Why & how to build stronger corporate LGBTQ+ inclusion

There are a wide variety of threats that could upend the global economy, such as pollution, biodiversity loss, deforestation, supply chain issues, labor rights, and water shortages. However, the COVID-19 pandemic shed light on a specific and significant challenge facing our world today: social inequality. Awareness of and action around diversity and inclusion has never been more important, especially as economic recovery from the pandemic allows for the inclusion of displaced groups.

Consequently, ESG (Environmental, Social, Governance) investors, along with employees and consumers, are driving the demand for companies to implement sustainable Diversity, Equity, and Inclusion (DEI) practices and take stances on social issues such as LGBTQ rights and inclusion.

For example, the Walt Disney Company publicly spoke against Florida's Parental Rights In Education bill, the so-called “Don't Say Gay” bill passed by Florida's House and Senate, after Disney employees shared their outrage on social media. And the Exxon Mobil Corporation recently announced plans to prohibit the LGBTQ-rights flag from being flown on the corporate flagpole outside its offices during Pride month, prompting a furious backlash from Houston-based employees. While other companies like Nike, Ben & Jerry’s, and Patagonia have taken a public stand in the fight against social issues and been rewarded with customer loyalty and a positive brand reputation.

While these decisions feel morally grounded, they’re also financially motivated. In fact, sustainable investments received a $120 billion inflow in 2021, more than doubling the $51.1 billion received by ESG funds in 2020 and setting another new annual record. And it appears the upward trend will continue. Global ESG assets are expected to hit $53 trillion by 2025, according to Bloomberg, accounting for more than a third of the $140.5 trillion in total assets under management.

Although social responsibility is more difficult to define and quantify, it has a significant impact on trust, confidence, inclusion, and successful stakeholder involvement. Furthermore, the definition of "value" is changing, and stakeholder expectations are shifting toward a more holistic view of value that extends beyond short-term profit. This transition has fueled a higher demand for material non-financial ESG information, such as social issues, to be more transparent and created a stronger call to address LGBTQ+ inequalities in the workplace and boardrooms.

The push to improve DEI

Diversity, Equity, and Inclusion is about more than policies, programs, or headcounts. Diversity is defined as the presence of differences within a given setting. Equity is the practice of ensuring that systems and programs are unbiased, fair, and deliver equitable outcomes for all people. Inclusion is the practice of ensuring that people feel a sense of belonging in the workplace.

Why is this important? A truly diverse, equitable, and inclusive workplace makes everyone feel equally involved and supported in all areas. These efforts are more than an attempt to make people feel good; they have tangible value, including:

• Committed Employees. Equitable employers vastly outpace their competitors by respecting the unique needs, perspectives, and potential of all their team members. As a result, diverse and inclusive workplaces that make employees feel safe earn deeper trust and more commitment from their employees.
• Greater Innovation. When employees feel included, they’re more engaged which has a positive ripple effect on productivity, morale, and trust. Companies can foster a greater sense of safety and innovation by embracing a learning environment and inclusive culture that ensures everyone in the organization is comfortable with change, reassured by failures or mistakes, and quick to identify new opportunities.

• Stronger performance. Gartner found that inclusive teams improve team performance by up to 30% in high-diversity environments. People working in inclusive workplaces also tend to have better physical and mental health and take less leave for health issues.

Clearly, strong diversity and inclusion policies benefit society in the long run, especially the LGBTQ+ community. Customers, employees, investors, and other key stakeholders that identify as LGBTQ+ value these benefits, and historical investment performance backs up this claim. McKinsey reports:

• Companies with gender diversity in the top quartile of executive teams were 21% more likely to outperform their peers in terms of profitability.
• Companies with top-quartile executive teams for ethnic and cultural diversity, including LGBTQ identities, were 33% more likely to have industry-leading profitability.
• Companies in the bottom quartile for ethnic and cultural diversity had a 29% lower chance of achieving above-average profitability.

Despite the lack of statistics on LGBTQ+-specific investments, analysts believe the growing demand for LGBTQ+ inclusion is part of a more significant ESG trend. And it appears that this trend is paying off. Gaingels, a network of 700 investors that invest in LGBTQ+ and trans-inclusive businesses, saw its investments expand tenfold in two years, from $5 million in 2018 to almost $50 million in the first eight months of 2020.

Corporate tools for LGBTQ+ inclusion

In 2002, when the Human Rights Campaign, an LGBTQ+ advocacy organization, began assessing U.S. companies on their inclusive policies, such as health care coverage for same-sex partners, just 13 companies received a top score. In 2021, 767 businesses received the highest possible score.

According to analysts, growing LGBTQ+ acceptance in the corporate sector has opened up new opportunities for socially aware investors, of all backgrounds and orientations, who want to further LGBTQ+ rights. Companies that encourage LGBTQ+ equality in the workplace have greater staff recruitment and retention, a stronger brand reputation, and higher profitability and productivity, as we already know. So, what methods can businesses use to increase transparency and involvement in their ESG social efforts?

In 2017, the United Nations LGBTQ+ Standards of Conduct for Business outlined businesses' responsibilities to combat discrimination against lesbians, gays, bisexuals, transgenders, and intersex persons, as well as their employees and supply chain.

As businesses evaluate how to increase LGBTQ+ inclusiveness, analytics and data become increasingly important. Companies, unfortunately, do not have access to fully developed instruments that allow them to score performance in relation to LGBTQ+ issues. Criteria can also be superficial and focused more on process than impact, allowing room for a practice known as "rainbow-washing." Similarly, globally disjointed and disorganized regulation makes it hard for businesses to use legal compliance as a yardstick for measuring long-term success in LGBTQ+ matters.

For now, companies seeking to build greater transparency around their DEI reporting and implement stronger due diligence on LGBTQ+ issues can focus on:

• Presenting the company's due diligence framework and methodology used to assess their current global LGBTQ+ policies and practices in alignment with the United Nations Corporate Standards of Conduct
• Explaining specific LGBTQ+ deliverables resulting from the assessment process
• Identifying remedial steps that companies should take to address LGBTQ+ policy and/or operational deficiencies based on assessment results

Here are some tools companies can use to create more comprehensive inclusion practices:

• The UN LGBTIQ+ Standards Gap Analysis Tool: this tool assists businesses in implementing the UN Business Standards of Conduct to combat discrimination against lesbian, gay, bisexual, transgender, intersex, and queer people in the workplace and beyond. The LGBTIQ+ Tool includes a gap analysis methodology and questionnaire, as well as a grading system and recommendations for closing gaps and strengthening policies, processes, and methodologies to promote LGBTIQ+ inclusion. It's completely free, user-friendly, accessible to everyone, and completely private.
• The UN Global Compact's WEPs Gender Gap Analysis Tool: this is a business-driven tool that can be used by companies around the world to evaluate gender equality in the workplace, marketplace, and community.
• The Human Rights Campaign Foundation’s 2022 Corporate Equality Index (CEI): The CEI is the nation's most comprehensive benchmarking survey and report on LGBTQ+ workplace equality policies and practices.

Making meaningful progress

While great strides have been made over the last decade to provide increased rights and support to the LGBTQ+ community, much more needs to be done. Even today, McKinsey reports that three in twenty LGBTQ+ women believe that their sexual orientation will negatively affect their career advancement at work. For LGBTQ+ men, this number is even higher, at six in twenty. Compared with straight women, LGBTQ+ women are also more likely to report that their gender has played a role in missing out on a raise, promotion, or a chance to get ahead.

Beyond implementing ESG reporting practices, companies can help make meaningful progress for LGBTQ+ employees through some key steps:

• Create structural support for trans employees by including trans-inclusive health insurance, allowing transitioning colleagues to take time off, allowing employees to use the restroom facilities that they prefer, including all-gender options, and ensuring that HR systems are inclusive of all employees' genders and pronouns.
• Encourage company-wide conscious inclusion training that includes support, awareness, and sensitivity toward trans and gender-diverse coworkers, as well as the proper use of pronouns and names, and provide safe-reporting channels to investigate and re-solve inappropriate behavior.
• To reduce the role of unconscious bias in hiring decisions, promote the company's support for the LGBTQ+ community and encourage the recruitment team to broaden their pool of diverse candidates as well as implement blind resume screening practices such as removing names, gender signifiers, and affinity-group affiliations.

Overall, companies should seek to promote inclusivity in all working environments, including remote. Company leaders should set the tone for acceptable behavior with decisive and visible action to promote it.

ESG materiality assessments

With investors inquiring more and more frequently about what your company is doing in regard to responsible investment, how you treat employees and vendors, your dedication to sustainability initiatives, and other activities that fall under the ESG umbrella, it’s important to have answers to these questions.

An ESG materiality assessment empowers you to easily report on your current state and outline future initiatives while taking into consideration your business goals and risks. Download our guide to creating and extracting the maximum strategic value from an ESG materiality assessment.

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Adam Sirvinskas

In his role as ESG Account Manager, Adam uses a holistic approach to ESG and sustainability to align internal stakeholders & identify the best ways to support clients. In addition to helping clients reduce their environmental impact & become better corporate citizens, he has experience in food waste, plant-based foods, and regenerative farming. Adam is also a member of Conservice United, an employee-led ERG group focused on making Conservice more inclusive & equitable.

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