The 30% Club UK Investor Group has published its guidance for companies on diversity reporting. The Group seeks to use the influence of investors to create greater representation and inclusion of underrepresented ethnic groups and women in corporate entities across Britain. The 30% Club is pushing for integrated reporting to be treated as a core strategic consideration rather than just a side offering to satisfy regulatory reporting.
The 30% Club considers that reporting should be as follows:
- Authentic and strategic: reflecting the running of the business. Where areas of improvement are identified, these should be discussed, addressing how they will be dealt with in the future. The more these areas of development are embedded into strategies, the better. Accountability needs to come from the top down, as the board and CEOs are the key forces for promoting diversity.
- Quality over quantity: more reporting does not mean better reporting. Investors are looking to understand potential investment companies quickly and easily. Creating lengthy or multiple reports will mean that investors will struggle to access the information. Some of the most useful reports the 30% Club have seen are concise, easy to understand and meaningful. This may be achieved by producing a summary document setting out diversity and inclusion activities or integrating strategies and activities into wider company reporting documents.
- Action-led: rather than containing generic statements of intent. Companies should be looking to create individual targets and should be able to show tangible evidence of what is being done. Progress should be reported on at least annually.
- Explanatory and informative: data should be accompanied by useful narrative. Figures alone do not paint the full picture. For example, investors want to know the ethnicity or gender representation of a board but they are also interested in underlying explanations and what the company is doing to improve the current statistics (if necessary), such as how board culture has changed or benefited from recent actions taken to increase diversity.
- Flexible but comparable: companies should develop a reporting framework using common features to allow investors to easily make comparisons. By giving companies freedom to report, investors will be able to identify and recognise those that are leading the way in the area of diversity and inclusion. As part of a company’s reporting framework, it is suggested that they may consider use of a balanced scorecard (a strategic planning and management system that organisations use to focus on strategy and improve performance).
The guidance also includes examples which show innovative or useful approaches taken by companies.
This guidance continues the narrative of diversity reporting, which we recently covered in our article on the FCA’s policy statement on board diversity (here) and in our article about ways to improve diversity and inclusion (here).
Businesses are becoming ever more aware of the need to become more diverse and inclusive. The economic disruption caused by COVID-19 disproportionately impacted ethnic minorities and women and exacerbated inequalities, so there is arguably now an even greater need to balance that inequality. A renewed focus on diversity and inclusion in the workplace should benefit all stakeholders and this most recent guidance suggests that potential investors recognise that this is best achieved by clarity and integrity in the reporting process.
