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Why transparency can be the key to getting DEI reporting right

Joanna Kim-Brunetti, Trusaic
Joanna Kim-Brunetti
Joanna Kim-Brunetti is chief legal officer and EVP of regulatory affairs for Trusaic. A former partner with Akin Gump Strauss Hauer & Feld LLP, Kim-Brunetti has over 20 years of experience advising clients on a wide range of employment, tax, intellectual property and other business issues.

The acronyms DEI, CSR and ESG have grown in popularity in the last several years, and for good reason. Given today’s social and legal landscape, it’s more important than ever for organizations to document and share their diversity, equity and inclusion (DEI) progress in support of corporate social responsibility (CSR) and environmental, social and governance (ESG) reporting.

What’s driving today’s DEI efforts?

Many factors have contributed to the steep uptick in demand for DEI in the workplace. For starters, movements like #MeToo, #TimesUp and #BlackLivesMatter have fueled the development. Emphasis on DEI is only projected to grow, as younger generations—tomorrow’s leaders—increasingly identify DEI as an important driver in their choice of employer. COVID-19 has also exacerbated the issue of inequality in the workplace and further motivated workers to contest the status quo.

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Other phenomena like The Great Resignation have resulted in workers having more opportunities to pick and choose which employers they’ll work for. Of note, younger workers are opting to work for employers with well-established DEI policies in place, including pay transparency and pay equity. And organizations leading the way in recruiting and retaining top talent have such DEI policies.

Not surprisingly, it’s not just the labor market that’s hyper-focused on DEI. Investors have taken a keen interest in DEI as well, and seek it out in organizations’ CSR and ESG reporting. This is happening so frequently now that organizations have added DEI to their CSR/ESG quarterly and annual reporting.

DEI initiatives, including diversity and pay equity, shine in CSR/ESG reporting. Given the current trend toward CSR/ESG reporting standardization, DEI reporting may very well become mandatory within the next few years.

Developing your DEI strategy

As momentum for implementing measurable DEI practices grows, organizations should revisit their approach and the process for reporting. There are six key steps involved in communicating your DEI progress:

  1. Who will be on your team? Identify a team to hold accountable for meeting DEI goals and reporting progress along the way. Choose a senior level (VP or above) person who has sufficient insight into all applicable areas of DEI to strategically lead the team. Find contributors from HR functional groups, and involve PR/communications.
  2. What are DEI leaders doing? Investigate which organizations in your industry or related industries are excelling in DEI. What activities are they doing? What information are they sharing? What commitments and goals have they announced? Collect metrics and engage with these DEI leaders to learn their approaches to success and what they have planned going forward. Look for the narrative, not just the metrics, and see how it fits into these leaders’ strategy for their companies. View the companies listed in the Great Place to Work Index as a starting point.
  3. What is your DEI strategy? Though the basic principles of DEI remain the same regardless of the type of organization, there are nuances in companies’ approaches to DEI. Be sure your DEI strategy aligns with your specific organizational goals. Once you’ve developed your strategy, commit to achieving goals and holding people accountable as outlined in that strategy.
  4. What are your metrics? How will you know where you stand, what goals to set, and whether your efforts are getting you closer to those goals if you don’t even know where you are? Simply announcing commitment to DEI is not going to get the job done. Start by implementing a DEI measurement system. Of course, you need to ensure that the input that goes into that system has data quality and integrity to generate reliable DEI metrics. Identify which DEI metrics you can use to confidently and accurately establish your baseline, set goals and track your progress.
  5. What are your disclosures? Disclose more relevant information about your organization, not less. Internal and external stakeholders are interested in important metrics relating to workforce representation, pay equity, employee sentiment and progressive policies, like pay transparency. Disclosures help shape a company’s vision, sharing where it’s been and where it’s headed. The more relevant information you include, the more authentic your narrative. Choose transparency over cherry-picking to cover what matters to your audience.
  6. Are you rinsing and repeating? Once you’ve completed these steps and developed a DEI snapshot, be sure to identify areas of success as well as areas for improvement. DEI is an ongoing process. Look for ways to improve goals, metrics and achievements.

Going beyond reporting

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A DEI report is not a stagnant, one-and-done piece. Rather, it’s an evolving reflection of your workforce, policies, goals and overarching mission. As such, DEI efforts should be ingrained within your organization. When this happens, organizations can hit their goals and disclose the results in various ESG and CSR reports to position themselves as leaders.

Incorporating DEI into every facet of your organization takes time and it should be approached enthusiastically, not as a daunting, check-the-box task. To begin, you should first understand where your organization is in terms of DEI.

To assess where you are, leverage the “DEI maturity model,” a framework for evaluating your organization’s DEI progress and long-term goals. It includes three levels—foundational, programmatic and strategic; the higher the level, the further along you are.

Foundational: If your organization is just beginning to engage with DEI, then it is at the foundational level. At this level, initial goals and objectives are established. Challenges you may experience at this level include lack of DEI policies, management, metrics and culture.

Programmatic: The programmatic level is for organizations that have made progress on DEI. At this level, baseline data has been established, metrics are in place to accurately and regularly report progress, and goals are being met.

Strategic: The final state of the DEI maturity model is strategic. At this level, there’s full engagement of leadership and stakeholders to drive DEI goals. Additionally, there’s shared accountability across teams for driving DEI initiatives, and just as importantly, DEI performance exceeds goals and benchmarks.

Dimensions of DEI metrics

The list is long of possible metrics to make your DEI-related CSR and ESG reports strong and useful. Ten of the most common and important metrics include:

  • Organization size and composition
  • Attraction
  • Retention
  • Pay equity
  • Diversity and inclusion
  • Training and development
  • Engagement
  • Talent mobility
  • Leadership development
  • Workforce safety and wellbeing

Best practices indicate that DEI reporting and metric monitoring should be done at regular intervals, with monitoring to be conducted typically every month, though this can vary by industry.

Final thoughts on DEI reporting

Once upon a time, topics like pay equity were hush-hush. Today, transparency is fast becoming the norm. Whether it’s expected by the workforce and investors, or mandated by law, the days of secrecy are over. DEI, CSR and ESG are here to stay.

It is tempting to merely satisfy the minimum requirements, but in the social and legal climate we’re in, it’s time to think about DEI differently.

The truth is, DEI reporting is an opportunity for you as an employer to work on improvements for your workforce that ultimately better your business in the long run. When done right, measuring DEI and communicating progress will make clear the connection between the success of your people, your business and the communities you serve.