Why Diversity and Inclusion are Crucial to Business Success
Today, developments in the field of sustainability emerge at an overwhelming pace and different non-financial reporting frameworks are established regionally and globally. While that collectively conjures up images of windfarms, solar panels or recycling centres, there is much more to sustainability reporting than disclosing information on a myriad of environmental topics. As new standards and regulations in the realm of ESG (environment, social and governance) draw attention towards the social pillar – or the “S” is ESG – the market follows suit.
An important component of the social pillar, and a topic which has been the subject of much consideration and regulation over the last years is gender equality.
Although gender equality and equal opportunity have been endorsed in national and international law, reality shows that women’s working life is still clouded with different forms of prejudice and discrimination. One of those striking inequalities is the underrepresentation of women in positions with decision-making power.
The Business Case for Diversity
It is in this context that Belgium became one of the first countries in the world to establish a quota of minimum 33% representation of people of the underrepresented sex on the board of directors. This so-called gender quota law is up for revision by parliament this year.
Additionally, the EU Women on Boards Directive – which requires that in every listed company in the EU at least 40% of non-executive director posts go to the underrepresented sex – must be transposed into national law before December 2024.
These gender quota have not missed their objective. Since the gender quota law entered into force in 2011, the number of women on boards of directors in Belgium has tripled.
This is not only a boost for gender equality, but also an important source of competitive advantage:
- A wider spectrum of ideas and perspectives leads to more creativity and innovation. Driving broader understanding of clients’ needs, promoting the creation of better, more tailored products and services and, ultimately, improving performance on the market: diversity is crucial to business success.
- Strong strategies on diversity and inclusion are also a crucial ingredient for talent attraction and retention. They help companies to find and keep the right people to assure their continued development and success.
- A heterogeneous board can be an important demonstration of responsible corporate citizenship and thus enhance the company’s reputation and strengthen investor confidence.
Access to Capital
Diversity and equal opportunity in the administrative, management and supervisory bodies, and in the workforce in general, is gaining prominence as a component of sustainability reporting and performance. This is one of the key topics in leading non-financial reporting standards, such as the GRI (‘Global Reporting Initiative’) and ESRS (‘European Sustainability Reporting Standards’).
Following increasing reporting requirements, the market is evolving towards a system that rewards companies with robust frameworks in place to foster diversity and inclusion. Indeed, mirroring the evolution regarding environmental performance, strong social performance is progressively becoming a determining factor for more favourable access to capital.
A Belgian Approach to Gender Quota
More diversity on decision-making level prompts more innovation, increased profits and a quicker reduction of CO2 emissions.
Bearing this in mind, the Belgian legislator is going to work on gender quota and the approach they will uphold is not yet clear. They can rest on their laurels and upgrade relatively easily from 33% to 40% representation of women, or they can choose to use these regulatory deadlines as an opportunity to adapt to society’s evolution and break the glass ceiling wherever it exists.
However, what is abundantly clear is that all companies across all sectors of the economy will need all the brainpower and creativity available to tackle the sustainability-related challenges ahead.