Why diversity failings need urgent repair

The benefits of social mobility are usually articulated from the individual’s point of view. 

They are the ones who, in being able to fulfil their potential unhindered by unfairness, can talk about a personal experience of social mobility and their journey in life. 

But, as we are constantly underlining to UK employers, social mobility is transformational and crucial for organisations and their long-term success too. Because a social mobility smart business is more likely to naturally bring in and benefit from the diverse talent Britain has. 

The Social Mobility Pledge's aim is to help companies tackle the issues around gender equality, poverty, education, decent work and sustainable communities which make up the core building blocks of improving social mobility.

Evidence increasingly tells us that teams made up of a diverse range of people whether by background, gender, ethnicity, sexuality, or in other respects are more agile, competitive and innovative. Gender is a key part of an individual’s social mobility story.

In one study, for example, professor Katherine Phillips of Columbia University concluded that diversity in the boardroom “often comes with more cognitive processing and more exchange of information”. This, she said, can generate new ideas and foster creative solutions.

This better decision making ultimately translates into bottom line results. Research published in 2018 by McKinsey found that companies in the top 25th percentile in terms of gender diversity on their leadership teams were 15 per cent more likely to report above average profits.  

 As I mentioned in a previous blog, landmark research by Deutsche Bank evaluated 56 academic studies that looked far wider than gender and more broadly on environmental, social and governance (ESG) in business.

In 89 per cent of studies, companies with high ESG ratings were shown to outperform the market in the medium and long term.

Even so, in spite of the clear business case, the message on diversity doesn’t seem to be hitting home among enough major corporations. For the third year in succession, the Investment Association has had to write to members of Britain’s top 350 listed firms to remind them of their gender diversity responsibilities.

Sixty-three companies are failing to meet what seems a fairly low target – to have 33 per cent female representation of women in boardrooms and executive committees by the end of this year. 

In 24 companies on the FTSE 250, there is only one woman on the board, while 35 FTSE 350 firms have all-male executive committees.

Given that shareholders increasingly understand that diversity can underwrite long term growth, it’s no wonder that business minister, Martin Callanan, says: “The message is clear: those businesses that fail to take diversity seriously risk losing the confidence of their investors.” 

 Perhaps as worryingly, evidence suggests it puts them at odds with a new generation of customers that are seeking ever more assurances that the companies they commit to are driven by real values and purpose. They want to see and know how businesses are a force for good as well as providing the product or service they need. 

Ministers have seen how the gender pay gap reporting has driven change through the power of transparency, even if it highlights that there is much further to go. It would be no surprise to see a Government now focused on ‘levelling up’ introducing similar transparency to company socio-economic reporting of some sort whether narrowly on pay or more widely. And it’s something the TUC’s Frances O’Grady has already raised.

Government, shareholders, investors, customers and market intelligence are all telling companies to embrace diversity. Ultimately, it seems that company accountability on levelling up will continue to rise up the agenda. 

Yet irrespective of that, there’s a business case for diversity and social mobility. And it sits alongside the hugely compelling case that equality of opportunity is a mission that British business can help deliver for our country for the first time. It’ll be a win-win for the strongest businesses and Britain’s talent, driving a race to the top and more change on the ground. 

Rt Hon. Justine Greening

Founder, Social Mobility Pledge

Former Secretary of State for Education, Minister for Women and Equalities, Secretary of State for International Development, Secretary of State for Transport, Economic Secretary to the Treasury