Diversity equity and inclusion: bridging the perception/reality gap

There is little doubt that diversity, equity, and inclusion (DEI) is on the corporate agenda. Businesses are declaring their DEI values, promoting themselves as having policies and practices in place to ensure their workplaces are diverse and inclusive. It is also clear that DEI is good for business, especially in a time of talent gaps.

But there appears to be a mismatch between what companies are saying and what they are doing – or at least, how their employees think they are doing. C-suite and managers appear to believe they are doing better on DEI than the reality. And this is a risk for organisations at a time when people risk is moving right to the top of the agenda.

Last month’s EY European DEI Index stated: “If you listen to the rhetoric of executives, you’ll assume that diversity, equity and inclusiveness (DEI) are more important than ever. Businesses in every sector are declaring their commitment to DEI at work, both seeking to improve their culture and internal processes, and building it into their brand in the marketplace… But the reality is that too many are still failing to create truly equitable and inclusive workplaces.”

EY said its research, from nine European countries, suggests that senior leaders are struggling to confront the scale of the challenge. “Beyond the rhetoric, some senior leaders appear to be over optimistic about the reality of their organisational performance on DEI. The research finds that while a slim majority of non-managerial employees rate their organisations as ‘‘good’’ or ‘‘very good’’ on gender diversity, fewer than half give the same level of approval to their performance on ethnic or cultural diversity and LGBTQAI+ diversity. These divergent perspectives suggest that leaders are failing to understand how much more work is needed.”

All of which is creating a risk headache for companies. As Lucy Brown, UK DEI and pay equity consulting leader at Mercer, explains: “A lack of diversity and inclusion within the organisation should be considered a material business risk. With an exponential increase in legislation, the threat could come from litigation, but this should not be the only driver. Historically the focus has been entirely on the environmental factors of ESG, with DEI and ESG terms often being used interchangeably, but this creates increasing people risk.”

According to Mercer, 53% of global organisations do not have a DEI strategy in place and are risking missing out on all of those benefits. Mercer’s Global Talent Trends shows that DEI is on the scorecard for many executives, yet only one in three feel confident that they will meet their DEI commitments this year. “With many organisations still focused on initiatives like monthly DEI-related events and trainings, rather than DEI strategies, and with a lack of metrics and governance to support executives, it is no surprise that executives are hesitant around their ability to meet these goals,” says Brown.

Brown points out that there is a world of difference between diverse and inclusive. “Typically, metrics put in place by executives or by legislation focus on representation – i.e. diversity with minimal focus on inclusion. Without inclusion, you can bring as much diverse talent into the business as you like but the effect will be a revolving door, where talent quickly leaves when they recognise they are not able to be themselves at work, that their new perspectives are not valued or that they do not feel psychologically safe at work. Therefore, long-term targets for gender or other characteristics will not be met unless there is an inclusive and authentic culture,” she notes.

At a recent Mercer event, chief finance officers confirmed that their biggest risks were people risks. “Risk managers should start to take note. This is unchartered territory for risk managers and it will involve working with other stakeholders such as HR. To be clear, however, businesses should be introducing a chief diversity officer to focus on DEI within the organisation. This should not be sitting within HR as typically happens, wherein there is no specific specialty and work is often done on the side of desks. This needs specific focus and a reporting line direct to the CEO, not CHRO, in order to have maximum impact,” says Brown.

She adds: “Firms that implement a multi-year, published DEI strategy that feeds directly to the CEO, with metrics that are linked to incentives, are better positioned to attract and retain Gen Z workers, among others, who value inclusion and expect their employers to follow suit. Companies with mature DEI programmes also tend to surpass those without, in terms of speed to market, market share and exceeding expected revenue. Furthermore, businesses with DEI teams report higher employee satisfaction – which has been shown to boost productivity.”

According to Barbara Frencia, CEO of Business Assurance at Norway-headquartered assurance and risk management company DNV, companies are starting to realise that DEI isn’t just a trend, it’s a business imperative. “DEI isn’t just a nice-to-have, it’s a must-have for business success. “And leadership buy-in is crucial. When leaders champion DEI, it sets the tone for the entire organisation,” she says.

“As a global certification body, DNV has witnessed first-hand the challenges and rewards of implementing DEI policies across diverse industries and geographies,” she adds. “Navigating DEI waters isn’t easy. But the rewards are worth it. In fact, a growing body of research suggests companies that take DEI seriously are more likely to experience enhanced financial performance and innovation, and attract exceptional talent.”

Frencia believes that DEI is often misunderstood: “DEI isn’t just about creating policies and ticking boxes; it’s about unlocking the full potential of your workforce. True diversity goes beyond surface-level metrics. It’s about embracing diverse perspectives and experiences. And inclusion isn’t just about inviting people to the table, it’s about ensuring they have a voice and are valued.”

She recommends adopting ISO standards such as ISO 30415, which provides guidelines to organisations on diversity and inclusion in addition to providing a way to structure the company’s approach to DEI, both internally and externally.

Above all, Frencia stresses the importance of embedding DEI into every aspect of a business. “DEI should be part of your organisation’s DNA,” she says. “By integrating DEI principles into culture and operations, it becomes second nature – not something you do, but something you are.”