Diversity, equity and inclusion improve business results

Diversity, equity and inclusion improve business results
Diversity, equity and inclusion improve business results

COLLABORATION by Carmen Pumariño, Investment Director at Zubi Capital AM.

There has been a lot of talk about diversity lately. Each interest group gives it a meaning, so confusion and even a certain fatigue is being generated. However, diversity is now clearly recognized as an essential value within companies, which make significant efforts to guarantee its presence and promotion in the work environment.

The reason? We have evolved: Society is more global, multicultural, open and also older. Although it may seem like a topic of our times, in reality there has been clear evidence for more than 10 years on how gender diversity contributes to improving business results. A Credit Suisse study in 2012 revealed that Companies that hire women on their boards of directors after the 2008 financial crisis recorded a Return on Equity (ROE) and growth that exceeded by four percentage points the average of companies run exclusively by men.

McKinsey, for its part, has been analyzing the correlation between diversity and performance in organizations since 2015. In the latest report from this consulting firm in this area, it highlights that Companies with the greatest ethnic, racial and gender heterogeneity in the management team They are 39% more likely to have better financial results than anyone else.

The conclusion of these studies is similar to that of other reports, such as one published by the Boston Consulting Group in 2018, which indicates that companies with above-average diversity obtain 19% more revenue from innovation and experience 9% higher EBIT margins on average.

Change of focus

However, in the last 10 years the focus on diversity has changed. We are no longer talking only about gender, as in work teams we find new characteristics that make employees unique, different (profiles with more experience, younger people, technical profiles, women, men, LGTBIQ+, functional diversities, different cultures…). This is the diversity that adds value.

According to the definition of Adeccois about “a strategic business value that responds to the range of different talents necessary for the optimal functioning of a company. It is often attempted to be quantified by establishing categories by gender, age, disability, race, etc. However, it is more difficult to account for when these labels are removed and the focus is on people’s knowledge, experiences, values, attitudes and genuineness. However, these returns are not generated immediately. It is a medium-term commitment, as it needs a correct inclusion and equity policy to unleash its full value.

In 2018, Deloitte revealed that organizations with inclusive cultures are twice as likely to meet or exceed their financial goals. They are also three times more likely to demonstrate high performance, six times more inclined to be innovative and agile, and eight times more capable of achieving superior business results. Deloitte also highlighted that Diversity alone is less effective than when accompanied by inclusionIf companies have diverse teams, a good strategy and a correct implementation of diversity, equity and inclusion (DEI) policies, they will be more efficient, more complete and, without a doubt, better aligned with the objectives of their different interest groups.

Market reaction

This is shown by the results; for example, listed companies have already demonstrated significant progress in integrating gender diversity into their boards of directors over the past decade, between 2013 and 2023. Specifically, Female representation on S&P 500 boards has increased by 14 percentage points. Furthermore, by taking a more holistic approach to diversity, the number of executives from diverse backgrounds at companies in the same stock market index has increased by 76% over the same period, according to a report by SpencerStuart.

Fuente: SpencerStuart

It’s not just about adding diversity to an organization but weaving it into the very core of its being, allowing equity and inclusion to be the pillars upon which all decisions and strategies are built. Companies that embrace this approach not only position themselves to outperform their competitors, but they also align themselves more closely with the expectations of a society that values ​​and demands equality and respect for diversity.

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