DEI: Putting people first with ESG
A material and stakeholder-led approach drives impact and good stories
Diversity, equity, and inclusion (DEI) issues were at the forefront across several complex stories this past week. While systemic racial and gender issues permeate society, especially in the US, it is hard for companies and governments to get it right or to understand the value and values at play.
I don’t pretend to have the answers, only one observational perspective, and here it is:
Companies, governments, and each of us have unique ways to improve systemic DEI issues. We all should address these issues for social good, but not in the same way.
Companies must address these issues through a material lens and consider their stakeholders.
Governments must lead with a steady hand in policy.
We all should care for each other.
Still, this is easier said than done, as DEI sits with the Social and involves the complexity of people.
Last week, Pew Research Center released a report on corporate DEI initiatives. Their findings were pretty middle of the road, with 54% of workers saying their company is spending about the right amount on these efforts. Surprisingly, the type of diversity valued varies with racial/ethnic most valued, followed by different ages, then gender, with sexual orientation last.
However, the survey didn’t examine the value of DEI efforts, the intersection with the materiality of those initiatives, or how companies attempt to address these issues, so we’re left wondering a bit about what steps are being discussed exactly. This is essential context as there are a range of issues at work. For example, there are systemic issues, like pay and career equity intersections which a Human Resources team can help foster. In addition, the culture might need a boost, leading to DEI training and Employee Resource Groups to build empathy (the survey does address these). Finally, there are intersections where a company can step up by considering materiality and its stakeholders and enact change as only it can.
DEI is complex and nuanced, and companies struggle when they approach it strictly with values without understanding the unique value their company can bring.
And so, to find some of this context, we can look at two corporate stories from this past week that called out interesting connections between DEI programs, material DEI issues and stakeholders, company value, and where values come in.
Levi Strauss
Jennifer Sey, the former Chief Marketing Officer of Levi Strauss, wrote an essay this past week called When great American brands sabotage their own success. Of course, the title harkens directly to the high-profile and ongoing missteps of Bud Light. Still, it points to how companies often get it wrong in attempting to address or integrate DEI through a new opportunity, like capturing new markets in the case of Bud Light. The result may be self-sabotage. The result fuels the anti-ESG narrative and directs attention away from material risks and opportunities.
That isn’t what Sey does in this article, but she gets close as she points out some non-material focus the company had. Here’s a little backgrounder on Sey. She publicly expressed her perspectives on COVID-19 and the damage of homeschooling, which Levi Strauss questioned. Sey resigned from her position and 20-year tenure at Levi Strauss and declined $1M in severance to be able to speak and write about her experiences. And so, here we are.
Let’s start at the end of the article with her only ESG mention. In her conclusion, she, unfortunately, gets ESG wrong by calling it a “social credit-style score card,” conflating ESG with rating agencies, which some companies do chase and is an apparent problem. Yet, in the middle of the article, Sey calls out precisely what ESG is by listing how Levi Strauss had materially addressed brand issues with stakeholder issues over the years. Here’s her list:
Except for 1936, these are material ESG opportunities along the Social pillar and relate to DEI because they focus on what Sey calls “Levi’s core mission: selling jeans.” I’d be remiss if I didn’t call out a more complex indirect connection between 1992, materiality, and Levi’s core mission. Leading the charge with same-sex partner benefits is an excellent example of how values and value can cross over through material issues like talent attraction and retention.
It’s worth reviewing the sales numbers from Levi Strauss to see the material intersections with results, but unfortunately, I could only find the numbers back to 2010.
While correlation is not causation, we can see that the significant reimagining of the women’s brand in 2015, a material Social change with high disruption potential around half of the market, did not hurt the brand’s net sales. But, COVID-19 clearly had a material impact on sales in 2020.
Target
Our second DEI company story comes from Target, the retailer. In contrast to Levi Strauss, Target’s growth has been seemingly supercharged around COVID-19.
On Fortune‘s Leadership Next podcast this past week, Target CEO Brian Cornell talked about this accelerated revenue growth and credited DEI. Here is one standout quote:
Our brand is all about delighting and taking care of the families we serve, and all those families, most of America shops at Target. So we want to do the right thing to support families across the country. And when it's true to our purpose and true to our culture, we lean in. And I'm really proud of the work we've done in the DE&I space. Now, the fact that we talked about almost 2,000 stores, well, half of those stores are run by female store directors. Over 40% of our store directors are diverse. That component is so important, but it also reflects the consumer we serve. And when your team, your leadership represents the consumer you serve, I think good things happen.
Starting with a purpose-led brand statement, Cornell leads us from purpose to how Target addressed a stakeholder engagement model by matching the consumer. From here, he adds another example, describing a new store in a primarily Latino market, “and recognizing that many of the guests were Latino, we've got the right Spanish-language signage in that store so that they feel at home and the store population looks and feels like the community they serve.” These are approaches that understand stakeholder engagement and put people first, including considering the communities in which the company operates.
In my estimation, this material intersection comes out here in Representation and Business under their DE&I page.
Many companies, including Levi Strauss and Target, lead with programmatic elements and metrics to prove their work. Cornell’s stories and Sey’s timeline are more powerful because they show the execution. Cornell leveraged the adage I often say, ‘data is the proof of your story,’ as the question started with the revenue that led to the story. I wish more companies told the great stories of stakeholder engagement and DEI at the intersection of materiality to show others what is possible.
Focus on materiality and stakeholders to drive impact
Companies should understand DEI issues across their stakeholders in the context of their business. One way to do this is to capitalize on the movement of employee stakeholders toward purpose. In fact, when I doubted my value in leading DEI conversations, my manager stepped in to remind me what a powerful ally I could be. People need those reminders to build confidence around their purpose.
Still, returning to Sey, companies can get tripped up. For example, according to Sey, Levi Strauss made her take an apology tour for her COVID-19 remarks. In another instance, she recalls that the company weighed in on a new Teen Vogue reporter after racist Tweets from her youth resurfaced. While arguments could be made that either issue may have been material (cultural cohesion and perhaps ad relations), neither really appears to be.
For companies, though, the question is whether or not companies should weigh in on non-material systemic Social issues. This question is difficult to answer, but there is a path forward.
One way to drive meaningful change is in only the way that your company can by addressing DEI issues in a material manner that makes sense for your stakeholders, brand, and purpose. If you take this approach, your company will have a more informed perspective and a more defensible story when addressing non-material issues.
Covering DEI in a way that makes sense for your company gives you a deeper understanding and can help prove you have the clarity to wade into other issues with transparency and consistency. If you don’t put stakeholders first, the issue will come first, and your company will be in a crisis of its own making.