That's not my name
DEI and ESG tipped over together, but you can stand them up
I’m going to try to keep this one simple. Like my book, this post won’t save the world or its people, so I apologize. Still, there is a path to that from here.
When people think about what garnered attention on ESG from the corporate world, many point to Larry Fink’s annual letter to CEOs. Starting around 2015, Fink called out sustainability and stakeholder ideas. From here, financial products grew across ESG, Socially Responsible, and Impact Investing. By the time the idea hit corporates, confusion reigned.
DEI is similar. If your company hadn’t focused on Diversity, Equity, and Inclusion by the time of COVID and George Floyd’s murder, whatever resulting programs your company stood up were likely trying to solve systemic issues instead of material ones.
Another way to think about this is the famous (often misattributed) axiom: “If you judge a fish by its ability to climb a tree, it will live its whole life believing that it is stupid.” Similarly, if a company tries to deal with systemic issues alone or without considering its company context, it will fail.
Even if you are one of the world’s most influential companies, directly addressing the issue doesn’t often work. The company will wind down these ineffective programs in a few years, potentially damaging even limited progress.
In ESG Mindset, I argue that the rise of ESG and DEI are on parallel journeys, gaining attention from 2020 on, being attacked, and now not being discussed (or greenhushing). As a result, a company’s ESG and DEI efforts have now become Schrodinger’s cat. You can only tell what’s going on by opening the box and poking around a bit. Is that even a cat in there? I mean, what is that?
Now, pair these nebulous acronyms that people are no longer openly discussing with a political perspective and surface understanding, and you have a convenient and frail strawman to drive news cycles and litigation.
So, it is no surprise that a recent Washington Post headline declares, “DEI is getting a new name. Can it dump the political baggage?”
This appears to be the next stage of greenhushing: Let’s not stop talking about things because stakeholders do care, but let’s call it something else.
Is a new name the answer, or do companies need to approach DEI with an ESG mindset?
In the WP article, Johnny C. Taylor Jr., chief executive of the Society for Human Resource Management, flips the acronym around to IED to focus on Inclusion first. At first glance, this isn’t too bad of an idea. After all, had Bud Light led with a little more Inclusion at the intersection of its core stakeholders, it might’ve staved off a vicious political backlash. Yes, including its stakeholders and their perspective is ESG.
Still, a name change feels like a shell game, shuffling around the items while pivoting a narrative to last long enough through the next wave of criticism. If you have to shuffle the letters around to get leadership attention or avoid an attack, you are only skimming the surface of these topics, and you’ll be back at the game table again in a few months.
I’ve attended several conferences with leaders speaking on their efforts, one of which appears in my book. In listening to those who have stood up successful DEI programs, it is clear that one thing made the programs last with defensibility.
To have a successful DEI program, one must understand the material issues of these topics through the company’s intersection, not through crises.
After all, how could your company address systemic issues if you don’t understand your company’s intersection with them?
Listening to diverse voices is a good place to start.
Seek to understand how each Diversity, Equity, and Inclusion pillar materially intersects with your business. I’ll give you a leg up. Universally, there are a few ways that are often discussed, including:
Talent attraction and retention
Employee satisfaction
New customer markets
But materiality isn’t so easy, nor is the material connection of DEI a strictly HR exercise, as in these cases. We must go further. Every company and business unit has unique intersections with these topics that must be explored.
The WP article mentions Eli Lilly, a pharmaceutical company, with these universal perspectives. While the company has removed DEI from its proxy statement and annual report, its DEI Impact report from last fall holds a material perspective.
A key component of improving global health lies in our health equity strategy. We are decentralizing clinical trials to create more opportunities for members of diverse communities to participate in clinical research studies. Although minorities make up nearly 40% of the U.S. population, they constitute less than 20% of participants in the key clinical trials that lead to the approval of new medicines, according to a 2015 study. We identify and address the barriers keeping marginalized populations from participating in clinical trials.
Every industry has this kind of bias that it can improve on, and yours is no different.
Do the work, engage a diverse group of stakeholders, listen, and learn.
Don’t lead with universal issues alone without the broader material context.
Don’t simply react to crises, brewing stakeholder sentiment, or even the shifting changes of a civil society.
I’ve been touring colleges with my daughter this past year, and DEI was a big recruiting theme, but it sure seems like higher education hasn’t figured it out.
Find the material intersection of DEI with your business and ride it. If you do this, you’ll find you stand on much stronger ground.