Why more people need to be talking about social equity

Conversations around social equity have grown louder over the past 18 months, with businesses expected to play a greater role in promoting equal opportunities for underrepresented groups. Invesco panellists highlight the challenges in solving what can be a tricky issue for companies to address.

Companies will need to start thinking differently about improving social equity as awareness of the issue continues to grow following the high-profile Black Lives Matter protests of the past year and inequalities highlighted by the Covid-19 pandemic.

One reason companies have not acted sooner to address inequalities is that the issue is not as well-understood as other factors, said Raghavendra Rau of Cambridge University’s Judge Business School. Rather than being treated as a core business issue, social equality has instead been considered a moral or ethical concern.

“One of the biggest questions economists have been talking about for some time now is ‘does diversity actually add value?’,” he said. “It is not ‘is diversity good in and of itself?’. I would probably say it is definitely good in and of itself, but the question for our hard-nosed shareholders is ‘what’s in it for me?’.”

From a shareholder perspective, said Rau, greater social equity and diversity could mean that companies were not cutting themselves off from a pool of people who could contribute to value creation. Furthermore, greater diversity can lead to different viewpoints, which may benefit a company in times of crisis.

However, Rau warned that commitment to diversity and social equity might be challenged during times of crisis.

“Companies choose the level of CSR [corporate social responsibility]; they choose the level of social equity,” he said. “In other words, if you are a firm in distress, you might say, ‘I don’t want to be involved in things like this right now; I’m trying to keep my company alive.’

“However, if a company is doing well, you might say, ‘I have the time: I can take on issues like social equity’. But then causality runs from performance to social equity. It doesn’t run from social equity to improving performance.”

One of the biggest challenges to addressing social equity in the workplace and among corporates is defining the issue, according to Nuala Walsh, chief executive of MindEquity Consulting.

“The problem is that there is no clear definition and interpretation of what social equity means,” she said. “Some people think it’s just about diversity and inclusion, CSR, or ESG. Some people just think it’s [about] gender, race, or climate. Others look and think, ‘well, it’s executive compensation or treating clients fairly’.

“Some companies are wrongly delegating responsibility to HR to take care of this problem. Some call it a ‘people problem’ - but, as we know, it’s not remotely a people problem - rather than address it head-on.”

Nevertheless, social equity has an essential role in the workplace and in correcting some of the social injustices that minority groups face.

“Prioritising equity and inclusion has been essential since the pandemic [began],” said Rikia Birindelli-Fayne, senior director for corporate engagement in EMEA at non-profit organisation Catalyst.

“Covid-19 has globally put women’s jobs more at risk - we see about 1.8 times more vulnerability than men’s jobs,” she said. “And the death of George Floyd [in the US] not only sparked a global discussion about racial and ethnic inequity, but also social justice, which has left many companies, individuals, and investors wondering how they can actively support black lives.”

Under such circumstances, companies have begun re-examining how they can change their policies to promote social equity and diversity, according to Birindelli-Fayne, particularly because it can prove to be a competitive advantage. Ultimately, shareholders and investors will be responsible for ensuring that companies promote social equity and stick by their commitments.

“Investors are really powerful: they can make organisations more accountable,” she concluded. “This is something that we need for them to reach diversity, equity and inclusion goals going forward. [Also,] to ensure they keep on top of them and make sure that they’re tracking their progress and holding them accountable.”

The above article was drawn from the ‘Diversity, equity, inclusion and social impact - how can companies and investors make a difference?’ session at our ESG@Invesco digital client event on 17 June 2021. Please click here to watch the session.