David Carroll and Matt Highfield

The year 2020 saw a significant elevation of Diversity, Equity, and Inclusion (DEI) in our collective consciousness. The death of George Floyd and calls for racial justice around the world garnered global attention and brought DEI to the forefront of national and international dialogue.

While conversations about injustice are not a new phenomenon, companies are increasingly seeing employees demand a tangible commitment to DEI, and leaders are responding to the escalating expectations in myriad ways. Salesforce announced a new Racial Equality and Justice task force to inform how best to drive racial equality in the workplace. Mondelēz International committed to double Black representation in U.S. management by 2024. And Deloitte, among other commitments outlined in its DEI Transparency Report, pledged to increase the number of Black and Hispanic/Latinx professionals in its U.S. workforce by 50% and increase female representation to 45% by 2025.

These commitments appear to deliver benefits far beyond the support of social justice. Research has proven the financial business case for a diverse workforce as well: one study by the Wall Street Journal found the 20 most diverse S&P 500 companies had a 50% higher operating profit margin and 138% higher annual share performance compared to the lowest-ranking companies.

So, what steps can leaders take to enhance DEI within their organizations?

Unfortunately, there is no single playbook and the solutions available to organizations differ widely. Deloitte’s 2020 report "Support Your Black Workforce, Now: Practical Ideas for Organizations and Leaders to Take Action" describes a framework and specific steps companies can take that may benefit Black and other marginalized communities, including: building antiracism as a workforce capability, emphasizing and expanding a culture of allyship, and revisiting and evaluating internal policies, processes, and practices through a lens of racial equity.

As companies utilize these and other approaches to develop a workforce reflective of their customer base and one that responds to the demands of their incumbent and prospective employees, they often fail to consider whether their physical footprint of locations helps or hinders efforts to access a diverse talent pool.

The evidence pointing towards superior organizational performance, as well as the demands made by existing employees, make access to and embrace of diverse populations pivotal to success. With a shift in focus, and in order to deliver on DEI commitments, those charged with corporate location selection are placing increasing emphasis on the availability of diverse talent and other DEI-related indicators when making location decisions.

A recent location decision made by a well-known Life Sciences client looking to expand their U.S. service delivery footprint was ultimately heavily influenced by demographic diversity and both an empirical and perceived ease of attracting a diverse workforce in the selected location. Another Life Sciences giant considered diversity at the location selection outset and committed to designate DEI indicators as a key strategic factor in their decision-making process. This resulted in the elimination of locations—irrespective of other attractive cost, talent, and operating conditions factors—that were not aligned with their DEI objectives and commitments.

For any organization pursuing a footprint expansion, there are three location-specific DEI considerations that must be assessed: demographics and representation, legislation related to equality, and public opinion.

• Demographics and Representation: An organization cannot practically broaden the diversity of its workforce if the availability of diverse talent is either in short supply or not present at all locally. Publicly available data such as employment figures by race and gender provide a baseline by which the location strategist can compare candidate locations. The presence of under-represented groups in local and state government leadership positions can be examined. Additionally, resources and insight are available from relevant publications such as the Human Rights Campaign Foundation’s Municipal Equality Index to determine how cities perform on equality and inclusivity.

• Legislation Related to Equality: Location decisions increasingly include an assessment of legislative leanings on equality, with companies viewing the roll back of minority, women’s and LGBTQ+ rights as an elimination factor. Investment in markets considered less progressive or even hostile to minority rights is receiving growing scrutiny among U.S. and global workforces, with leaders being held accountable for investments in markets not well aligned with the company’s DEI commitments.

Laws and regulations will depend on whether an organization is expanding domestically or internationally. For example, in June 2020 the U.S. Supreme Court ruled that people in all states can seek recourse for employment discrimination based on sexual orientation and gender identity; however, at the time of this writing there remain 20 states without any explicit prohibitions for such discrimination.6 Globally, maintaining commitments to the well-being and recruitment of diverse populations can be more challenging. Only 81 (42%) of the United Nations Member States protect employees against discrimination based on sexual orientation, according to a 2020 report from the International Lesbian, Gay, Bisexual, Trans and Intersex Association (ILGA).

To promote gender equality, leaders are comparing locations on issues such as reproductive rights, employment restrictions, property rights, and maternity leave regulations. The World Bank’s "Women, Business and the Law 2021" study, which measures laws that affect women’s economic opportunity in 190 economies, finds that only 10 countries score a 100/100, with women on an equal legal standing with men across all areas measured. With a score of 91.3, the U.S. ranks 37th, tied with Albania, Cyprus, and Taiwan. 

• Public Opinion: Indicators relating to public sentiment on diversity and issues that impact diversity are available, valuable, and are increasingly incorporated in the location selection process. Understanding and managing workforces in countries whose value set and approach to diversity may differ from those at HQ is a complex, dynamic, but ultimately critical requirement.

In 2019, the Pew Research Center published a report entitled "A Changing World: Global Views on Diversity, Gender Equality, Family Life and the Importance of Religion." The results from 27 countries show that while people generally favor more gender equality (64% of respondents), there is less support in favor of increased ethnic, religious, and racial diversity (45% of respondents). However, several countries, such as Indonesia and South Korea, are strongly in favor of both. 

In another report, "Around the World, More Say Immigrants Are a Strength Than a Burden," the Pew Research Center found that in top migrant destination countries, the public generally views immigrants as a strength. But in several others, the majority viewed immigrants as a burden. These sentiments will not only impact the ability to source diverse and talented colleagues, but also create friction with progressively strong and public commitments by companies to not only diversity, but human rights. 

While no one factor should drive any location decision, the three elements described here represent trade-offs that should be considered during the site selection process. True understanding of a location’s ability to support diversity and equality will result from appropriate due diligence, both at the desktop level and in-market. Corporate leaders are increasingly being asked the questions that thoughtful location selection and due diligence are designed to answer.

Every organization will differ in its approach to improving DEI. Some companies will emphasize training and education programs. Others will develop strategies to combat unconscious bias in hiring and promotion processes. Many corporations will pledge significant funds to support organizations promoting racial justice and inclusion. A growing number of companies are embracing all these levers. What most will agree on is that there remains much work to be done. By placing greater emphasis on establishing operations in locations that allow them to source and provide opportunity to demographically diverse populations, and whose citizens and elected officials advocate for equality, organizations can position themselves to meet their own diversity goals and set an example for others looking to effect positive change.