Stand aside CSR… ESG will take it from here!

Environmental, Social and Governance (ESG) is seen as the bigger and better CSR (Corporate and Social Responsibility) and as more relevant for today's world of business. The three core elements of ESG provide the model for measuring the sustainability and ethical impact of a business and its operations. 

ESG is fast becoming a factor for investors when they evaluate which businesses to invest in and for prospective employees wishing to better understand the ethics of a business that may be their employer. As a result, diversity has become a priority for many employers (and their employees) and is increasingly seen as having an operational and accountable 'home' through ESG agendas with a focus on action and reporting in this area.

To enable employers to study, analyse and address workplace inequalities, it becomes essential to collect, understand and report on key diversity metrics. However, this data collection can be a complex exercise. Employers need to be mindful of data protection considerations and potential discrimination risks not only in the UK, but also other jurisdictions where they collect and process this type of data.

Successful collection and analysis of diversity data also lean on other factors like cultural expectations, technology and operational systems and, of course, communication channels to ensure employees are on board with such disclosure.

Time for change

It is not difficult to see that pressure has grown on employers to tackle issues of discrimination. Take the impact of the pandemic and moments of change such as the killing of George Floyd and the Black Lives Matter movement, or the #MeToo movement and Everyone's Invited, which show clear push factors on employers to take meaningful action act on issues of diversity and inclusion. Alongside these push factors there is a growing body of study and acceptance showing the pull factors from the benefits of a diverse workforce. 

And yet, a shocking number of employees point to discrimination playing a key part in reducing opportunities for their progression and advancement.

The PWC Hopes and Fears 2021 Survey, for example, conducted its research around the future of work by looking at the experiences of more than 32,500 working age people. This study found that 50% of people said they had been held back at work due to discrimination. How can businesses redress the balance?

Diversity data: what does success look like?

Collecting diversity data will raise data protection legal challenges, but having high quality diversity data is crucial for employers if they are to identify and address underrepresentation and discrimination whether that's overt, due to unconscious bias, or due to factors outside the obvious remit of the business.

In short, the better the quality of the data, the more nuance can be gleaned from it, for example, whether employees with different diversity characteristics are impacted by particular areas such as recruitment, promotions, disciplinaries and dismissals within an organisation.

Beyond the priorities of tackling discrimination and increasing diversity in the workplace, organisations need to be able to demonstrate to their stakeholders (shareholders, investors and importantly their people and customers) how they are progressing against their ESG objectives and what measurable success looks like.

ESG: equality and discrimination

Equality and discrimination expectations are driven by laws and, unsurprisingly, these differ across jurisdictions. The characteristics that may or may not be recognised and therefore protected will also differ.  In the UK, the Equality Act 2010 sets out a legal framework for the protection of employees against discriminatory treatment. The framework is set out against nine protected characteristics that include (as you might expect) gender, race, sexual orientation, and disability. Other laws in the equality space may not have the same approach or coverage of characteristics. 

When employers collect and use diversity data, they need to take care not to allow such data to be used in a manner which is deliberately or inadvertently discriminatory. ESG programmes must ensure that diversity data is a shield and a facilitator of progress against discrimination, rather than a weapon or tool that leads to employees with a particular characteristic being treated less favourably than others. 

It follows that any flaws or negligent programme framework would expose employers to significant risk, both legal and reputational. The damage could undermine the very goals they seek to accomplish so it's crucial that employers implement adequate controls and safeguards to minimise the risk of claims for discrimination or unfair treatment.

Cultural awareness: celebration not division

It's also important for employers to take cultural attributes and sensitivities into account when gathering data and naturally this becomes a bit more complex when different jurisdictions are involved.  For example, diversity data collection methods such as surveys or questionnaires need to take into account whether a question that is reasonable to ask in one country is reasonable, lawful or even culturally acceptable to ask in another. 

Diversity data is not just 'data' – it can go to the core of someone’s identity and be deeply sensitive, to the extent that employees would not be happy for it to be disseminated. For example, when such data includes sexual orientation, employees (or applicants) may be concerned about possible discriminatory treatment if they are identified from the data. Employers have to be alive to data disclosure anxiety and think hard about the most appropriate and effective ways to build trust. 

Long live ESG

Trust rarely evolves by chance - ESG programmes need to have trust and ethics at their very heart so employers can both achieve and communicate positive outcomes. Diversity data is not the answer and not in itself the goal, but instead the agent of change and accountability to tackle inequality in the workplace. Real change can only be achieved when it is and driven from the top down and embedded at all levels of a business.

Find out more

To discuss the issues raised in this article in more detail, please reach out to a member of our Technology, Media & Communications or Data Protection & Cyber teams.