DEI Disclosures a Stepping Stone to Better Outcomes

“Unprecedented progress” in response to As You Sow engagement and escalation efforts this US AGM season.  

US companies are responding “more positively” to calls for disclosure around workplace equity and racial justice policies and practices, but continued persistence from investors will be key to securing more granular data, and a deeper understanding of outcomes. 

Shareholder advocacy non-profit As You Sow has published the results of its corporate engagements on racial justice and workplace equity over the last 12 months, noting that 88% of the shareholder resolutions it filed against US companies this AGM season led to “improved practices”.  

“My expectation is that this corporate response rate is only going to increase as companies see more examples of peers making commitments and prioritising these social themes,” said Meredith Benton, As You Sow’s Workplace Equity Programme Manager, who also runs her own consultancy firm, Whistle Stop Capital. 

As You Sow’s workplace equity programme aims to challenge companies to report on the effectiveness of their in-house diversity, equity and inclusion (DEI) policies and processes beyond “anecdotal and qualitative” evidence.  

The racial justice programme was launched in 2020, following the murder of George Floyd and the rise of the Black Lives Matter (BLM) movement. It aims to hold companies accountable and ensure they follow through on actions promised in their public statements published in response to BLM. 

While the first step of these multi-year campaigns has been to improve transparency and disclosure around core workplace and employment metrics, investors won’t have access to sufficiently granular data overnight, Benton told ESG Investor.  

“Investors still ultimately need a way to benchmark and understand the effectiveness of a corporate’s DEI or racial justice programme once it’s in place,” she noted. 

As You Sow is using these more details data flows to analyse the workplace equity and racial justice programmes that companies are implementing, identifying those which are driving the strongest performance and improvements.  

“We will then be able to use these findings to inform our future engagement efforts with companies – highlighting what kinds of programmes are the most efficient and effective when it comes to driving performance,” said Benton. 

Going forward, Benton said that companies will also be increasingly challenged on board responsiveness to DEI and racial justice-related issues. 

A step forward 

As You Sow engaged with 41 companies across its workplace equity and racial justice programmes ahead of the 2022 AGM season.  

Fifteen of these responded “in a positive and constructive manner”, meaning that escalation was deemed unnecessary, while As You Sow filed resolutions against 26 other companies. Thirty-eight out of the 41 companies targeted ultimately committed to disclosing their racial justice or workplace equity progress.  

“There has been a strong shift in investors’ expectations towards reporting on the hiring, promotion and retention of diverse employees – investors want to see this information,” said Benton. 

However, multinational conglomerate Berkshire Hathaway, telecommunications firm Charter Communications and shipping company UPS refused to commit to As You Sow’s requested changes. 

Other companies have responded positively to As You Sow’s 2022 engagement efforts after initial reticence.  

In 2021, 35% of shareholders backed As You Sow’s resolution calling for sportswear giant Nike to publish its recruitment and promotion data according to gender, race and ethnicity, but the company made no such commitment. This year, however, As You Sow re-filed and then withdrew its resolution when Nike committed to disclosing this information by the end of 2024. 

“Stakeholder attention and activity; advocacy groups, investors, consumers and employees have been instrumental in advancing change,” said Olivia Knight, As You Sow’s Racial Justice Initiative Manager.  

“Pressure is mounting” 

In the UK, NGO ShareAction recently launched a campaign calling on FTSE 100 companies to disclose their ethnicity pay gap. Similar to As You Sow’s campaigns, the first step is to ensure companies are disclosing their ethnicity pay gap, the next will be to ask companies for more detail on the reasons for the gap and the measures being deployed to address it.  

Globally, progress around employment and other social-related disclosures is slow. Just 1% of 1,000 of the world’s largest companies assessed by the World Benchmarking Alliance (WBA) are performing acceptably against 18 core social indicators, including fair pay, human rights and worker empowerment. 

The WBA noted that 99% of companies “failed to demonstrate the fundamentals of socially responsible business conduct”, with over half of companies assessed scoring between zero to five out of 18. 

“In a perfect world, companies wouldn’t be waiting for investors or shareholder advocacy firms to contact them and catalyse action,” said Benton. 

“But, as momentum has been building, it’s becoming clearer to investors that there are leaders and laggards when it comes to socially responsible corporate practices. Pressure is steadily mounting on companies to prioritise their social-related performance and disclosures or they risk falling behind.” 

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