Consumers, employees and shareholders are increasingly pressuring corporations to reflect the diversity of the communities in which they live and are demanding to understand what organizations are doing to advance social justice in ways related to their business. Sara McKinstry and Siobhan Harper of ESG communications firm Labrador share their insights into how some of the biggest companies in the U.S. handle racial and social justice reporting.
While companies have been scrutinized for their environmental and social impacts since the Industrial Revolution and, more recently, the Civil Rights movements of the 1960s, that scrutiny has increased dramatically since 2020. A perfect storm has developed, as social movements like Black Lives Matter and #MeToo overlapped with intense political debate related to the Covid-19 pandemic and the Supreme Court decision that overturned Roe v Wade — and stakeholders of all stripes have demanded companies address these issues.
But are companies that made bold supporting statements for racial justice in 2020 after George Floyd’s murder following up such statements with action? Are companies headquartered in states banning books or education around racial and social inequality speaking out? Are companies helping their employees access inclusive healthcare practices even in states where abortion or gender-affirming care are being banned?
Customers, employees and other corporate stakeholders are all asking these questions.
Current U.S. best practices in racial and social justice
In direct response to bold statements of support many U.S. companies made after the death of George Floyd, the nonprofit shareholder advocacy organization As You Sow launched its Racial Justice Initiative and Scorecards. The initiative strives to “monitor corporate responses and follow up with companies to ensure that statements of support for racial justice are translated into concrete actions that truly promote equity, thereby helping them on the path to end corporate complicity in systemic racism.”
While the nonprofits’ annual scorecard demonstrates that U.S. companies have a lot of room for improvement, As You Sow recognized PayPal, illumina, Microsoft, Disney, Altria, American Electric Power, Activision Blizzard, eBay, UnitedHealth Group and BNY Mellon for their related policies, practices and communications.
Over the past several years, many companies have developed DEI programs that include some of the emerging best practice elements below. Several were driven by shareholder proposals and broader stakeholder engagement.
- Some companies have adopted the so-called “Rooney Rule” so that diverse candidates are included in searches for new board members and other internal positions.
- Prompted by shareholder proposals and support from the NYC comptroller, many companies put their latest EEO-1 data online and include links to the data in their ESG reports.
- Companies like Apple have had shareholder proposals lead to civil rights and other related audits.
- A growing number of U.S. companies have created leadership positions focused on enterprise-wide diversity, equity, inclusion and belonging goals and initiatives. It has become market best practice for companies to set DEI-related goals around recruitment (especially into leadership positions), pay equity, training and compensation incentives.
- Many companies have also focused their community engagement and philanthropic giving on addressing gender, racial and ethnic disparities in areas like financial inclusion, small-business development, education (especially in science, technology, engineering and mathematics), food insecurity, environmental justice, a just transition to a clean economy and access to healthcare.
In addition, a number of best practices have emerged in U.S. ESG reports around racial and social justice disclosures. Labrador’s benchmarking of 2020-21 ESG reports from the S&P 50 found that:
- Nearly all included race, ethnicity and gender workforce diversity data; a small percentage also included data on sexual orientation, age and disability status.
- Nearly all provided access to their most recent EEO-1 data.
- Around half set social goals with two- to five-year targets and showed quantitative changes from baseline year-to-year.
- Around one-third discussed gender or racial inequality, while a little less discussed systemic racism.
- Around one-fifth published separate social, human capital management or DEI reports.
- Less than one-fifth discussed pay equity.
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Read moreBelow are examples of companies that have made moves toward transparency:
- PayPal includes comprehensive workforce diversity data, details on social innovation and employee and culture highlights in its 2022 Global Impact Report.
- Microsoft has multiple reports, including its 2023 Global Diversity & Inclusion Report and 2022 Impact Summary Report, that cover sustainability, corporate responsibility and diversity and inclusion. The company also has in-depth information on company culture and how it is turning commitments into action.
- Boeing shares in-depth diversity information, including veteran, disability and LGBTQ+ diversity data, in its 2022 Sustainability Report.
Looking ahead
Despite recent pushback from some U.S. lawmakers against corporations taking stances on racial and social justice matters, we anticipate that these programs and reporting will continue to grow as stakeholders become more informed and demand more transparency from companies.
Companies should monitor what ripple effects, if any, the U.S. Supreme Court’s June 2023 ruling on Students for Fair Admissions, Inc. v. President and Fellows of Harvard College, which effectively overturned affirmative action in college admissions, may have on corporate DEI programs. In addition, we suggest monitoring ripple effects from letters sent by 13 Republican state attorneys general to the CEOs of the 100 biggest U.S. companies stating that using race in hiring and employment practices could bring them negative legal consequences. We suggest companies consider focusing on the “why” of their DEI and social justice initiatives and explain how they tie back to their core business value and profile to support value creation.
To date, however, the anti-ESG backlash in the U.S. has not slowed down advances in ESG corporate reporting regulations or voluntary frameworks development and alignment.
At least a half-dozen global frameworks or regulations require varying levels of DEI, human rights and social justice commitments and/or disclosures from companies, including:
- United Nations Sustainable Development Goals (UN SDGs)
- UN Global Compact
- UN Guiding Principles on Business and Human Rights
- Global Reporting Initiative (GRI) Standards
- Just Capital Rankings and Scorecard
- Workforce Disclosure Initiative (WDI)
While the newly released international corporate standards focus only on financially material sustainability disclosures, depending on a company’s industry and value chain relationships, racial and social justice issues may need to be disclosed.
Possibly the biggest set of changes coming, however, may be the newly released European Union Corporate Sustainability Reporting Directive. Not only does the directive require disclosures related to a company’s own workforce, workers in its value chain, affected communities and consumers and end users of its products or services but also compliance with the EU’s Corporate Sustainability Due Diligence Directive. We suggest that U.S. companies start thinking now about if and how CSRD may apply to their business and corporate ESG reporting.