How 2020 Has Shaped the Way Companies Address Diversity
November 20, 2020 |
The C2FO Team
Corporations have promoted diversity and inclusion, internally and externally, for years. But the events of 2020 have caused many of them to re-examine and redouble their efforts.
Long before 2020, many leading US companies began to make diversity and inclusion a priority.
Corporate giants like Marriott International, Eli Lilly & Co., MasterCard and others won recognition for their commitments to promoting diversity within their workforces, serving more diverse communities, and supporting minority-owned businesses.
A series of tragic events in the late spring and summer brought the resurgence of the Black Lives Matter movement and has heightened the sense of urgency for companies to address issues of racism and diversity in their own ranks and in the world at large.
Here are a few steps that companies have taken, both internally and externally, to counter racism and to make their organizations more representative of the nation’s diverse population.
Something shifted in American culture with the May 25th death of George Floyd at the hands of Minneapolis police. Protests erupted in the Twin Cities, then spread throughout the nation and soon around the globe. A Monmouth University poll released on June 2 reported that 76% of Americans (including 71% of Whites) now considered racial and ethnic discrimination a big problem in the United States, up from 51% in 2015.
As the nation confronted issues of systemic racism and bias, corporations needed to act quickly to show their commitment to racial justice in the nation and to greater diversity and inclusion in their own leadership.
While it would take time to plan and implement internal diversity initiatives, companies could immediately show solidarity with the anti-racist movement by opening their wallets. The weeks following the start of the protests saw a tremendous outpouring of corporate dollars to civil rights groups.
Walmart, Sony Music Group and Warner Music Group each announced $100 million in funds to support social justice organizations. Sundar Pichai, CEO of Google’s parent company Alphabet, announced $12 million in donations to “organizations working to address racial inequities.” Amazon pledged $10 million to various civil rights groups, including the American Civil Liberties Union, Black Lives Matter, the Brennan Center for Justice and the NAACP. Another $10 million commitment came from Facebook CEO Mark Zuckerberg.
These are only a few high-profile examples. Virtually every major US corporation has responded with some kind of monetary contribution to anti-racist causes.
Donations were only the first step. Companies understood that, in order to thrive in an increasingly diverse marketplace, they needed to take a close look at the messages they were sending with their marketing. The time had come to re-examine their own brands and consider whether some long-lived icons were racially problematic.
Quaker Oats, a subsidiary of PepsiCo, discontinued its Aunt Jemima brand within a month after the Minneapolis protests began. Mars rebranded its Uncle Ben’s rice products to Ben’s Original, dropping its familiar logo depicting the face of a Black head waiter from a Chicago restaurant. The makers of Mrs. Butterworth’s pancake syrup and Cream of Wheat also announced reviews and brand changes. In a gesture of sensitivity toward indigenous people, Dreyer’s changed the name of its Eskimo Pie snacks to “Edy’s Pie.”
The changes didn’t stop at brand names and logos. Companies reevaluated policies and marketing strategies to signal solidarity with minority groups demanding fairness.
NASCAR, whose image has long been associated with conservative rural America, banned the display of the Confederate flag at its events. CVS, Walmart and Walgreens discontinued the practice of keeping beauty and grooming products for Black customers in locked display cases. Airbnb announced Project Lighthouse, an initiative it developed with leading civil rights groups to investigate and root out racial discrimination on its platform.
Clearly, the events of 2020 acted as a catalyst for greater sensitivity in the ways companies marketed their products and services to a diverse population.
Entertainment companies, whose role as content providers make them some of the most consumer-facing businesses of all, responded quickly to the shift in the zeitgeist.
Netflix was among the first to adjust its programming, adding a new Black Lives Matter collection to feature Black history and Black creators. HBO Max pulled the controversial classic “Gone With the Wind” from its streaming service, then restored it two weeks later with a disclaimer and a one-hour panel discussion of the film’s whitewashed depiction of slavery.
The Paramount network canceled its long-running reality series “Cops,” which civil rights groups had frequently criticized for presenting a lopsided view of the criminal justice system. “Sesame Street” joined forces with CNN in a town hall to help children understand racism and how to counter it.
Donations and brand overhauls can be accomplished relatively quickly. Transforming an entire company into a more diverse, inclusive organization is a much longer and more labor-intensive process.
Many businesses had already implemented aggressive plans to improve diversity before the events of 2020 brought the issue back into the spotlight. Starbucks, in the wake of a 2018 incident in which an employee called police on two Black men who were waiting for a friend, famously closed 8,000 of its US locations for a day of anti-bias training. More recently, the company has tied executive pay to its goal of achieving 30% minority representation in its corporate employees and 40% in its retail and manufacturing workforce by 2025. It also announced a minority executive mentoring program to help improve diversity on its executive team.
Other companies have set similar targets. Google adopted a five-year plan to achieve 30% minority representation in upper management. Adidas announced a goal of hiring 30% Black and Latinx workers for new positions.
In addition to diversity goals, companies have committed to a variety of plans to make their workplaces more inclusive. General Motors CEO Mary Barra, in an email to employees, announced the creation of an Inclusion Advisory Board to focus on the company’s diversity goals. The fashion and lifestyle giant PVH created a task force to explore ways to promote inclusion of Black employees. Nike, Twitter, Square, the New York Times, Vox Media and others have made Juneteenth a paid holiday for their employees.
Supporting minority businesses
Business-to-business relationships have played a major role in corporate anti-discrimination efforts. While many companies had already made commitments to increase their support of minority-owned businesses, that trend has spiked in 2020.
PepsiCo announced a plan to more than double business with Black-owned suppliers. Paypal announced a $530 million commitment to “support Black businesses, strengthen minority communities and fight economic equality.” At the retail level, Sephora rolled out its “15 Percent pledge,” vowing to devote at least that percentage of shelf space to products from Black-owned businesses.
An ongoing challenge
At the beginning of the year, Forbes named software giant SAP the best employer for diversity in 2020. In July, with protests still at their height, SAP’s head of people sustainability and Chief D&I Officer Judith Williams spoke out in a CNBC article about the need to do more. At that time, the most recent data showed SAP’s workforce as 68% White, 23% Asian, 4% Hispanic, and only 3% Black. Williams acknowledged the difficulty of reaching SAP’s goal to have a “nationally representative” workforce within 10 years. “We’ve not grown at that rate historically, so we’re really going to have to shift our focus in our talent attraction strategy to make sure we’re sourcing differently.” That, she admitted, will involve building a more inclusive culture.
Another CNBC report, published two weeks after the death of George Floyd, detailed how far companies still had to go to make significant improvements in diversity. Drawing on data from the human resources firm Mercer, the report revealed that 85% of executive positions were held by Whites, while only 2% and 3% were held by Blacks and Hispanics, respectively. Data from the Economic Policy Institute showed that wage growth since 2000 was still significantly faster for Whites than for minorities.
Facing these challenges, companies are now redoubling diversity efforts that have been ongoing for decades. If history is a reliable guide, it won’t be easy to achieve the aggressive goals that corporate America has set for itself.
Will it last?
Given the historical difficulty of making lasting improvements in diversity, it’s natural to ask whether it’s really different this time. With record numbers of Americans agreeing that racism is a significant problem, it certainly feels different. Half a year after the death of George Floyd, diversity and racial justice still dominate the nation’s headlines.
Major American companies have continued moves to increase diversity and support minority communities in the months since the protests began.
While these efforts are both laudable, it’s not just about morality or optics. Recent research has shown that there are strong financial incentives for companies to increase diversity and inclusion, especially at the executive level. Increased diversity brings a wider range of perspectives, which can foster innovation. A Boston Consulting Group study concluded that innovation revenue in companies with diverse management teams was 19% higher than in companies with homogeneous leadership.
Diversity in the workforce is also a key factor in attracting and retaining top talent, particularly younger workers. It’s estimated that millennials will represent 75% of the global workforce by 2025. This generation, poised to take over the majority of corporate leadership positions in the coming decades, places a high value on diversity, not only in gender and ethnicity but in culture, sexual orientation, and individual perspectives.
In addition to talent, companies need to attract investors. Socially conscious “impact investing” has been a rising trend for some years and has only gained popularity during the COVID-19 pandemic. With more individuals factoring in the social impact of their financial decisions, companies that don’t prioritize diversity can risk losing investors.
For these reasons, a diverse corporate culture benefits the bottom line. A study by the McKinsey consulting group found that in 2019, companies in the top quartile for gender diversity on executive teams were 25% more likely to have above-average profitability than those in the fourth quartile. The findings were even more compelling for ethnic diversity, where companies in the top quartile outperformed those in the fourth by 36%. According to the report, “The most diverse companies are now more likely than ever to outperform less diverse peers on profitability.”
Will the events and reforms of 2020 result in lasting change? After only a few months, it’s still too early to answer conclusively. But with more companies committing to long-term goals of promoting diversity and inclusion, American’s C-Suites and boardrooms may look significantly different by this time in 2025.