic and George Floyd’s brutal murder, many in the corporate world has come to realise that creating D&I measures that go beyond corporate statements (read here for why performative initiatives and vanity metrics aren’t really helpful) is a crucial tool for business growth.

 

ESG, the evaluation of an organization’s social and environment factors, has huge potential to drive D&I – but how? Accurate data from a load of different sources that is now being both collated, reported and ultimately judged on by company employees, customers, regulators and investors means change. As I’ve said before, money (and reputation) talks.

ESG reporting means a) stakeholders will measure companies in these non-financial areas, such as D&I and environmental sustainability and can’t be sacrificed for ‘shareholder profit’; b) through solutions that hold and report all of this data, there’s no excuse for not tackling D&I problems if they’re rampant in your company; c)when there is readily available data and financial/reputational repercussions from not acting, decisions get made.

 

These are decisions that will help create work environments with integrated D&I principles at their heart.

 

Impact on Employee Retention Factor

But if it wasn’t obvious, and taking the human aspect out of it, why are ESG and D&I good things, even for ‘greedy’ businesses?

 

As alluded to earlier, it has become a known fact that companies with higher ESG scores perform better than the competition. And investors keep a keen eye on this factor as it majorly affects a business’s growth. In the past, companies used to pay less attention or completely neglect environmental, social, and governance (ESG) issues. Well, does it matter if they don’t? Yes. ESG issues play a vital role in determining a firm’s reputational and financial performance which are under the strict surveillance of rating agencies, clients, and investors.

 

But that’s not the actual reason for which a company should be focusing and prioritising ESG and D&I issues. The most important stakeholders that are affected by these issues are your employees.

If you did read PwC’s survey above, there is also a link between ESG performance, D&I and employee mood - an important metric in an era of high turnover and fierce talent competition. Thus, ESG performances can highly impact the workforce sentiment of a firm which creates an advantage over their peers.

So in short, we started the year passionate about D&I, sustainability and advising our clients on how the two are crucial to attracting top tier talent. At the end of the year, and as more companies look at their ESG strategy, we’re doubling down on that message!

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