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  • Writer's pictureRyan Wu

Why does Diversity, Equity, & Inclusion Matter?

In a previous article I discussed what DEI is and completed an introductory dive into their intricacies. But now you might be wondering why it matters? Why should businesses or CEO’s even care about DEI? What benefit does it bring to company’s beyond good PR and reputation?

Well, McKinsey and Company has an excellent answer to this question. For those who are unfamiliar with them, McKinsey and Company is one of the top consultancy firms, and they specialize in management consulting. One of their key areas of expertise is ESG and all of its affiliated fields: environment, social, governance. As part of this, in 2015 they conducted the first well known and widely referenced study on diversity called “Why Diversity Matters”. Since then they have continued to release reports every few years on their continued efforts into studying it in depth.

In fact, in 2020 they released their most recent report “Diversity Wins: Why Inclusion Matters” which provided the first quantitative evidence that DEI actually boosts a company’s growth and revenue. Over the five years since they released their first report they have continued to follow companies and track the companies that did or did not integrate DEI into their business structure. The study examines over 1,000 different companies across 15 countries around the world.

It was found that companies whose executive boards had at least 30% women were found to outperform their competitors with little to no gender diversity by 48%. In regards to ethnic diversity, the study demonstrates similar sentiments. Companies that demonstrated ethnic diversity in their executive boards outperformed other companies by 36% in profitability in 2019. Unfortunately, the study also reveals that only 5% of companies have female representation of at least 30%. And in terms of ethnic diversity only 15% of companies have ethnic representation greater than 30%.

In regards to inclusion, the study has not been able to quantify inclusion’s direct impact on business’ profitability; it was noted that there was a correlation between less inclusion and underperformance of companies. It was also recorded that a lack of inclusion was also correlated with lower levels of happiness within a business. Nonetheless, they concluded that, like diversity, inclusion will likely be one of the areas where businesses can optimize their activities and operations. Part of this is that they proposed a number of actions that a company can take to tackle the issue of inclusion. I will go into these later on but I hope that you realize that DEI, especially diversity, is already showing signs of being a definite, concrete factor in a business’ success.

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