Why we need to defend DEI/ESG: they’re good for people, the planet, and profits

by | Apr 8, 2023 | Blog | 0 comments

Did you expect the growing conservative backlash against DEI (diversity, equity, and inclusion) and ESG (environment, social and governance), the key non-financial factors that many investors use in their analysis. I didn’t. And if you’re not familiar with what’s been happening, this Provoke Media article can bring you up to date.

The attacks on DEI and ESG have surprised me on several counts, especially since both concepts have been tightly woven into our work lives for a number of years. If DEI and ESG unravel much more, they could leave gaping holes in our work practices and tear apart the ways we humans relate with one another and collaborate.

Granted, the “equity” within DEI started becoming even more wobbly during the pandemic when many parents, especially mothers, felt they had to drop out of the labor market to care for their children. Then the situation worsened last June when the Supreme Court overturned Roe v. Wade. “Health care equity” has transformed into “health care disparities.” Many state legislatures and judges are now deciding what reproductive and related health care services are available in their respective states, taking the responsibility and autonomy away from patients and health care professionals. As a result, health care is even more inequitable across the U.S. than it was a year ago.

Yet, DEI and ESG had achieved notable successes before becoming such popular scapegoats for the Silicon Valley Bank failure, culture wars, and other societal ills in recent months. Here are just a few examples.

First and foremost, DEI and ESG contribute positively to improved business performance. For example, diverse teams are smarter and more innovative than homogeneous teams, based on research. Diverse teams are able to tap into members’ different life experiences, different ways of thinking, and often different job duties to bring a range of perspectives to the issues and problems they’re focusing on, improving their work quality. True, team members often find the experience more stressful because it takes time and effort to know their teammates. Plus they may have to adapt their style to work with individuals who are different from them. Yet, feeling less comfortable initially results in better performance later.

Another positive development, this time on the equity front, is greater openness about a topic once deemed taboo – pay. Due to a number of salary transparency laws enacted in some U.S. states and municipalities, employees are able to learn about pay levels for various jobs. The laws are designed to promote fairness and reduce pay disparities related to gender, race, and ethnicity.

As for inclusion, it affects everyone because of the way our brain works. As I learned in my neuroscience studies and have personally experienced, anytime you don’t feel as if you’re intentionally being included in a group, you can feel excluded. Over the past few years, the concept of “psychological safety” has grown in familiarity and in practice as people learn about the groundbreaking work of Dr. Amy Edmondson and Dr. Timothy Clark. When individuals feel psychologically safe, they’re more willing to speak up and share ideas. Plus, they can be more creative, more innovative on their own and with others, and make better decisions – all attributes organizations need from knowledge workers.

Turning to ESG initiatives, they call attention to climate concerns and other business practices that help companies build more sustainable businesses. For example, companies that create a greener supply chain to be more environmentally friendly often will operate with less redundancy and waste. Companies making commitments to safeguard the climate also can attract superior talent, which can improve innovation and productivity. (For more about ESG, check out this McKinsey analysis.)

Second, DEI and ESG can help companies build stronger relationships with employees and customers. These relationships can boost brand loyalty as well as corporate reputations while achieving other positive benefits.

Third, DEI and ESG support a return to more balanced capitalism. Back in 2019, the Business Roundtable announced it was redefining the purpose of a corporation. The statement, signed by 181 business leaders, committed to “promote an economy that serves all Americans.” The primary responsibility of companies stopped being to maximize profits for shareholders, as advocated by the Nobel prize-winning economist Milton Friedman. Now, companies are expected to provide value to their full range of “stakeholders.” These multiple stakeholders includes employees, customers, and communities—as well as shareholders.

And fourth from a personal perspective, the backlash to DEI and ESG has introduced me to an upside down world. To my surprise, I’ve become a fan of Shakespeare (“Politics makes strange bedfellows”); Milton Friedman (on an extremely limited basis); and Disney (for standing up to the Florida governor).

Consider Milton Friedman. Today, almost two decades after his death, his ideas still resonate with many, especially Republicans – with the exception of the current Florida Governor Ron DeSantis.

DeSantis has a much more expansive view of government than Friedman ever did. DeSantis, who rails against DEI and ESG, also remains angry with Disney for speaking out against the Florida Parental Rights in Education Act, nicknamed the Don’t Say Gay bill. According to Friedman, all of these issues have no place in government.

“Government has three primary functions,” Friedman said. “It should provide for military defense of the nation. It should enforce contracts between individuals. It should protect citizens from crimes against themselves or their property. When government — in pursuit of good intentions tries to rearrange the economy, legislate morality, or help special interests, the cost comes in inefficiency, lack of motivation, and loss of freedom. Government should be a referee, not an active player.”

DeSantis not only is legislating his definition of morality, he’s also been retaliating against Disney for expressing opinions. In response, Disney’s CEO has called DeSantis and his actions “anti-business” and “anti-Florida.”

While this current spat between DeSantis and Disney revolves around detailed issues in the state of Florida, this situation highlights the dilemma for business today. CEOs are complicit if they stay silent. And if they speak out, they and their company can become targets of powerful people.

However, if leaders believe in humanity and want to be known as human-centered, they need to defend and protect DEI and ESG for two key reasons. One, DEI and ESG are evidence-based business tools that add value to employees, their organizations, and the bottom line. Two, leaders need to maintain their employees’ trust.

The 2023 Edelman Trust Barometer again showed that business is still the only institution considered to be both competent and ethical. There’s a 12-point gap in trust between government and business. No wonder then why employees are continuing to ask their leaders to speak and act on social issues that affect them.

We can help our leaders. Give them some love. Show them we have their backs by being dependable employees plus voters in government elections. And we also can defend and support DEI and ESG practices at work. What do you say?


Submit a Comment

Your email address will not be published. Required fields are marked *