These quotas vary in scope, ranging from requiring "at least one" female director to a minimum of 40% female representation². Countries like France, Iceland, Italy, and Norway have set the most ambitious targets at 40%, while others like India, Israel, and Korea mandate a minimum of one female director. Additionally, 13 other OECD jurisdictions require companies to set diversity targets with a "comply or explain" approach³. For instance, the UK's Financial Conduct Authority (FCA) sets "comply or explain" gender and ethnic diversity targets for listed companies. These targets require a minimum of 40% female board representation, at least one woman in a senior position (Chair, CEO, CFO, or SID), and one board member from an ethnic minority background⁴.

Indeed, research shows that a diverse workforce can be a key driver for business performance. Research on Diversity and Inclusion shows that companies prioritizing diversity achieve higher financial returns and growth rates compared to those lacking diversity in leadership roles⁵. On the other hand, companies with low diversity in leadership are much less likely to succeed. According to the latest study, the least diverse companies are now 66% less likely to outperform financially, which is a significant increase from just a few years ago⁶. 

This focus on DE&I extends beyond just high revenues and financial returns. By embracing a diverse workforce, companies open avenues for capturing new markets and fostering a culture of innovation. This innovation thrives on the fresh perspectives and diverse and unconventional thinking that come with a team composed of individuals from various backgrounds.

However, while achieving diverse hiring numbers is a crucial first step, it's not always enough to provide the needed change in terms of culture. To build a team that brings diversity of thought that comes with different ages, gender, socio-economic backgrounds, the company needs to go further than representational diversity. 

A focus solely on representation can backfire. Fixation on quotas, for example, can lead to existing employees feeling disengaged and overlooked. But it can also lead to disengagement from the employees that are being hired to support a more diverse workforce as they may perceive themselves as tokens, hired to meet diversity goals rather than for their unique skills and perspectives⁷. This lack of inclusion can contribute to absenteeism, according to Bupa Health Clinics⁸. Ultimately, a company's overemphasis on quotas hurts both employee morale and the potential benefits of a diverse workforce.

A key challenge to DE&I initiatives can be resistance from existing employees who fear being disadvantaged or losing their jobs. This perception can be amplified if the rationale behind DE&I initiatives is not clearly communicated. When engagement and communication is poor, there could be disengagement from all sides, including existing employees, newly hired employees and the business owners themselves. 

It's crucial to acknowledge that fostering a truly inclusive environment can be complex. Diverse points of views might be conflicting, while those who historically have not faced exclusion might not be aware of the challenges others encounter. Change can be uncomfortable, and some may feel threatened by a more inclusive environment. However, the potential benefits far outweigh the initial challenges.

Understanding the issue

Thus, it is important to remember that DE&I consists of three concepts: Diversity, Equality and Inclusion rather than one. Diversity does not necessarily imply or lead to inclusion or equality, as the employer has to actively work on embracing the other two parts of the concept. More diverse hiring practices need to be complemented by other policies.  This is where the ‘I’ in the DEI comes into play. Inclusion “refers to a cultural and environmental feeling of belonging”9. It can be assessed as the extent to which employees are valued, respected, accepted and encouraged to fully participate in the organization10.

Inclusion fosters a safe space where everyone feels valued, respected, and empowered to contribute their unique perspective, leading to better problem-solving and creativity. It is about fostering a culture of tolerance, where different perspectives are accepted rather than judged. This translates into increased productivity and a diverse range of skills brought to bear on company challenges. In a safe and inclusive workspace employees seek out different opinions to challenge the status quo, thus discussions are broadened to include the views of a variety of stakeholders, so innovation is increased in problem-solving, and companies are more adaptable to change.

The benefits of inclusion extend beyond business performance. An inclusive company finds it easier to retain and recruit top talent. For instance, a recent study by Deloitte shows that over half of ethnic minority LGBT+ employees and around 40% of Gen Z and Millennials, are looking to switch employers for greater LGBT+ inclusion11. This aligns with broader industry findings – a lack of diversity and inclusion is a major driver of employee turnover12.

It is difficult to make everyone feel safe and welcome, as diverse points of views might be conflicting. Moreover, “non minorities” benefit from a default sense of inclusion, thus they are often not aware that others may feel uncomfortable or excluded. Change can be uncomfortable, and some may feel threatened by a more inclusive environment. However, the potential benefits far outweigh the initial challenges.

How could an employer create a diverse and inclusive workplace? 

Here are some steps to consider:

• Diversity of thought can be fostered in many ways, and goes beyond metrics like gender and ethnicity. Consider neurodiversity, social class, and other dimensions of background that contribute to unique perspectives.

• Start with your specific case. Each company is unique. Consider your current employees and what could enhance their sense of belonging. Create a DEI committee and ask employees what they need in their workplace to feel safe and welcomed. 

• Foster open communication: Encourage honest conversations about diversity and inclusion. Create avenues for employees to voice concerns and offer suggestions. 

• Psychological safety: Employees must feel comfortable speaking up without fear of retaliation. This requires building trust and demonstrating a commitment to continuous improvement.  

• Learning and development opportunities: Offer diverse training methods beyond traditional approaches to foster empathy and cultural competence, thus enhancing inclusion efforts. 

• Target bias at the top level. It is essential to have your management on board so that they set the right tone

• Expand your DEI efforts. While gender and race/ethnicity get attention, a comprehensive approach requires including age, disability, sexual orientation, and nationality.

• For multinational corporations, contextualize DEI initiatives for each country of operation to ensure their relevance and effectiveness.

Moving beyond the one-dimensional "numbers game" approach of representation requires a holistic approach. Companies need to understand societal inequities and how they are carried over from society into the organization. Strong leadership committed to change is crucial to break the pattern. Ultimately, creating a truly equitable, diverse, and inclusive workplace requires constant effort to push back against systemic biases and foster a culture of inclusion at all levels.

Navigating the DE&I journey can be complex. Black Sun Global could help you in understanding both the legal requirements and best practices to create a more inclusive work environment. If you would like to speak to one of our experts about fostering employee engagement with an inclusion-lens and navigating the DEI regulations landscape, please get in touch with our Head of Business Development, Naomi Hawkins.