S&P 50 Roadmap on Racial & Social Justice Disclosures

While companies have been scrutinized for their environmental and social impacts since the Industrial Revolution and, more recently, the Civil Rights movements of the 1960s, that scrutiny has increased dramatically since 2020. A perfect storm has developed, as social movements like Black Lives Matter and #MeToo overlapped with intense political debate related to the Covid-19 pandemic and the Supreme Court decision that overturned Roe v Wade — and stakeholders of all stripes have demanded companies address these issues.

But are companies that made bold supporting statements for racial justice in 2020 after George Floyd’s murder following up such statements with action? Are companies headquartered in states banning books or education around racial and social inequality speaking out? Are companies helping their employees access inclusive healthcare practices even in states where abortion or gender-affirming care are being banned?

Customers, employees and other corporate stakeholders are all asking these questions.

Current U.S. best practices in racial and social justice

In direct response to bold statements of support many U.S. companies made after the death of George Floyd, the nonprofit shareholder advocacy organization As You Sow launched its Racial Justice Initiative and Scorecards. The initiative strives to “monitor corporate responses and follow up with companies to ensure that statements of support for racial justice are translated into concrete actions that truly promote equity, thereby helping them on the path to end corporate complicity in systemic racism.”

While the nonprofits’ annual scorecard demonstrates that U.S. companies have a lot of room for improvement, As You Sow recognized PayPal, illumina, Microsoft, Disney, Altria, American Electric Power, Activision Blizzard, eBay, UnitedHealth Group and BNY Mellon for their related policies, practices and communications.

Over the past several years, many companies have developed DEI programs that include some of the emerging best practice elements below. Several were driven by shareholder proposals and broader stakeholder engagement.

• Some companies have adopted the so-called “Rooney Rule” so that diverse candidates are included in searches for new board members and other internal positions.
• Prompted by shareholder proposals and support from the NYC comptroller, many companies put their latest EEO-1 data online and include links to the data in their ESG reports.
• Companies like Apple have had shareholder proposals lead to civil rights and other related audits.
• A growing number of U.S. companies have created leadership positions focused on enterprise-wide diversity, equity, inclusion and belonging goals and initiatives. It has become market best practice for companies to set DEI-related goals around recruitment (especially into leadership positions), pay equity, training and compensation incentives.
• Many companies have also focused their community engagement and philanthropic giving on addressing gender, racial and ethnic disparities in areas like financial inclusion, small-business development, education (especially in science, technology, engineering and mathematics), food insecurity, environmental justice, a just transition to a clean economy and access to healthcare.

In addition, a number of best practices have emerged in U.S. ESG reports around racial and social justice disclosures. Labrador’s benchmarking of 2020-21 ESG reports from the S&P 50 found that:

• Nearly all included race, ethnicity and gender workforce diversity data; a small percentage also included data on sexual orientation, age and disability status.
• Nearly all provided access to their most recent EEO-1 data.
• Around half set social goals with two- to five-year targets and showed quantitative changes from baseline year-to-year.
• Around one-third discussed gender or racial inequality, while a little less discussed systemic racism.
• Around one-fifth published separate social, human capital management or DEI reports.
• Less than one-fifth discussed pay equity.

Below are examples of companies that have made moves toward transparency:

Looking ahead

Despite recent pushback from some U.S. lawmakers against corporations taking stances on racial and social justice matters, we anticipate that these programs and reporting will continue to grow as stakeholders become more informed and demand more transparency from companies.

Companies should monitor what ripple effects_AFTER_TAG

Impact of Supreme Court’s Decision on Corporate Diversity, Equity, and Inclusion Programs

The U.S. Supreme Court’s ruling on Students for Fair Admissions, Inc. v. President and Fellows of Harvard College has significant implications for corporate DEI programs. The decision effectively overturned affirmative action in college admissions, which may lead to ripple effects in the corporate world. Additionally, 13 Republican state attorneys general sent letters to the CEOs of the largest U.S. companies, warning about potential legal consequences of using race in hiring and employment practices.

Given these developments, it’s important for companies to focus on the rationale behind their DEI and social justice initiatives and demonstrate how they align with their core business values to drive value creation.

Despite potential challenges, the pushback against ESG (Environmental, Social, and Governance) principles in the U.S. has not halted the progress of ESG corporate reporting regulations and voluntary frameworks.

Various global frameworks and regulations now mandate different levels of DEI, human rights, and social justice commitments and disclosures from companies. These include the United Nations Sustainable Development Goals (UN SDGs), UN Global Compact, UN Guiding Principles on Business and Human Rights, Global Reporting Initiative (GRI) Standards, Just Capital Rankings and Scorecard, and Workforce Disclosure Initiative (WDI).

A newly released set of international corporate standards focuses solely on financially material sustainability disclosures. However, companies may still need to disclose racial and social justice issues based on their industry and value chain relationships.

The European Union Corporate Sustainability Reporting Directive introduces a significant set of changes, requiring disclosures related to a company’s workforce, workers in its value chain, affected communities, and consumers and end-users of its products or services. Furthermore, compliance with the EU’s Corporate Sustainability Due Diligence Directive will be necessary. U.S. companies are advised to start considering how these directives may apply to their business and corporate ESG reporting.