Racial equity: The impact on companies bottom line.

Racial equity: The impact on companies bottom line.

The past year has shone a spotlight on the impact of discrimination in society.

The Black Lives Matter social movement galvanised following the death of George Floyd, which sparked difficult conversations around the role of systemic racism in society, including in the workplace. These issues have resurfaced in the wake of the racial abuse targeted at some of England’s black players, following the Euro 2020 final defeat.

Whilst many organisations may appreciate there is a connection between having a diverse workforce and improved financial performance, finding data to support this has been harder to come by.

However, new research by Engine Transformation with Henley Business School demonstrates just this. In the wide-ranging report ‘The Equity Effect’, examining the impact of racial inequities on UK business; researchers found that organisations who actively confront racism with practical measures were found to see an improvement in employee job satisfaction and loyalty, and reported on average 58% higher revenue than organisations which do not.

But what is equity and how does this differ to equality?

Equality versus equity

Equality focuses on achieving fairness by promoting that we treat everyone the same. It assumes we all have the same starting position — but as we know, not everyone starts at the same position, or has the same barriers to overcome. To build a fairer and more equitable society we need to acknowledge this fact.

Racial equity on the other hand, is defined as striving to promote fairness by acknowledging that different people, have different starting positions; thus, suggests we should treat people differently depending on their needs. Equity then does not undermine equality, but rather provides a means to achieve it.

Potential barriers

Whilst in the UK, positive discriminationis illegal under the Equality Act 2010 as it does not give equal treatment to all, positive action is not. Positive actions are measures which are targeted at protected groups to encourage people within these groups to overcome or lessen their disadvantage. For example, positive action could take the form of an organisation ensuring they have a diverse candidate pool when recruiting, with the successful candidate still selected based on merit irrespective of any protected characteristic such as race or gender.

In terms of barriers to the success of racial equity programmes, the research from Henley suggests that when it comes to business leaders, fears of positive discrimination in relation to hiring and promotions, and a lack of understanding of race related issues were seen as potential impediments.

Moreover, when employers were asked about the most important challenge, they had to overcome in the next 12 months, achieving racial equity was ranked as the least important priority, compared with other staff management issues. This is likely linked to the fact that racial equity is a lesser-known concept compared with equal opportunity, but also points to how difficult businesses perceive it is to implement measures to combat racial inequities.

The road ahead

Organisations such as Coco-Cola, AstraZeneca and WPP have all made commitments to achieving greater racial equity in their businesses. Coca-Cola has developed a Racial Equity Action Plan to strive for greater justice and equity within its own organisation, including a 10-year commitment on recruiting and developing ethnic minority talent, particularly within leadership roles. AstraZeneca are increasing promotion rates of under-represented demographic groups, in part by ensuring diverse candidate slates and interview panels. Whilst, WPP have pledged to invest $30 million over the next three years to fund inclusion programmes.

This research highlights that investing in racial equity and D&I programmes can contribute to an organisations bottom line. When companies invest in their people, their performance improves. Racial equity and business success should then not be treated as separate conversations. It is critical that any organisation wanting to achieve its objectives in this rapidly changing world of work, to engage in this important conversation.

You can read the full Equity Effect report here.