7 ways companies are advancing racial justice in business

  • Over the past year, the pressure for companies to act on racial equality has increased.
  • In response, they have started to focus on seven key actions to increase diversity, equity and inclusion (DE&I).
  • These include hiring for DE&I roles and providing anti-bias trainings.

The murder of George Floyd at the hands of police officers on May 25, 2020, caused a surge in activism across the world, and forced businesses and organizations to both acknowledge and scrutinize the systemic racism and bias inherent in much of corporate culture and operations.

For the past decades, corporate diversity, equity and inclusion (DE&I) programmes mostly focused on advancing gender equality and ignored racial justice as too complex and too controversial. But since 2020, mentions of “systemic racism” in corporate meetings have exponentially increased. Nearly one-third of Fortune 1000 companies have made public statements on racial equity, and the private sector has pledged a total of $66 billion towards racial justice initiatives.

Over the past year, the pressure for companies to act has increased. The Harris Poll found that 54% of employees said they would consider quitting if their company did not take a stand against racial injustice. According to a recent Edelman survey, 42% of respondents said they had started or stopped using a brand in the past year because of its response to protests against racial injustice – an increase from last year. Yet, nearly half said they believe that business has done little concrete action to address systemic racism.

To address these concerns, many companies have started to operationalize their racial justice commitments and implement an integrated and corporate-wide approach across all business functions. Here is an assessment of seven areas of action that corporations have started to execute and double down on:

The COVID-19 pandemic and recent social and political unrest have created a profound sense of urgency for companies to actively work to tackle inequity.

The Forum’s work on Diversity, Equality, Inclusion and Social Justice is driven by the New Economy and Society Platform, which is focused on building prosperous, inclusive and just economies and societies. In addition to its work on economic growth, revival and transformation, work, wages and job creation, and education, skills and learning, the Platform takes an integrated and holistic approach to diversity, equity, inclusion and social justice, and aims to tackle exclusion, bias and discrimination related to race, gender, ability, sexual orientation and all other forms of human diversity.

1. Establishing dedicated diversity, equity and inclusion roles

Companies are investing in dedicated DE&I teams and increased hiring for diversity managers. According to LinkedIn data, diversity roles are up 71% over the last five years. While the COVID-19 pandemic has first caused many companies to divest from DE&I efforts – creating a dip in the number of DE&I roles posted immediately after the COVID-19 lockdowns – the data shows an exponential growth of new DE&I roles since May 2020, with the number of DE&I jobs growing faster than HR jobs.

Creating formal and dedicated leadership roles to manage diversity and inclusion is one of the strongest predictors of creating more inclusive organizations, and research shows that the appointment of diversity managers sees 7% to 18% increases in all underrepresented groups in management in the following five years.

Diversity roles

Diversity roles

Image: LinkedIn

2. Sharing racial and ethnic representation levels transparently

Companies have started to collect demographic data of their workforce and publish annual diversity reports about racial and ethnic representation across their business. For example, Goldman Sachs shared that – in the US, just 49 of its 1,548 executives, senior officials and managers are Black. Mostly using voluntary and confidential self-identification processes, such data increases the understanding of workforce composition and helps to uncover potential bias in recruitment, retention, promotion and progression.

When collecting such data, companies need to ensure that employees are protected from negative, unintended consequences of such data disclosure. Outside of the US, varying national laws and regulations around data protection, privacy and anti-discrimination have made it extremely challenging for multi-national companies to set up a global compliant and harmonized data collection approach.

3. Expanding corporate accountability through DE&I goals and targets

Many companies have established clear goals, targets and metrics to tangibly measure corporate progress towards racial equity. For example, PepsiCo set the target to expand the representation of Black managers to 10% of its workforce by 2025. As of the first quarter of 2021, PepsiCo reported to have increased its Black managerial representation to 8%, including adding 28 Black associates to its executive ranks.

To hold leaders accountable, many companies have also started to integrate DE&I goals as one of the key metrics to evaluate job performance determine executive compensation, or issued penalties for not meeting diversity goals. Uber, for example, has set specific KPIs to achieve compensation targets for their most senior executives: by 2022, grow the percentage of women at Uber’s L5 level and above to 35% and grow the percentage of underrepresented employees at the L4 level and above to 14%.

4. Providing anti-bias trainings and workshops

Nearly all Fortune 500 companies offer some form of anti-bias trainings, yet research suggests that these trainings do not reduce bias, alter behavior or change the workplace. Three major barriers to effective training are defensiveness (trainees refusing to admit their own bias), futility (trainees feeling overwhelmed by the pervasiveness of bias) and uncertainty (trainees being unsure how to take action).

Trainings can be effective, however, when they emphasize what can be done and are integrated in a broader DE&I strategy. For example, at BAE Systems, the bias trainings include developing a personal action plan for leaders and holding them accountable to that plan after the training programme. Those leaders have been shown to hire 15% more women and people of colour.

5. Creating ownership and responsibility for leaders across all business functions

One of the most crucial elements for success in DE&I efforts is to create a sense of ownership and responsibility for the DE&I work in people managers. Senior leaders must the tone for the organization: research finds that managers, willing to drive change, continue to be biased in hiring and promotion if their senior leaders show prejudice.

Companies like Uber have strategically assigned senior leaders across its business units to be responsible for the operationalization of specific commitments of its racial equity strategy, while its DE&I team and Chief Diversity and Inclusion Officer serve as consultants.

6. Conducting pay equity audits

To promote equal pay, companies are adopting pay transparency policies and publicly disclosing anonymized pay data by categories such as gender, race and ethnicity. In 2020, Glassdoor committed to transparency to drive racial equity, publicly releasing its annual pay gap audit publicly and senior executive salaries. Glassdoor’s actions are illuminating how pay transparency can create institutional incentives to combat unexplained pay gaps.

7. Diversifying the supply and value chain

Companies can use supportive business functions through their value chain – such as procurement – to ensure equal representation of, and management by, under-represented groups, and to actively promote a more inclusive society. Retailers like Sephora or Macy’s have taken the 15 Percent Pledge that asks companies to dedicate at least 15% of shelf space to Black-owned businesses.