News and insights (March 2021): Diversity and inclusion must be part of post-pandemic recovery

By Sarah Bosworth, Senior Research Executive, Research and Campaigns

The pandemic has had an impact on so many areas of our life over the past year and it has become clear that women have been disproportionately hit by the pandemic, with more finding themselves out of work, furloughed or taking on home schooling responsibilities. All of these factors are likely to further exacerbate the UK gender pay gap, which already stood at 17.4% in April 2019. This was the last time when large corporates (with over 250 employees) were obliged to disclose their gender pay gap. Due to the pandemic, 30 months will have passed by October 2021 when these same companies will next be required to report on their gender pay gap and we will know how it has changed. Unfortunately, where progress was being made, the pandemic has caused a long pause on what was intended to be annual reporting. 

Anecdotally, the picture of women’s experience in the workplace over the last year doesn’t look pretty. Research from the Institute for Fiscal Studies (IFS) showed how women with childcare responsibilities were picking up the brunt of the lockdown load, spending on average 10.3 hours a day looking after children, 2.3 hours more than their male counterparts. This impacted women’s working lives, with mothers more likely to have left paid work or reduced their paid hours during the pandemic than fathers. As a driver for change, on improving equality in the short term, the pandemic appears to have put us in reverse. 

The pandemic has also given us time away from the office to reflect on what a new work / life balance could be, particularly for those lucky enough to be able to work remotely. Outside the context of a global pandemic, working from home a few days a week and cutting down on commute times are perks that employees would like to keep. It offers a way to better balance home priorities or frees up time to pursue interests outside the office that can strengthen wellbeing. We now know this ‘new normal’ can work, and it would be short-sighted of companies to ignore the positives the pandemic has brought. 

At the same time, while COVID may have put on ice the requirement for firms to disclose on social issues, it hasn’t frozen society’s concerns on raising awareness of the barriers to equality in the workplace. For Millennials and Gen Z employees in particular, companies having a clear social purpose and being transparent on disclosing around social issues will no longer be a ‘nice to have’ that firms can opt into, but a yardstick by which they are judged. 

Of course, it is far easier to raise and highlight an issue than it is to fix it. Currently, much of the reporting data on social issues that is being called for just doesn’t exist. While the abbreviation of ESG (Environmental, Social and Governance) is becoming common parlance in corporate communications, attention on social and governance issues remain in their infancy compared to the environmental concerns. The magnifying glass through which firms are scrutinised over their practices around social and governance issues has less focus to it than it does on environmental topics. Even on environmental topics, progress is only just beginning to be made to establish standardised and meaningful measures for companies to consistently disclose on.  

While the data may not exist yet, the direction from the legislative and regulatory standpoint is already being marked out. The European Banking Authority’s (EBA) current Consultation Paper on ESG implementing standards sees climate change disclosures required by firms as the first stage, with quantitative information on social and governance issues planned in the future for stage three.  

This change in expecting companies to disclose more on social issues is simultaneously happening on a global scale and here in the UK. In a recent speech, Nikhil Rathi, the new CEO of the Financial Conduct Authority (FCA), the UK’s financial services regulator, outlined the significance he holds in firms improving their diversity and inclusion standards: “As an employer, we are determined to improve our own diversity and to work on our culture to ensure it is inclusive. As a regulator, we want the same from the firms we oversee and in the markets we regulate. Not because it is a social good – although, frankly, that should be enough. We care because diversity reduces conduct risk and those firms that fail to reflect society run the risk of poorly serving diverse communities. And, at that point, diversity and inclusion become regulatory issues.” 

Change is clearly coming. While companies may be focussing on the ‘E’ of ESG in 2021, it won’t be long before scrutiny turns to what they are also doing around the ‘S’ and ‘G’ too. It is now up to companies whether they want to lead by example on disclosing and committing to social and governance issues, or to wait to be pushed along by the regulator or policy maker. Firms have the chance now to own their own change and begin to both show and tell external stakeholders what they are doing to address and promote social and governance issues internally with their businesses. If this is not incentive enough, it is becoming widely acknowledged that it is economically prudent for firms to be socially smart too. 

Social issues like the gender pay gap may have lost the battle over the last year during the pandemic, there is still hope that the war of improving equality and inclusion in the workplace can be won, thanks in part to the awareness the last year has shown us.

This piece first appeared in Cicero/AMO’s March news and insights update – click here to access our full update.

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Sarah Bosworth

Senior Research Executive