Reality check: A ‘sustainable norm’ required for DEI and ESG

By Geoff Rodgers, Chairman

There has been heightened scrutiny on Diversity, Equity and Inclusion (DEI) and Environmental, Social and Governance (ESG) in the global corporate sector over recent months. This has become even more evident following the re-election of President Trump in the US and the continued tightening of world economies, with certain pundits misguidedly pitting DEI and ESG against financial and commercial/organisational performance and sustainability.

According to the Diversity Council of Australia’s 2023-24 Inclusion at Work Index, the percentage of Australian workers who oppose or strongly oppose DEI initiatives at work has more than doubled in recent years — increasing from 3% in 2017 to 7% in 2024. Of course, it is important to note this view is still very much the minority.

History shows when economies boom, business, politics and society increasingly embrace socially-oriented dynamics, and when economies cyclically turn south there tends to be an immediate reaction to get back to basics with increased calls for ‘jobs, jobs, jobs’, shareholder returns, and perhaps a relaxation in environmental disciplines and support for social causes.

However, despite the current questioning, there is still overwhelming support for DEI and ESG. Though 7% of Australian workers now oppose DEI initiatives, 74% support or strongly support them, with 19% neither supporting nor opposing. In the US where the DEI backlash is perhaps most apparent, support is slightly lower but not drastically different. A poll of US workers conducted by The Conference Board in October 2024 shows 58% of workers support current DEI policies and 21% don’t believe their organisation’s efforts go far enough. It is also possible that these figures have changed slightly following the US election in November 2024 and President Trump’s ensuing commentary in this area.

Regardless of prevailing economic and political conditions, I genuinely believe a balance is required to achieve what I call a ‘sustainable norm’. Not companies picking winners on causes they feel carry favour with a specific political party or special interest group, but genuine and authentic commitment to causes aligned with their core business and society at large.

Business is not about short-termism. Long-term sustainability is, and should be, central to any business operation. In-built to this proposition are proven values and principles such as authenticity, transparency, ethics, integrity, commitment, focus and resilience. As regulatory bodies across the world, including our ASIC and ASX, currently assess their respective stances on DEI and ESG, I ask everyone to get real.

I believe right-sized DEI and ESG are integral to modern business — both strategically and operationally — and for shareholders, employees, other stakeholders, and the world generally. By way of example, every business (and individual) in the world today has a moral obligation to play their part in environmental protection and management in whatever way they can and aligned with the nature of their operations.

Research consistently shows that companies with greater gender and ethnic diversity in executive teams and boards are more likely to outperform their peers, as highlighted in McKinsey’s December 2023 report, Diversity matters even more: The case for holistic impact:

There have been far-reaching changes in the business environment over the past few years, yet companies with diverse leadership teams continue to be associated with higher financial returns. Our expanded dataset shows this is true across industries and regions, despite differing challenges, stakeholder expectations, and ambitions.

A commitment to right-sized DEI and ESG strategies and practices is not only ethically appropriate, but makes good business sense.

My firm, Rowland, as a strategic communication firm, has worked in this space for more than three decades. During this time, we have seen and been able to work with all the prevailing trends and definitions — community relations, corporate philanthropy, corporate social responsibility, triple bottom line reporting and ESG, to name a few. In reality, these all relate to the corporate sector doing the right thing and adopting a commonsense approach.

Not only can Rowland assist organisations in developing their own positioning, outlook and narrative in these areas (internally and externally), but via our core lens on corporate reputation, stakeholder engagement, issues management, and creativity, we can also add strategic value to policy frameworks and direction, organisational culture, corporate behaviour, operating standards, and various aspects of disclosure and reporting.

We would welcome the opportunity to discuss how we can assist your business in this increasingly critical area.