Diversity and inclusion

Authors: Lea Marie Körber, Jakob Neugebauer, Viona Röckendorf, Sebastian Schmitt, August 31, 2024

1      Introduction

1.1  Definition

Diversity and Inclusion (D&I) are more than just corporate responsibilities – they are key driver of sustainable business success. In an increasingly globalised world where competition for talent and innovation is fierce, companies have realised that a diverse and inclusive workforce not only leads to more creative solutions but is also critical to their strategic sustainability goals.^1,2 By integrating D&I into strategic sustainability management, organisations not only create a fairer working environment, but also ensure long-term competitiveness and resilience.

However, achieving true inclusivity requires more than just acknowledging diversity; it demands a commitment to equity. Together they form the concept of Diversity, Equity and Inclusion (DEI)(see Figure 1). Equality plays a pivotal role in this context by ensuring that all employees have access to the same opportunities and resources, irrespective of their background or identity. While diversity refers to the range of human differences – such as gender, race, and age – equality focuses on creating a level playing field where these differences do not translate into disparities in opportunities or treatment. Inclusion, on the other hand, is the organizational practice of leveraging diversity and promoting an environment where all individuals feel valued and respected.³

D&I involves harnessing the potential of all employees to create an inclusive environment while contributing to organisational goals. Research has shown that diversity characteristics such as gender, age and position within the organisation are related to employees’ sense of inclusion, which in turn has a significant impact on organisational commitment and job performance.⁴ Although diversity and inclusion are often used interchangeably, they are distinct concepts.^5,6 Diversity refers to the spectrum of human similarities and differences, while inclusion describes how an organization structures its practices to utilize this diversity effectively.⁵ Importantly, equality ensures equal access to opportunities and fair treatment, regardless of personal characteristics. It serves as the foundation upon which these concepts are built, ensuring that diversity does not simply exist but thrives in an environment where inclusivity is practiced and all individuals have equal access to opportunities.^7,8

Although D&I can cause conflict, it is essential to foster innovation, creativity and competitiveness in the global market.^9-11 D&I practices are also associated with increased profitability, productivity and quality of life for employees.¹⁰Therefore, implementing D&I policies as part of sustainable human resource management (SHRM) can help address talent shortages and improve organisational performance.¹² Effective D&I management requires understanding and valuing individual differences, preventing bias and promoting inclusivity.¹³ Corporate communications can play a critical role in driving D&I efforts beyond mere reporting, offering new perspectives and giving voice to underrepresented ideas.¹⁴ D&I forms fundamental values for human coexistence and collective success and makes strong business sense across different organisational levels.¹⁵

Diversity
The science of diversity emerged in the mid-20th century and researchers have identified it as a key factor for the 21st century.¹¹ Over time, the definition of diversity has evolved and varies between different groups. Initially defined simply as ‘being different’¹⁶, the concept has expanded to include ‘all the characteristics and experiences that define each of us as individuals’¹⁷. However, this broad definition has been criticised as problematic.¹⁸ Research suggests that majority and minority groups perceive diversity differently, with minorities tending to define it more complexly, considering both numerical and structural representation. In contrast, majority groups often view diversity solely in terms of numerical representation.¹⁹ This difference in perception is attributed to group interest motivations, as diversity is more in-group relevant for minorities.¹⁹ Resent definitions of diversity encompasses various demographic aspects such as gender, age, race, ethnicity, sexual orientation, religion and disability (see Figure 2).⁹ The different interpretations of diversity and the wide range of characteristics and experiences highlight its complex nature and the challenges of establishing a universally accepted definition.

Inclusion
Inclusion, within the corporate context, refers to organizational practices and systems designed to harness the potential of diversity effectively.⁵ Ashcraft, Muhr, Rennstam, & Sullivan (2012) define inclusion as “an organisation’s strategic approach to creating a diverse workplace that is welcoming to employees, supervisors, customers, and clients alike. Thus, diversity refers to a group of people with different external characteristics, cultural backgrounds, and beliefs; inclusion is how an organisation approaches this diversity.” ²¹

It goes beyond the concept of diversity, to focus on how organisations operationalise diversity through opportunities, interaction, communication and decision making.⁵ Inclusion has gained prominence in recent years, often coupled with diversity in organisational rhetoric and practice.²² It is increasingly recognised as a critical aspect of responsible global leadership. However, the concept of inclusion needs to be critically examined as it can still be implicated in exclusion and inequality.²² Researchers emphasise the need for context-specific definitions of inclusion that consider global perspectives at national, organisational and team levels.²³ This evolving understanding of inclusion highlights its importance in contemporary organisational practice and global business operations.

Murphy (2018) argues that moving from diversity practices to inclusion strategies is not necessarily a legal requirement, but a business imperative in a changing society.²⁴ The distinction between diversity and inclusion is important, as non-inclusive diversity policies have led to cases of reverse discrimination.²⁴ Effective inclusion practices are crucial for organisations to fully reap the benefits of a diverse workforce and create more inclusive working environments.

However, reporting on ethnic diversity and structural aspects of employee inclusion remains limited. Overall, the implementation of D&I practices is considered crucial for attracting investors, aligning with the UN Sustainable Development Goals, and achieving sustainable strategic development in various sectors.²⁵ Implementing D&I practices globally requires developing context-specific definitions, considering dimensions relevant to global contexts, and assessing performance outcomes across countries and within multinational corporations.²³ By embracing equality as a core value within D&I strategies, companies can create more inclusive environments that not only attract investors but also foster a culture of innovation and long-term growth.

1.2  Relevance and Status Quo in the Corporate and Societal Context

The issue of diversity and inclusion is becoming increasingly important. First, numerous international treaties and conventions, such as the Declaration of Human Rights, various fundamental rights, and the UN Convention on the Rights of Persons with Disabilities, emphasize the importance of inclusion. In addition, many pieces of legislation related to diversity have been introduced in recent years. For example, Directive 2014/95/EU contributes to the promotion of diversity by requiring large companies to disclose information on their diversity practices with regard to gender, age, education and professional background in their management and supervisory bodies. In addition, this reporting aims to increase transparency and accountability on diversity, thereby encouraging companies to build more diverse leadership teams and further develop their inclusion strategies. Taken together, these efforts support the broader goal of establishing diversity as an integral part of corporate governance.²⁶

When considering the current state within the corporate context, the report “Diversity Wins: How Inclusion Matters” shows that while progress in diversity is visible, it is generally advancing slowly. For instance, there are still significant gaps in the representation of women and ethnic minorities in leadership positions. Moreover, although some companies have made considerable progress, the majority are either falling behind expectations or stagnating. Between 2014 and 2019, the percentage of women in leadership teams increased from 15% to 20%, reflecting an average annual change of only 1.1 percentage points. Despite these slow advancements, the report highlights that companies with a higher proportion of women and ethnic minorities in leadership positions are significantly more likely to achieve above-average financial performance. This underscores the ongoing need for companies to intensify their efforts to promote diversity and inclusion in order to achieve sustainable progress.²⁷

When comparing Western companies with Chinese companies, it becomes clear that the understanding of inclusion in Chinese companies has a broader meaning than in the West. In China, inclusion is often equated with tolerance, especially tolerance for mistakes. This tolerance is deeply rooted in Chinese culture and reflects the strong emphasis on social harmony that is so important in Chinese society. In addition, unlike Western countries where inclusion is often understood as the integration of diverse groups into the organizational structure, Chinese companies place additional emphasis on the need to foster a harmonious relationship between leaders and employees.²⁸

2      Theoretical Background

2.1  KPIs

A number of Key performance indicators (KPIs)can be used to better recognise gaps in the area of diversity and inclusion in companies and to manage measures. KPIs for D&I include demographic data, policies and structural aspects of employee inclusion.²⁹ However, reporting on ethnic diversity and industry-specific targets remains limited. A comprehensive framework for quantifiable D&I outcomes has been proposed, focusing on measurable factors such as salary and promotion rates.³⁰ On the other hand behavioural science approaches can enhance D&I strategies, allowing for more effective measurement of impact and return on investment.³¹ Studies have shown that diversity characteristics such as gender, age and position within an organisation are related to employees’ sense of inclusion, which in turn affects organisational commitment and job performance.⁴ While there is no consensus on a single KPI for measuring workplace productivity, qualitative questionnaires are more widely adopted than quantitative tools.³² Inclusion has been found to significantly impact organizational commitment and job performance.⁴ To achieve D&I, organizations can implement standards and codes of practice that focus on setting objectives, reducing bias, mobilizing resources, developing an inclusive culture, and influencing supply chains.³³ These findings underscore the need for organisations to adopt robust D&I measurement and reporting practices to foster inclusive workplaces and drive sustainable progress.

Gender and age         
Gender and age diversity are key performance indicators for diversity and inclusion in organisations, as they have a significant impact on business growth and performance. Research shows that gender diversity in the workforce is essential for business success, fostering creativity, innovation and better decision making.³⁴ Demographic diversity of the board, including gender and age, has been found to positively influence firm performance in knowledge-intensive firms.³⁵Furthermore, board gender diversity is an important predictor of gender equality and inclusiveness in the workplace, while age diversity is more influenced by firm characteristics.³⁶ Recognising the importance of diversity and inclusion, many organisations have developed diversity statements and strategic plans to create inclusive environments.³⁷

Ethnic and cultural diversity           
Ethnic origin and cultural identification are important corporate diversity and inclusion metrics, as they have a significant impact on organisational performance and societal dynamics. Research shows that companies with high ethnic and cultural diversity in leadership outperform less diverse counterparts by 33% in profitability margins.³⁸ Cultural diversity is positively associated with economic development, while the overlap between ethnicity and culture decreases with development.³⁹ However, greater overlap between ethnicity and culture may increase the likelihood of civil conflict.³⁹Measuring ethnic and cultural diversity is challenging, particularly in Europe, where a standardised measure is lacking.⁴⁰Implementing diversity KPIs often requires cultural change programmes to embed them in organisational practices.⁴¹Effective measures of ethnic origin can predict self-identification as an ethnic minority, experiences of discrimination, strength of national identity and attitudes towards immigration.⁴⁰

Inclusion of people with disabilities            
The inclusion of people with disabilities is increasingly recognised as a key component of corporate diversity and inclusion initiatives. Research shows that 42% of Fortune 100 companies explicitly include disability in their diversity policies.⁴² This inclusion is based on the principles of human rights, equal opportunities and valuing diversity.⁴³Organisations benefit from disability inclusion through reduced risk of discrimination litigation, access to untapped talent, and new business opportunities.⁴⁴ However, challenges remain, including discrimination and high unemployment rates for people with disabilities. To address these issues, companies can implement awareness programmes, ensure compliance with quota laws, and improve accessibility in the workplace. By promoting disability inclusion, companies not only contribute to building a more equitable society, but also potentially enhance their intellectual capital and attract new consumer segments. 

Salary and promotion rates             
Salary and promotion rates are key performance indicators for diversity and inclusion in organisations, as they reflect the outcomes of inclusive practices. Research shows that underrepresented employees are less likely to be promoted and to reach management positions than their counterparts.⁴⁵ Diversity incentives in managers’ compensation packages can increase the likelihood that underrepresented employees will be promoted, especially if their pre-promotion efforts are high.⁴⁶ Reporting frameworks that measure quantifiable outcomes, such as pay and time to promotion, can help identify inclusion and stimulate action.³⁰ Adopting inclusive practices and diversity initiatives is critical to increasing business profitability and maximising the quality of life for employees.¹⁰ However, significant pay gaps remain, particularly for women in senior roles.⁴⁵

Training and Education       
Corporate Diversity and Inclusion training and education is critical to raising awareness among all stakeholders. These initiatives have evolved from focusing on legal compliance to recognising the value of diversity.⁴⁷ In today’s rapidly changing global business environment, diversity is essential for companies to survive and thrive.⁴⁸ However, challenges remain, including employee resistance and difficulties in measuring impact.⁴⁷ To successfully embed diversity and inclusion, organisations should focus on effective engagement, establish performance indicators and share success stories.⁴⁹ A unified approach to diversity and inclusion can have a lasting positive impact on individuals, businesses and society as a whole.⁴⁹

Subjective well-being            
While measurable KPIs are essential for assessing progress on inclusion and diversity, they do not tell the whole story. The well-being of the individuals and groups involved is equally important, but often difficult to quantify. Inclusion and diversity are about the subjective experience of belonging, appreciation and acceptance, which cannot be directly captured in statistics. Individual feelings and experiences play a crucial role and contribute significantly to the success of inclusion initiatives. Perceived diversity can have a significant impact on employee well-being, with knowledge diversity having a positive effect and superficial diversity potentially having a negative effect.⁵⁰ Inclusion mediates the relationship between knowledge diversity and well-being, highlighting its importance in diverse workplaces.⁵⁰ Subjective well-being at work is influenced by factors such as meaningful work, relationships, culture and diversity, which can affect both eudaimonic and hedonic happiness.⁵¹ Implementing inclusive practices and diversity policies can lead to increased productivity, profitability and quality of life for employees.¹⁰ In addition, subjective well-being is associated with positive outcomes, including improved mental and somatic health, longevity and stress management skills.⁵² These findings underscore the importance of prioritising subjective well-being and diversity in corporate environments.

2.2  Framework

International frameworks such as the Global Reporting Initiative (GRI) Standards, the UN Global Compact, the Corporate Sustainability Reporting Directive (CSRD) and the International Labour Organization (ILO) help companies measure and improve their progress on diversity and inclusion. These frameworks provide clear rules and targets that make it easier to operate fairly and openly. They ensure that companies comply with legal requirements and earn the trust of their stakeholders. By using these frameworks, organisations can improve their diversity and inclusion practices while making a positive contribution to society. The following section takes a look at four superordinate frameworks:

Global Reporting Initiative Standards       
The Global Reporting Initiative Standards provide a framework for companies to measure and report on their diversity and inclusion (D&I) efforts. However, research suggests that uptake and comprehensive reporting remains limited. A study of New Zealand companies found that only 1.84% fully met the GRI standards for reporting on employees with disabilities.⁵³ In the mining industry, while D&I reporting has increased over time, companies tend to focus on readily available metrics such as demographics and policies, with limited reporting on ethnic diversity and established industry goals not covered by GRI standards.²⁹ Critics argue that GRI’s effectiveness is characterised by undecidability, cautioning against reductive interpretations of data and emphasising the complex, multifaceted nature of social inclusion and sustainability.⁵⁴ These findings suggest that while the GRI standards provide a useful framework, their impact on improving D&I progress may be limited by incomplete adoption and reporting practices.

UN Global Compact
The United Nations Global Compact (UNGC) is a voluntary corporate responsibility initiative that promotes ten principles in the areas of human rights, labour, environment and anti-corruption.^55,56 While diversity and inclusion are not explicitly mentioned, gender diversity on the board positively influences UNGC adherence, mediated by the existence of a CSR committee.⁵⁷ UNGC adoption often requires organisational changes that improve the environmental, social and governance (ESG) performance of companies.⁵⁸ This, in turn, can have a positive impact on the financial performance of UNGC participants.⁵⁸ The UNGC has produced numerous publications and created leadership platforms to help companies implement responsible business practices and support global development goals.⁵⁵ With over 10.000 corporate participants from more than 130 countries, the UNGC is the largest voluntary corporate responsibility initiative in the world.⁵⁶

Corporate Sustainability Reporting Directive       
The Corporate Sustainability Reporting Directive (CSRD) is expected to have a significant impact on listed companies and capital markets, emphasising sustainability and ESG issues.⁵⁹ The ESRS S1 targets for the company’s own workforce cover diversity, equality and inclusion and include 17 measures. These range from DEI policies and objectives to diversity and pay equity data. Employee surveys are a key means of gathering information and capture the views of the workforce. The CSRD also goes beyond the traditional binary gender model and places particular emphasis on intersectional equity. This extension supports a more nuanced understanding of DEI and enables organisations to disclose their data on aspects such as gender identity, age, nationality, disability, sexual orientation, religion and ethnicity. This increases transparency and strengthens equal opportunities for traditionally under-represented groups.⁶⁰

International Labour Organization Conventions
The International Labour Organization addresses diversity and inclusion through various conventions and initiatives. The ILO promotes equal treatment and opportunities for persons with disabilities in vocational training and employment, as outlined in Convention No. 159.⁶¹ Gender equality is addressed in core Conventions No. 100 and No. 111, which have significantly influenced the international human rights framework for women’s labour rights.⁶² The ILO also develops standards related to ergonomics and occupational safety, such as Convention No. 127 and Recommendation No. 128, which specify requirements for manual handling of loads.⁶³ The Gender, Equality and Diversity Branch supports the implementation of the ILO’s policy on gender equality and mainstreaming and promotes the application of fundamental principles and rights at work, including non-discrimination and equality standards for various groups, such as disabled persons and indigenous peoples.⁶⁴ These efforts influence companies by setting international standards for workplace practices.

3      Practical Implementation

The success of an inclusive diversity culture is deeply embedded in the organizational culture. Figure 3 shows how an inclusive diversity culture can be achieved through four essential transformational stages: The first phase deals with raising awareness, building understanding and encouraging reflection. The second phase focuses on the development of a vision of inclusion, followed by the third phase where key management concepts and principles should be created and re-evaluated. The final phase focuses on the adaptation of the Human Relations Management system and processes.⁶⁵

Phase 1 focuses on the fact that there must be different perspectives on reality in order to foster inclusiveness.⁶⁶ This awareness is crucial for the development of core values, which in turn form the basis for an inclusive culture. There are privileged and marginalized viewpoints and in order to create inclusiveness, it becomes vital to integrate and empower those that are marginalized.⁶⁵

In Phase 2 of the four transformational stages, is crucial that the organization’s CEO and other leadership personnel clearly state their support for both the vision and the actions that follow.^67-69 Leadership commitment is a key factor in the success of D&I initiatives and is crucial for D&I efforts, aligning them with the firm’s goals and ensuring accountability.⁶⁶ For example, the social enterprise AfB gGmbH defined the company’s vision to be the world’s leading non-profit IT company. As Europe’s largest non-profit IT company, AfB provides job opportunities for people with disabilities by refurbishing and remarketing used IT and mobile devices.⁷⁰ At Microsoft, D&I is central to the mission to empower every person and every organization to achieve more.⁷¹ Satya Nadella, Chairman and Chief Execute Officer at Microsoft stated that that the commitment to diversity and inclusion is essential to Microsoft’s mission.⁷²

Many CEOs commit to supporting networks and initiatives for underrepresented groups.
A popular example is the commitment to UN Global Compact (mentioned in Section 3.2) and its principles. A distinction, exclusion, or preference that has the effect of exclusion or disadvantage of people because of their race, color, religion, sex, disability, political opinion, social origin, or any other attribute that has no relation to the job is identified as discrimination under Principle 6. Corporate leaders need to integrate the UN Global Compact and its principles into their organization’s daily operations, corporate strategy, and organizational culture if they commit to UN Global Compact.⁵⁶

At the European level, signing a national diversity charter is a well-known example for initiatives. An organization that signs a diversity charter pledges to support diversity and value all of its workers, regardless of their age, social background, gender identity or ethnicity, physical or mental ability, religion or ideology, or sexual orientation. The German Diversity Charter consists of six points: promoting a climate of mutual respect and appreciation within the organization, assessing and modifying HR procedures that are inclusive of diversity, identifying and addressing diversity both inside and outside the company and, lastly, showcasing annual progress and employee involvement.⁷³

The company-led program called CEO Action aims to create a more inclusive atmosphere in the workplace by promoting DE&I. The Coalition supports business leaders to take action and drive progress by offering a range of tools, resources, events and thought leadership opportunities. CEOs must support the foundational components of the commitment. In practice, this means creating an environment that fosters open communication and introducing and expanding training and education on unconscious bias. Involving governing bodies in the development and evaluation of diversity, equity and inclusion strategies are also essential components of the commitment.⁷⁴

The commitment to achieving more inclusiveness should also be demonstrated at executive positions. According to a report on board diversity in “Fortune 500” companies, underrepresented groups became more between 2020 and 2022, but overall diversity is still restricted.⁷⁵ In contrast to this, Mc Kinsey and Company found that the business case for gender and ethnic and cultural diversity in executive teams is at an all-time high.²⁷
Voß and Würtemberger (2023) highlighted that inclusion measures in change management can cause resistance, especially at leading management levels. One explanation is the that the managers are familiar to the established corporate culture and the misconception that their success is solely due to their performance, not due to systemic advantages. Change can lead to discomfort and (passive) resistance which ultimately hinder inclusiveness across a company.⁷⁶ The role of change management will be discussed further in phase 3.  

Ultimately, a commitment to diversity and inclusion at CEO level alone is not enough.⁷⁷ The McKinsey report from 2012 highlighted this problem: While CEO endorsement was rated as “good” or “fairly good” at 70% of companies, this was only the case for 57% at senior management level and only 41% at middle management level.⁷⁸ Accordingly, special attention needs to be drawn to where the implementation of measures takes place and responsibility for the implementation of strategies and changes lies. Hence, it must be ensured that the managers across all levels are systematically involved which leads to transformation phase 3.

The third phase focuses on the rethinking and redefining of key management concepts and principles in order to enable transformation.

At Ford, diversity is managed top down by the European Diversity Council (EDC), composed of the European leadership team, which defines the overarching diversity goals on an annual basis. In order to determine whether these goals have been met, they are evaluated throughout the year using a scorecard. The EDC is held four times per year.⁷⁹ Unilever has a similar organization of D&I management: the Global Diversity Board provides the shared vision, governance and goal setting for inclusion and diversity across the company. Several members of the Unilever Leadership Executive (ULE) and General Managers from important markets are members of the Board, which meets four times a year and the board reports to the ULE monthly.⁸⁰ In addition to corporate governance improvements, mutually recognized principles serve as the foundation and provide guidance for a company, formally stating its intention to create and maintain an inclusive culture ⁸¹ In case of Volvo, practicing diversity and inclusion is a commitment in the Code of Business Conduct which serves as a cohesive strategy.⁸².

Followed by governance measures, managerial accountability is a key action for effective diversity programs.⁶⁶ By assigning, modifying, and defining the objectives for every department, the diversity managers (at Volvo) derive the established goals throughout the entire company. The diversity managers will assist as needed, but the individual functional areas are in charge of carrying out the objectives.⁷⁹ Managers should openly express and publicly display their dedication to multiple forms of diversity in order to promote a feeling of community and belonging. They should also connect with a wide range of people and assist employee resource groups. Here, it is important to note, that promoting diversity does not guarantee inclusiveness. Mc Kinsey found through a social listening approach that overall sentiment on diversity was positive but sentiment on inclusion was negative.²⁷ This aligns with the conclusion in the definition part of this report that diversity does not necessarily result in inclusion.
Diversity management is also responsible for change management, which is important at every point in the employee lifecycle. Organizational members’ personal views, policies, procedures, and practices are called into question and may need to be modified or completely realigned during transformation processes. An organizational gap can occur when a company integrates diversity into its strategy and introduces diversity management due to the organization being stuck in old structures. In order to close this gap, change management needs to include multiple organizational levels. The top management can facilitate change through clear goals and strategies, provision of resources (e.g. budget), communication and monitoring. Responsibility of project management is the implementation of the defined goals in the departments, such as HR, development or recruiting and other tasks, e.g. resource planning to enable change. Effective project management can guarantee that modifications are executed effectively and in compliance with the plan. A company’s change management program can support change by implementing focused strategies like seminars, coaching, and training that target the psychological aspect of change. To guide the change processes and encourage acceptance, tasks include creating objectives, selecting metrics, and coordinating these measures with project management.⁷⁶
Following the diversity management, functional and national diversity councils also play an important role in the top-down and bottom-up approach to promoting diversity. Functional councils, such as those in purchasing, offer recommendations on what subjects should be covered within their domain, such as product development, in addition to supporting the achievement of the overall goals.⁷⁹   
Employee networks form the basis of diversity management not only at Ford but at many large companies such as Nestlé, Microsoft and Unilever. Employee networks are created voluntarily. They have to define their own objectives but there are no guidelines apart from basic rules, to which an officially recognized employee network can be established. Namely, the network should pursue the company’s goals and principles and offer membership to all employees on a voluntary basis. At Ford, employee networks cannot engage in political, legal, lobbying or legal activities on behalf of the company without prior agreement. Additionally, employee networks are not authorized to represent the company or speak on its behalf. 
As an example of a flexible and dynamic organization based on the top-down and bottom-up principle, each recognized network has a sponsor from the European management at Volvo. Every six months, the network meets with the sponsor to report on its activities. If necessary, the sponsor is contacted to obtain support for a specific topic, e.g. if the support of top management is required for the implementation of particular measures.⁷⁹

Volvo Germany has the networks Women’s Engineering Panel, Women in Finance, Women in IT, Women’s Product Panel, Parents’ Network, Working and Caring Network, Gay, Lesbian or Bisexual Employees, Turkish Resource Group.⁷⁹ Since 1989 Employee Resource Clubs (ERCs) are integral for D&I management at Microsoft. Asians at Microsoft, Blacks at Microsoft, Disability at Microsoft, Families at Microsoft, Global LGBTQIA+Employees and Allies at Microsoft, Hispanic and Latinx Organization of Leaders in Action, Indigenous at Microsoft, Military at Microsoft and Women at Microsoft are the nine ERCs mentioned in the D&I report.⁷²

The fourth transformational phase focuses on the adaptation of the Human Relations Management system. This aims to support the creation, reinforcement, and acknowledgment of inclusive behavior through converting the guiding principles into observable and quantifiable implementation.⁶⁵ The tools of HR are presented in the following section.

3.1  Recruiting and HR management

When it comes to implementing diversity and inclusion, the HR department in particular has a decisive role to play, as a company’s own employees represent the largest internal field of action. The key task is therefore to review HR processes and policies. These also represent two of the 4 Ps of inequality that Michelle Penelope King introduces in her work alongside practices and personal attitudes, the latter of which are difficult to influence from an HR perspective¹⁰. Nevertheless, there are still opportunities to at least send a signal here; in the case of practices, for example, role models can be honoured and cases of discrimination can be recorded and punished with consequences. The same applies to personal attitudes where, for example, a speak-up culture can be supported by processes and training in the event of cross-border comments and actions. The 4 Ps can be tracked along the entire employee lifecycle, from employer branding and recruiting to social framework conditions, possible reintegration measures, e.g. after illness or pregnancy, and management selection through to offboarding. The task of HR is to go through these stages and review them with regard to the 4P and D&I. Dependencies can hereby also be utilised and concepts transferred, e.g. from onboarding processes to internal job changes. After all, there are always ‘moments that matter’ at every stage of an employee’s career that determine how much of a sense of belonging and connection they feel to the company.²⁰

In the case of employer branding, it is therefore important, for example, to look at which target group the existing processes reach and to what extent this corresponds to the intended target group from a D&I perspective. A target group analysis and a survey of existing and former employees should be helpful here. Other aspects here could be to see how employees can act as ambassadors for their own company. If the intended target group and the target group reached do not match, it is important to check how existing networks can be expanded or how access points can be created through partnerships and sponsorship. In the case of employer branding, policies are all written documents, such as the career website or flyers, which set out the values and practice of D&I in the company and how the company positions itself.⁸³

Comparing the D&I statements on the websites of companies from 5 different countries, as done by Johnson et. al (2021), shows clear differences. The diversity factor of nationality plays a much greater role in Europe than in the USA. In the USA and the UK, on the other hand, there is a much stronger focus on ethnicity and race. Overall, the number of companies commenting on D&I on their website is increasing. 63 of the 75 companies analysed hereby gave concrete examples of how they support D&I in their corporate culture, such as support groups for minorities or generation learning programs. Overall there was the tendency for companies to increasingly talk about inclusion rather than diversity, but this change is happening primarily in terms of language without any major change in behaviour.⁸⁴

In connection with employer branding, however, there is also the task of fulfilling the promises made, as otherwise, for example, evaluations by former employees can reveal this shortcoming. This also makes it clear why offboarding should also be taken into account with regard to D&I. After all, there is an opportunity here to obtain feedback and respond to any shortcomings identified.²⁰

In the practical implementation often even small adaptations like application forms that were adapted for screen readers can significantly reduce barriers for certain target groups.²⁰ This becomes even clearer when companies specifically tackle barriers for certain target groups, as happened at SAP with the ‘Autism at Work Initiative’. This goes back to the strategic goal set in 2013 of employing 1% autistic people by 2020, after positive experiences had already been made with 5 autistic employees at the Indian site in Bangalore. The entire application process was adapted together with their partner Specialisterne from Denmark. Most autistic people come to SAP through referrals and local organisations. Initial contact is then made by e-mail, followed by a questionnaire that helps to determine whether the person’s skills are a good fit for SAP. In order to get to know the applicant and their way of working better, they are then invited to an assessment where, among other things, they have to assemble and programme a Lego Mindstorms robot. Once this has been successfully completed, a six-week onboarding programme follows in which the employees work as interns to get to know the working methods and structures at SAP. This final phase also serves to determine which adjustments are necessary to create an environment that is as compatible as possible with the disorders associated with autism in this person.^85,86

Adaptation can also be made with regard to employment models and flexibility in terms of place of work, which does not only apply to people with physical limitations. This also includes models such as parental leave and part-time work in order to adapt to the needs of families and parents. Another example of this is Ford’s ‘3auf2’ project, in which three employees who are no longer able to work full-time due to age or the late effects of Covid 19 are able to share two full workplaces.⁸⁷ This approach is therefore also part of corporate integration management.⁸⁸

To increase the acceptance of diversity and reach more understanding workshops can be a good tool to raise awareness. The social start-up Blinc, which supports companies and organisations in hiring more people with a low vision background, shows what these workshops can look like. The various workshops are united by the goal of raising awareness and sensitisation by exposing participants to everyday situations with blindfolds or limitations caused by virtual reality applications, as experienced by those affected.⁸⁹ The awareness created in this way can enable managers and colleagues to create a working environment that creates optimal conditions, taking barriers, strengths and weaknesses into account. But the limitations can also contribute to the development of strengths from which companies and colleagues can benefit, as the workshop on resilience shows. This is led by people with a low vision background who have had to overcome various obstacles and adapt due to their blindness. The strategies they have developed can also be learnt by the participants to improve their resilience and the way they face problems.⁹⁰ Blinc is only one player here, but already shows what is possible through the exchange and acceptance of diversity in organisation and society. With regard to the design of the workshops, it is generally important to adapt and implement them for all levels of the organisational culture. The workshop leader is also decisive here and the extent to which they can convey characteristics, especially if they themselves do not have these characteristics. Diversity training can make an important contribution to the corporate culture, especially if it is carried out regularly and involves all stakeholders and feedback⁹¹

3.2  Recognising and using diversity of society within and outside the organisation

The insights gained through the workshops can also help to better recognise and adapt to diversity in one’s own organisation and in society. In this way, a working environment with inclusive workplaces can be created that caters to different needs and barriers. For example, SAP offers employees with autism quieter workplaces in smaller offices in order to avoid irrelevant information (conversations, language, signals, etc.) that cannot be filtered by those affected. ⁹²Visually impaired people, on the other hand, can be provided with technical assistance such as screen magnification software, a Braille display and screen readers, as is the case at DHL Group. ^92,93

In addition to technical and physical adjustments, the implementation of the organisational culture plays a decisive role when it comes to achieving inclusive workplaces. Transparency is important here to involve all employees and let them feel responsible. But there are further options for organizations how they can support inclusion operationally. One is implementing mentorship or buddy programs. At SAP, these represent a further component of the Autism at Work initiative to establish a support model. In this way, autistic employees are provided with fixed contact persons who offer stability in the overall agile corporate environment.⁸⁶ Further approaches are shown by the example of Citigroup which relies on Implicit Association Test (IAT) training and affinity groups to contribute to an open atmosphere of dialogue in which barriers can be addressed.²⁷ In general employee groups are a common tool especially in larger organisations like Nestlé or Ford as already mentioned above. 

With regard to nursing management, a study from Norway identified three principles that can contribute to a more inclusive working environment from an employee perspective. The study looked at a team in a nursing home that differed in terms of origin, age, level of experience and education. While there are differences that emerge from the position, a general principle that was emphasised as positive was that “everyone should take responsibility for the quality of care”. In addition, the organisation ensured that tasks were rotated so that all employees were deployed once in all areas. Besides this, more unpopular tasks were combined with other more attractive/easier tasks so that there is a balance. This system ensures that unpopular tasks are not always assigned to the same people. The last principle resulting from the interviews was that everyone should work together and support each other. This is also supported by the fact that everyone has a partner who, on the one hand, is intended for exchange, e.g. to coordinate medication plans again, but at the same time also serves as a substitute for cases of illness. All these principals together contribute to a system that take into account the personal qualities of every employee and sees them as a valuable resource. At the same time, the decentralisation of tasks promotes cohesion and mutual support, which strengthens the sense of belonging. However, it should be noted that Munkejord (2019) only considers one nursing home here, which limits the general validity of the results. Nevertheless, the insights reveal concepts that might be transferable to other smaller organisations in order to create an inclusive workplace. ⁹⁴
Another concrete example of how small and medium-sized companies can implement and utilise D&I is the Goldbrötchen Bäckerei, which is based in the Vogtland region of Saxony and was awarded the 2021 Inclusion Award for Business. With 11 severely disabled employees, the company has an employment rate of 37%. This is made possible by individual support plans and thus a customised employment, which implement the philosophy and strategy of the company, which states that people come first. Based on the skills of each employee, the company looks at how they can best be integrated. As deaf people cannot hear the beeping of the oven, this position is difficult, but tasks such as spreading curd on the dough are not a problem and can be passed on with a written to-do list. Visually impaired people, on the other hand, would not be ideal for this task, so another task in the bakery, sales, logistics or administration must be found for them. This individual assignment of tasks sometimes leads to up to three people working together on a task that would otherwise be carried out by a healthy skilled worker. However, due to the shortage of skilled labour, this approach is a good solution despite the increased workload. In a separate early shift, preparatory work can already be completed and taken over from the master bakers. Managing Director Jahnsmüller also reports that the measures lead to a strong sense of belonging as well as a high level of motivation and commitment to the company. The high level of flexibility and the removal of barriers also contribute to this. All branches and workplaces have been made structurally barrier-free. In order to respond to possible complaints, a quiet room was also created and an additional ‘firewood production and landscape conservation’ department was set up in the show bakery, which serves as an alternative workplace.^95,96

To sum it up inclusive workplaces are characterised by the fact that they create an “environment in which all employees feel valued, respected and supported”⁹¹. In this way, inclusive workplaces also contribute to a sense of belonging.

In the analysis so far, the focus has been on employees and therefore within the company’s own organisation, but most companies are integrated into supply chains, which means that there are also opportunities to drive D&I forward here. IBM has therefore had a Supplier Diversity Programme since 1968, which aims to strengthen diversity among its suppliers. This ensures that suppliers who are valuable to IBM can participate in the programme, which is also linked to various accompanying programmes and is intended to strengthen the relationship between the two companies. The support programme includes the Federal Mentor Protégé Program and the Commercial Protégé Program, which provide support with needs assessments, business development assistants and financial services through IBM Global Finance. This gives suppliers the opportunity to expand their skills and advance their business. IBM gains new perspectives through these programmes and is closer to its customers through this global network in order to understand their needs. Small companies in particular often drive innovation, which IBM can utilise for its own benefit through its network. In this way, diverse suppliers also contribute to quality and can represent a competitive advantage over competitors. ^97,98This is also demonstrated by Starbucks, which has been able to expand its product offering through its supplier programme. Other effects of supplier diversity programmes are the creation of jobs and support for the local economy, as shown by Coca Cola and Walmart. This also contributes to the brand’s reputation.⁹⁹

If the strategically desired culture of belonging can also be implemented in the operating business by actively tackling processes, policies, practices and personal attitudes, companies also have the opportunity to have an external impact, besides supply chains. In this sense, King’s 4P model of inequality can be extended to include the Ps of products and public relations as shown in 3.3. In practice, this means that by adapting its products and PR from a D&I perspective, the organisation can also reach stakeholders outside the organisation and thus possibly also have an impact on society.²⁰

From a strategic point of view, D&I can be a good way to reach new target groups. As in the case of suppliers, a more diverse workforce also represents more perspectives from society and thus creates a broader field for innovation.²⁰ When looking at products, a distinction must be made between product marketing and innovations. If there is a diverse team behind a campaign for a product, this team will also include more aspects in product marketing. For example, the team may have knowledge of how otherwise unreached target groups of a certain ethnicity can be reached or addressed more directly.^100,101 An example of this is a Ford sales campaign at the Cologne wholesale market that was customised for Turkish dealers. Turkish-speaking sales and financing advisors addressed them more directly and made them feel more valued by addressing them in their native language, which was reflected in a measurable 5% increase in sales for Ford.⁷⁹For inclusive marketing, it is also important that content is adapted to the respective target group and not just relying on symbolism, such as a black or disabled person in a group picture as the sole adaptation. Feedback from a diverse team or from external people from the target group through appropriate market research also helps to find the right message to reach new and existing customers.¹⁰²

Another example from Ford shows how valuable this feedback can be in product development. The company has a Women’s Product Panel (WPP), which is made up of women with different backgrounds from across the company. The WPP is consulted by the more male-dominated product development team in order to identify relevant functions for this target group. This feedback was used, for example, to add a function that allows the boot to be opened with a foot movement under the bumper or a fold-down convex mirror to view the entire rear seat. Functions that also benefit other target groups.⁷⁹  
However, the inclusion of D&I can also directly target new groups, such as Degree/Rexona did, a deodorant brand that belongs to Unilever, with Degree Inclusive. Degree Inclusive is an adaptive deodorant designed for one-handed use, making it easier for disabled people with limited sight or arm mobility to use. The product was developed in collaboration with the Muscular Dystrophy Association, the non-profit organisations Open Style Lab and The Lighthouse Chicago, among others, to meet the needs of the target group.^101,103

3.3  Communication and Monitoring

In addition to the communication of D&I reports, employer branding and products, some methods such as public relations (PR) can be powerful measures to reach minorities.¹⁰⁰ As shown in Figure 5 PR is part of both the internal and external culture of belongingness and offers the opportunity to make a positive contribution to society but also to improve the company`s perception. For example, Ford’s Corporate Identity (CI) project “Driving for blind people” enabled blind and visually impaired people to drive a driving school car at the Ford test site in Cologne in order to increase their self-confidence in road traffic and raise awareness of their challenges. Another CI project was “Mobile Counseling”, in which a Ford Transit was used as a mobile counseling center to inform Turkish youth about educational options and educate them about prevention against drug and gambling addiction. This project was especially useful in areas with high Turkish populations. Sponsorships, as part of PR, can also provide a link to minorities, such as the funding of sporting events. ⁷⁹

Measuring and evaluating the impact of D&I initiatives is crucial for their success. Organizations that track key metrics related to D&I have a better ability to assess the success of their efforts and are enabled to adjust them. Measurement can include tracking diversity metrics, employee engagement surveys, and performance indicators related to D&I.⁷⁶ Roberson and Perry examined success factors for inclusive leadership and used both top-down and bottom-up feedback and employee involvement Diversity management often defines new KPIs for the organization in order to be able to manage the diversity targets. It is essential for diversity management to work with selected quantitative and qualitative data since it is impossible to manage diversity if it’s not measured. Fundamental analyses must be carried out in order to set up diversity controlling. Here, it is important to assess what HR and diversity targets have already been set or which the company currently has. Also, it can be helpful to assess whether there is already process controlling existing in the individual (Human Resource) processes that diversity management can utilize e.g. in the recruiting process. 
In practice, there are some KPIs that are easier to record compared to others, e.g. the women’s quota. In contrast to the numbers on binary gender distribution, ethnic diversity can be multifaceted due to dual citizenships and memberships of particular ethnic groups, which are not necessarily matching with nationality (e.g. Kurds in Turkey). Even disabilities are only partially recorded in a regular basis, and neither sexual orientation nor identification are reported in most companies. Reporting on disability is typically carried only during the active job phase or when significant disabilities are voluntarily disclosed during the recruitment process. Therefore, defined goals are frequently limited to specific KPIs, such as gender, age diversity initiatives, and work-life balance (where family caregivers are left out).¹⁰⁴

4      Drivers and Barriers

Diversity and inclusion are still under-represented in many organisations, making them difficult to sustain. It is therefore particularly important to look at the drivers and barriers in order to develop targeted policies that address these challenges. Harnessing the right drivers can significantly boost progress, while identifying and overcoming barriers early on is crucial to avoiding setbacks and building a truly inclusive culture. This chapter examines in detail both internal drivers, such as demographic trends and improved business performance, and external influences, such as market changes, regulatory requirements and technological developments, as well as internal and external barriers.

4.1  Internal Drivers

Demographic Developments in the team structure of a company           
Demographic trends show that the proportion of older people in society will continue to rise. As a result, the number of people in the workforce will continue to decline. This shift in the age structure will inevitably lead to a shortage of skilled workers, resulting in a highly competitive labor market. In such a market, diverse and challenging work, an open and welcoming corporate culture, and the opportunity to work in international and diverse teams will be key factors in the Millennial generation’s choice of employer. For this target group, these factors play a central role in deciding whether or not to join a company. In order to keep up with this changing labor market and position themselves as attractive employers, companies are responding by intensifying and expanding their diversity management efforts.¹⁰⁵
Due to demographic changes, the working life span has significantly increased. As a result, company teams are becoming more age-diverse, with up to five generations working together, leading to considerable diversity. If this generational diversity is effectively managed by leadership, it can become a competitive advantage. Positive effects such as extensive knowledge transfer and improved decision-making quality can arise from successfully integrating these diverse generational teams.¹⁰⁶

Improved business performance     
The “Diversity, Equity, and Inclusion 2024” report by the World Economic Forum highlights several points that explain how diversity initiatives can lead to improved business performance. Greater innovation potential goes hand in hand with diversity in teams, as this leads to higher quality and fact-based decisions. This not only boosts the innovative strength of companies, but also enables the development of products and solutions that appeal to a broader target group. At the same time, companies with a diverse workforce are more adaptable and better able to drive change. This flexibility strengthens their resilience to economic, technological and social challenges. In addition, diverse teams contribute significantly to employee motivation and retention. They make it possible to better utilise the potential of employees, which leads to lower turnover rates as morale is higher and there is a stronger sense of belonging. According to recent studies, employees in such environments are 3.8 times more likely to realise their full potential.¹⁰⁷

4.2  External Drivers

Market changes        
Several current market changes serve as external drivers for companies, particularly key developments such as globalization and increasingly diverse societies. Globalization is driving companies to operate in more diverse and international markets, requiring a deep understanding of these markets and their unique needs. For example, international companies can benefit from diverse leadership. In addition, as societies become more diverse, consumer behavior and purchasing decisions are affected. Companies that fail to embrace diversity risk losing market share and damaging their reputation. Fostering a diverse workforce is therefore critical to responding to these societal and market changes.¹⁰⁸ In addition, as competition in global markets intensifies, the ability to innovate and adapt becomes critical; diverse teams are better equipped to generate creative solutions and meet a wider range of customer needs, giving companies a competitive edge. Market dynamics increasingly demand that companies not only recognise diversity and inclusion, but also actively promote it in order to remain relevant and successful.¹⁰

Regulatory Requirements    
Regulatory and legal requirements also serve as drivers for diversity and inclusion, as companies are often required by law to implement or adapt their strategies in this area. These regulations not only set minimum standards but also push companies to proactively address inequalities and create a more inclusive environment, which can enhance their reputation and competitiveness.¹⁰⁹

In addition to the overarching frameworks GRI Standards, the UN Global Compact, the CSRD and the ILO mentioned in Chapter 2, at the European level, there are four key Equal Treatment Directives, which have been transposed into German law through the General Equal Treatment Act (AGG). These include the Anti-Racism Directive, which establishes a legal framework to prevent discrimination based on race or ethnic origin. The Employment Framework Directive aims to prevent discrimination in the workplace, specifically based on religion, belief, disability, age, or sexual orientation. Additionally, the Gender Directive ensures equal treatment of men and women in terms of access to employment, vocational training, career opportunities, and working conditions. Complementing this is the Gender Equality Directive outside the workplace, which aims to prevent gender-based discrimination in access to and the provision of goods and services.¹¹⁰

Technological developments            
New technologies are increasingly acting as external drivers for diversity and inclusion in organizations. They offer different ways to overcome traditional barriers and create a more inclusive work environment. For example, the use of artificial intelligence and data analytics helps reduce decision bias by using objective data instead of subjective opinions in hiring processes. In addition, digital platforms are helping companies implement comprehensive training programs on topics such as unconscious bias and inclusion. Finally, technological innovations are supporting flexible work models that allow employees to better balance their work and personal lives.¹¹¹

4.3  Internal Barriers

Internal implementation challenges           
The first obstacle to overcome is internal implementation. For many companies, putting the planned concepts into practice is a significant challenge. Leadership must unify different points of view. If there are differences of opinion within a team or in the company and prejudice or discrimination lead to the company’s tasks not being achieved, it is not an effective solution to transfer or dismiss employees. The recruitment of new employees does not guarantee that existing issues will be resolved or that innovative ideas will flourish. The key challenge is creating an environment where everyone is encouraged to share their perspectives and ideas but in such a way that everyone feels comfortable and works together as a team.¹⁰⁵

Therefore the approach and challenge of the management team is central to the effective promotion of diversity within an organisation. Managers may resist diversity management measures, highlighting the tension between the need for attitudinal change and the implementation of behavioural management.¹¹² Traditional management approaches that treat all employees uniformly may inadvertently overlook the unique contributions that different perspectives, such as those related to gender, race or ethnicity, bring to management styles and problem-solving techniques.¹¹³ This uniformity can perpetuate psychological challenges rooted in ingroup-outgroup dynamics, in which individuals tend to favour those perceived as similar, creating unfair barriers for some while providing undue advantages to others. ¹¹⁴

To overcome these challenges, management must adopt a proactive approach, incorporating strategies such as cultural exchange programmes, diversity training and setting specific targets alongside rigorous monitoring.¹¹² Furthermore, fostering open dialogue between different groups and implementing policies that recognise and respect both differences and similarities can help bridge divides and promote a more inclusive workplace.¹¹⁴ Addressing these challenges requires a committed and nuanced approach from the management team, as they play a critical role in shaping an organisational culture that values and leverages diversity.

While the business benefits of diversity and inclusion should undoubtedly be considered, there is a risk that an exclusive focus on them becomes an internal barrier. In the article “Getting Serious About Diversity: Enough Already with the Business Case” from the Harvard Business Review suggests that this focus could lead companies to implement superficial measures¹¹⁵. According to the report, the short-term, economic focus is preventing companies from making far-reaching, structural changes. The real approach of embedding diversity as an ethical and cultural obligation is neglected.

4.4  External Barriers

Depriorization in times of crisis      
In times of crisis, such as the COVID-19 pandemic, there is a risk that diversity and inclusion in companies may be deprioritized. Companies often shift their focus to more urgent challenges, like maintaining operations or securing liquidity. According to the “Diversity Still Matters” report, past crises have shown that diversity initiatives can fall by the wayside during such times, which can have long-term negative effects. Companies that forgot these measures during risky periods risk missing out on the benefits of an inclusive workforce, which is crucial for innovation and resilience.¹¹⁶

Social Factors            
As a social factor, unconscious biases must be mentioned. These include deeply rooted societal prejudices that act as external barriers. An example is decision-making in assessment centers. These unconscious biases can lead to judgments that are not always objective and fair, which can hinder diversity in companies. Therefore, a company should take steps to recognize and reduce these biases.¹¹⁷

Another social factor related to barriers is “occupational segregation.” This term describes a labor market phenomenon where the choice of a particular profession can often be attributed to certain characteristics of individuals. This typically includes demographic factors such as gender or ethnicity. For example, there are currently occupations that are predominantly held by women.¹¹⁸ This stigma inhibits diverse teams – it makes groups more homogeneous.

Political Factors        
In addition to rising populism, government policies and legislation can also act as external drivers for diversity and inclusion, either by forcing or inhibiting progress in this area. For example, political decisions affecting immigration laws, equal opportunities policies and anti-discrimination regulations can have a significant impact on how companies and society at large approach diversity. In regions where governments actively promote inclusive policies, companies may find it easier to implement diversity initiatives. Conversely, in environments where political rhetoric and legislation discourage diversity, companies may face greater challenges in promoting inclusive practices. In addition, political instability and changes in government can lead to shifts in policy focus, creating uncertainty for organisations trying to maintain long-term diversity and inclusion strategies. These political factors, combined with the broader societal attitudes they influence, underline the complex and often fluctuating nature of the external environment in which diversity and inclusion efforts are pursued.¹¹⁹

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