Breaking biases: How does ESG address gender equality?

It’s an unequal playing field

Female leaders and women-led businesses face a unique set of challenges.
 
The unfortunate truth remains that our social models are still significantly biased against women and minorities. This bias rears its ugly head in the business world, where women and minorities often face lower salaries, slower career paths, and a distinct lack of access to C-suite or board positions. They also receive fewer and smaller investments, regularly starting their businesses with less capital in order to preserve growth potential. 
 
Biases can take many forms. They could be implicit gender stereotypes that affect decision making, such as a preference for candidates who fit traditional gender roles – like assuming that men will be better negotiators and women better ‘supporters’. Or a lack of diversity in business networks, which leads to exclusion of certain groups. Or – perhaps most infuriating – they could be barriers that have been structured as specific processes and policies; a person may only be listened to or considered if they have a certain level of experience or qualifications – opportunities that may have been denied to them as a female or minority group in the first place.
 
Women have been fighting for gender equality in the workplace for decades, but progress has been slow. Despite making up almost half of the global workforce, women remain significantly underrepresented in leadership positions across most industries. Research shows that women often face unconscious bias, discrimination, and barriers to advancement that hinder their career progression. And the statistics prove it.

• 23% of executives around the world are women. (For additional context, 29% of senior management, 37% of managers, 42% of professional roles, and 47% of support staff positions are held by women.)
• 8.8% of Fortune 500 CEOs are women, and less than 1% are women of colour
• Research by Deloitte in 2019 found that – at the current rate of change – financial services firms wouldn’t achieve gender equality in leadership until 2085.
• The European Banking Authority reports that women made up only 20% of positions within management groups at Europe’s largest banks and 8% of CEOs at European credit and investment institutions (Wall Street Journal).

 

Data shows that history should not repeat itself

Despite a challenging history, female leaders and women-led companies are poised to thrive in the long run. Research shows that these businesses tend to generate better return on investment over time, thanks in part to the skills and tenacity of their leaders.
 
Women-led businesses regularly outperform other businesses, delivering excess returns for investors while doing so in a more capital-efficient manner.
           
Studies have shown that companies with higher gender diversity have better financial performance. A study by McKinsey & Company found that companies with the most gender-diverse executive teams were 21% more likely to experience above-average profitability than those with the least diverse executive teams.
 
A report by S&P Global contains some eye-opening statistics on female leadership.

• Firms with female CEOs and CFOs have superior stock price performance, compared to the market average. In the 24 months post-appointment, female CEOs saw a 20% increase in stock price momentum and female CFOs saw a 6% increase in profitability and 8% larger stock returns.
• Firms with a high gender diversity on their board of directors were more profitable and larger than firms with low gender diversity.
• Firms with female CEOs and CFOs have a demonstrated culture of Diversity and Inclusion (D&I), evinced by a larger representation of females on the company’s board of directors.
• Firms with female CEOs have twice the number of female board members, compared to the market average (23% vs 11%). 

Which begs the question, why are we still fighting for equality when it’s clearly the best path forward?
  

ESG is good news for equality in all forms

Despite the undeniable barriers, there is reason to be optimistic. More and more people are recognizing the importance of addressing environmental, social, and governance (ESG) issues, which is bringing social concerns into the limelight.
 
Investors are championing for change, urging public companies to increase diversity and equality among their director ranks and assessing how companies respond to ESG risks and opportunities. There's growing external pressure for companies to boost the representation of women and people of colour in leadership positions, as well as equal compensation and mobility. These efforts can make a real difference in promoting diversity, inclusion, and closing the gender gap.

While the positive knock-on effect is undeniable, it will very soon be mandatory for companies to be proactive on all elements of ESG. Regulatory and disclosure requirements for ESG reporting are growing, with new measures popping up across the globe and many more on the way.

• Governments can pass laws that promote gender diversity. Norway passed a law in 2008 that requires at least 40% of board members of publicly traded companies to be women.
• In 2021, the German Supply Chain Due Diligence Act (SCDDA) was passed to hold companies legally responsible for respecting human rights across their entire global supply chains.
• This past January, the European Union passed the Corporate Sustainability Reporting Directive (CSRD), which requires all large and listed companies to disclose information on risks and opportunities arising from social and environmental issues. 

 

Building a better, more inclusive society

In recent years, many organizations have recognized the importance of gender diversity and inclusion. They have implemented policies and programs to support women's career development and advancement. For example, some companies have created women's leadership networks, mentorship programs, and training initiatives to help women build the skills and networks they need to succeed.
 
However, these efforts alone are not enough. To truly break the glass ceiling and achieve gender equality in leadership, we need to address the root causes of gender bias and discrimination. This requires a concerted effort to challenge stereotypes and biases at all levels of society, from our workplaces to our homes and communities. And it starts with transparent action and reporting on social initiatives as part of a robust ESG strategy.
 
Ansarada proudly stands with female leaders in driving change toward a more sustainable & equitable society. It's time to recognize the power and potential of women in business and create an environment where they can thrive and succeed.