This four-part series is brought to you by the letter ‘S’ in ESG — diving into what social impact means for companies, how focusing on workplace equity can help deliver on the ‘S’, how it is critical for business impact, solutions for reporting, and how to communicate it internally and publicly.
There is proven upside for companies who address and report on environmental, social, and governance (ESG) metrics, including higher returns, improved employee retention, and risk mitigation. Yet despite growing “surround sound” pressures on companies from investors, consumers, employees, regulatory bodies, and legislators to disclose ESG efforts and outcomes, only one in ten investors found the ESG information they were looking for in corporate disclosures in 2021.
In particular, ESG metrics related to social impact have historically been overlooked. The 2021 Global ESG Survey by BNP Paribas revealed that 51% of investors found the ‘S’ to be the most challenging ESG element to assess and utilize in investment strategies. The survey states “there is an acute lack of standardization around social metrics” contributing to this lag. This is especially noticeable when contrasted to environmental factors, for which standardized units of measurement for quantifiable metrics such as carbon emissions and water usage have gained mainstream recognition.
The same survey goes on to state, “[Social metrics] data is more difficult to come by… Investors have been willing to accept data that does little to actually assess the social performance of the companies in which they invest.” This is backed by an NYE Stern analysis that found that 92% of ratings frameworks for social metrics focused on measuring efforts and activities — not outcomes or impact.
But activity alone does not lead to progress, as shown by performative DE&I pledges that have little impact on representation, pay gaps, and other employment outcomes. Achieving lasting change requires setting realistic, measurable goals, performing frequent data analyses, and communicating transparently on outcome-based social ESG metrics along the way.
Looking at workplace equity metrics for ESG ‘S’ reporting
Because the ‘S’ is broadly defined — and can potentially encompass everything from pay equity, DE&I, labor relations, customer welfare, community relations, data security, human rights, workplace health and safety, and more — it can be overwhelming to consider all the possible reportable metrics. Start by focusing on in-demand areas that have a direct impact on employee satisfaction and brand reputation, such as reducing pay gaps and ensuring equitable hiring, promotions, and retention: known in sum as workplace equity.
As a measure of both pay equity and opportunity equity outcomes, workplace equity metrics should be foundational to any social impact reporting. Companies who disclose two core workplace equity metrics — representation by job group and pay equity analyses — tend to see higher returns.
Workplace equity metrics are also a great starting point because they utilize data that companies already track, such as demographics, pay, and hiring, retention, and promotion rates. Additionally, due to growing pressure from employees, investors, and legislation, pay equity specifically is increasingly being put under the spotlight. Companies will be well-served to control the narrative and proactively disclose about pay equity progress alongside other workplace equity and social impact metrics.
9 recommended workplace equity metrics for reporting on the ‘S’
Below are some quantifiable metrics related to workplace equity that you can use in social impact reporting to demonstrate progress towards equitable employment outcomes. Many of them recommend an index: we explain in detail what an index is and how to build one further on in this post.
All workplace equity metrics should cover gender and race in the U.S. and gender globally, with a strategy to consider and expand your reporting to include other comparisons such as age, veteran status, LGBTQ+, care-giver status, and disabilities, depending on the makeup of your employee population.
|What to Measure||Metric|
|Equitable pay for similar work||Adjusted pay gap|
|Equitable access to higher-paying roles||Unadjusted mean or median pay gap|
|Equitable starting pay (including equity/stock, as well as sign-on bonuses)||Mean and/or median new hire pay starting pay by identity group for the year|
|Equitable bonuses||Percentage of employees receiving bonuses|
|Equitable recruiting||Recruiting index that compares the likelihood of a group to move from applicant to offer between different groups|
|Equitable employee engagement||Satisfaction and/or engagement index indicating whether each group is more or less likely to give the company the average engagement and/or satisfaction score|
|Equitable rates of all performance scores||Performance rating index indicating whether each group is more or less likely to be rated at the average company-wide performance score|
|Equitable promotion rates at every level||Promotion index indicating whether each group is more or less likely to be promoted at the average promotion rate for the company|
|Equitable retention rates at every level||Retention index indicating whether each group is more or less likely to be retained at the average retention rate for the company|
Syndio’s Workplace Equity Platform can help you report on many of these metrics. Learn more about the platform here.
The power of an index
While there are myriad ways to break down, analyze, and visualize any data set, for many of the workplace equity metrics above, we recommend reporting an index rather than actual rates.
An index is a composite indicator that highlights whether a group is above or below average for their company for a given metric. An index creates an overall benchmark (e.g. on average, that 12% of employees received a promotion in the past 12 months), and then calculates the same statistic for a particular identity group (e.g. 9% of women were promoted in the past 12 months). The last step is taking the ratio of these two (e.g. 9%/12% = 0.75) to compare the group results to the average.
An index is helpful because it removes specifics (such as actual rates) that are not necessarily needed to understand the final interpretation of the data — and that companies may not want to disclose. Since the actual rates are “normalized”, we end up with a number that has a clean interpretation: in our example, the “promotions index” for women is 0.75. Since this is less than 1, it means women are being promoted less often than average.
Indices can be calculated for a variety of the employment outcomes we are concerned about from a workplace equity perspective, allowing them all to be displayed together using a similar scale (where 1 means the group is average with respect to this outcome, a number less than one means the group is less likely to have this outcome, and a number greater than one means the group is more likely to have this outcome).
How to Build Promotion and Retention Indices
Example Promotion Index
Say the average promotion rate for a company is 12.77%. By taking the ratio of each identity group’s promotion rate and the average promotion rate, you can come up with an index for each group that shows whether each group is more or less likely to be promoted at the average rate.
|Group||Group Promotion Rate||Average Promotion Rate||Promotion Index|
Example Retention Index
For the same company, the average retention rate is 76.9%. The table below calculates the ratio of each group’s retention rate and the average retention rate to create the Retention Index.
|Group||Group Retention Rate||Average Retention Rate||Retention Index|
If you were simply to state the actual rates for each group, e.g. “The promotion rate for white men is 19.55% and the retention rate for white men is 84.1%”, there would be a lot more context required to make the data meaningful. As you can see in the example visualization below, the indices provide a useful shorthand that reveals where each group stands in comparison to each other and across measurements. You can see at a glance that white men are more likely to be promoted than the average and more likely to be retained than the average, without having to show and explain actual rates.
Up next: Technology that helps you report on ESG metrics and progress
Workplace equity metrics provide a useful, quantifiable entry point into social impact reporting for metrics. However, companies will want to go deeper than these top-line metrics to identify what is driving these dynamics. Disclosure alone does not create benefits if goals, strategies, and actions are not in place to generate progress towards equitable outcomes.
For example, pay equity has traditionally been managed with an annual process that identifies and resolves disparities after they have formed — and grown — throughout the year. This “fix” is retroactive rather than preventive. This means that the underlying causes of pay inequities are not addressed, even if the related metrics are disclosed, which leads to a cycle of analysis, remediation, and recurrence. So how can companies achieve real progress?
In our third post in this series, we discuss how to use technology to not only report on workplace equity ESG metrics, but also to serve as the foundation for a modern workplace equity program with realistic goals and a proactive, preventive approach to solving inequities.
Did you miss the first post in our series on the ‘S’ in ESG? Check out Part 1: Why Investing in and Reporting on the ‘S’ in ESG is Good for Business.