Why businesses should double down on EDI to weather economic turmoil

Equality, diversity and inclusion programmes are often the first victims of organisation-wide budget cuts, but increasing investment in these areas makes long-term financial sense, argues Monica McCoy

Credit: Monica Motivates

The murder of George Floyd on 25 May 2020 by the white police officer, Derek Chauvin, led to an increase in public interest in the impact of ongoing racism and discrimination. Around the world, people took to the streets to call for justice and equality. There were protests, demonstrations, acts of civil disobedience. There were sit-ins, die-ins, and waves of internet activism. At the centre of many of these protests was Black Lives Matter, a grassroots political movement launched by three Black women in the US, following the acquittal of George Zimmerman in the killing of Trayvon Martin.

The murder of George Floyd captured on video translated into extensive soul-searching both personally and in the business world, followed by meaningful attempts to advance social justice in the workplace through the creation of equality, diversity and inclusion (EDI) programmes and a much greater consciousness of inequality. Racial equity became a top priority for corporate America and across the globe. Nearly $70 billion was pledged towards racial equity work. Diversity and inclusion officers soon became high-demand positions.

But now, much of that progress is at risk. Faced with geopolitical volatility, energy crises and an economic downturn, investment in EDI has begun to slow and there is evidence to suggest that EDI budgets are being cut. The director general of the Institute of Directors in the UK has warned that the “task of progress” could be “eroded”, and the UK government is under pressure to cut supposedly “woke” causes – which include the drive for greater diversity, inclusion and equity – from the public sector.

Maybe this is to be expected. ‘Last in, first out’ – often a method of redundancy selection – can apply to just about everything, and EDI initiatives launched in the last two or three years are now being targeted. Organisations are also struggling to determine how best to implement EDI initiatives and how to measure their impact, making it harder to tie investments directly to results. But the idea that EDI has less value than other business areas betrays a misunderstanding. And though it goes without saying that organisations have to be financially prudent, this misunderstanding could be costly.

We need to remember that what we’re trying to achieve with the implementation of EDI and similar initiatives is the undoing of prejudices and injustices entrenched over centuries as they manifest in the world of work. Addressing these injustices is clearly the ethical response and it provides an enormous benefit to wider society, by helping to create a more just world. And since businesses are in dialogue with society – they don’t exist outside of it – EDI helps to create a virtuous cycle, whereby businesses help to make society more equitable, diverse and inclusive, and society influences businesses in return.

But businesses also stand to benefit from stronger performance when they create inclusive environments that tap into unique perspectives and skillsets. McKinsey & Company has conclusively shown that high gender diversity corresponds to higher profitability and productivity. The most ethnic and culturally diverse companies outperform the least by a third in terms of profitability. Meanwhile, The Boston Consulting Group has said that investing in increasing EDI at the management level is a “slam dunk” for businesses. “These companies find unconventional solutions to problems and generate more and better ideas, with a greater likelihood that some of them will become winning products and services in the market,” the articles say. “As a result, they outperform their peers financially.”

Businesses with greater EDI are also more attractive to customers. Gen Z in particular are demanding more EDI from brands, and the vast majority (75 per cent) say they will boycott companies that discriminate based on race and sexuality in their advertisements (something far more likely to happen in homogenous teams). This generation, who are growing in purchasing power and having an outsize influence on the culture as a whole, want to buy from companies that look like all of humanity, not just one segment of it. This should be a major consideration of companies considering taking their foot off the pedal on EDI.

So what should businesses do now, faced with economic uncertainty? My answer is simple: they should double down. The more they invest, and the more intelligently they invest, the faster change happens, and the quicker they will derive the enormous benefits of EDI – benefits that will help them to ride out this and future crises. Businesses should be led by the data, and the data on the value of EDI is in, and conclusive. By doubling down, they can play their part in preserving and advancing the gains made in the aftermath of George Floyd’s tragic murder, and help to create a better world. They will also position themselves to be far more competitive than their peers who cut EDI programmes now.

Monica McCoy is CEO and founder of Monica Motivates