The Canadian Securities Administrators (CSA) recently announced final “comply or explain” disclosure requirements regarding the representation of women on boards and in executive officer positions. While some companies may report because they’re asked to, compliance shouldn’t be the only reason they want to make diversity more of a focus in their human capital agenda, according to an EY report.
Read: Rules will highlight gender makeup of boards and management
Businesses that rethink their diversity and inclusion practices outperform competitors, with a 42% higher return on sales, a 66% higher return on invested capital and greater female representation on their boards and in senior leadership roles.
“Diversity just makes business sense,” says Fiona Macfarlane, a managing partner at EY. “High-performing boards have culture, talent and strategy on their agenda, and are taking a broader view of risk in order to differentiate themselves from their competitors.”
With an undeniable body of evidence that shows talent and culture as the biggest drivers of innovation, growth and the ability to outperform the competition, now is the time for management and boards to commit to breaking down the obstacles that are preventing meaningful progress, suggests the report.
Read: 4 banks snag Canadian diversity award
“As organizations grapple with an increasingly competitive environment for both market share and talent, they must tap into the largest and deepest talent pool available,” explains Macfarlane. “Leadership teams and boards need diversity of thought to be truly effective at what they do. It’s important for every organization to develop a robust enterprise risk management that extends to a full spectrum of human capital opportunities and risks.”
Fostering a higher-performing, more diverse corporate culture and mindset, rather than a compliance-based approach to meeting quotas, will lead to more optimal outcomes. Key success factors for this change to occur include:
- Making an authentic and visible commitment: Establish a corporate diversity policy, and embed inclusive practices into existing business processes.
- Setting the tone at the top: Create measurable objectives for achieving diversity in membership and annually assess progress.
- Setting measurable goals and indicators: Link diversity goals with business drivers and objectives to compete for talent, markets and clients.
“Successful organizations understand that their corporate culture will nurture or destroy their corporate reputation, and that ethics and compliance programs are viable only if people are motivated by values, not just rules,” says Macfarlane, “By developing a better understanding of their companies’ and industries’ talent capacity and issues, boards will be in a better position to help the CEO and executive team succeed from a business perspective.”