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The Limited Scope of ESG Metrics on Gender Diversity

In ESG reporting, gender diversity and equality in organizations are often overlooked as reporting frameworks don't provide comprehensive coverage or mandatory reporting on this issue. Read more to learn which regulatory frameworks mention diversity topics and in what scope.

In recent years, the emphasis on reporting ESG (Environmental, Social, and Governance) efforts has grown significantly, reflecting a broader acknowledgment of the critical role that corporate responsibility plays in sustainable development. However, despite the growing emphasis on ESG reporting, one area that has received surprisingly little attention is gender diversity and equality within organizations.  Although social metrics typically make up a large part of disclosure frameworks, diversity, especially gender diversity, is not a major focus point. 

A closer examination of various reporting frameworks—GRI (Global Reporting Initiative), ESRS (European Sustainability Reporting Standards), SDG (Sustainable Development Goals), UNGC (UN Global Compact), and SASB (Sustainability Accounting Standards Board), reveals a noticeable gap in comprehensive coverage and mandatory reporting. 

Promoting gender equality is not merely an ethical matter, but a sound business strategy. The advantages of companies with diverse leadership teams have been extensively researched and typically found to outperform their less diverse counterparts. As examined in the 2023 McKinsey & Company report Why Diversity Matters Even More, Diverse leadership teams are associated with higher financial returns, improved employee morale, reduced turnover, and enhanced brand reputation. Given the importance of gender diversity and equality, it is surprising that ESG frameworks don’t place a stronger emphasis on these topics. 

Missing Diversity Metrics?

Analyzing these frameworks uncovers that even though some do include metrics related to gender diversity, the scope and depth of these metrics may vary significantly, often leaving substantial gaps in gender-related data. The key performance indicators (KPIs) considered across these frameworks include the percentage of women in the total workforce, at various levels of management, in different job functions and scopes, and on the board. Additionally, they consider various aspects of the gender pay gap.

However, a nuanced look reveals that many of these KPIs are not consistently covered across all frameworks and do not systematically address gender gap flaws. For instance, One of the most widely used ESG frameworks, the GRI (Global Reporting Initiative), includes several indicators related to gender equality, such as the percentage of women across different job functions and the gender pay gap (Exhibit 1). Other frameworks like ESRS and SASB are more selective in their inclusion. 

The SDGs (Sustainable Development Goals) and the UNGC (UN Global Compact) initiatives, both exhibit significant gaps in their coverage of gender topics. Out of the 17 SDGs, only 3 can be tied to diversity topics (goals 5,8, and 10). The UNGC only includes a few KPIs related to gender under its Principle 6, which focuses on the elimination of discrimination with respect to employment and occupation (Exhibit 2).

Exhibit 1
Exhibit 2

This inconsistent coverage and the lack of mandatory gender diversity metrics across all frameworks points to a broader issue: the existing ESG frameworks do not sufficiently prioritize or standardize gender diversity reporting. While some organizations may report these metrics voluntarily, the lack of mandatory requirements allows many to overlook gender diversity as a critical aspect of their ESG performance. 

Moreover, the lack of detailed and comparable gender diversity disclosure points might make it challenging for stakeholders to assess a company’s commitment to gender equality as well as track industry-wide progress toward gender equality, and identify areas that require more focused interventions. Companies’ true performance in this area could be hard to asses in topics that are left out of the frameworks’ KPIs such as promotion rates or employee turnover for women, sexual harassment, parental leave policies, or support for women's career advancement, which are critical components of gender equality in the workplace.

What is Being Done

In response to these limitations, some organizations and advocacy groups have developed their own frameworks specifically focused on gender equality. For example, the GEGS (Gender Equality Global Standard) provides a comprehensive set of indicators covering various aspects of gender diversity and inclusion, including recruitment and retention practices, leadership development, and employee well-being. Similarly, the WEPs (United Nations Women's Empowerment Principles) offer a set of principles and guidelines for businesses to promote gender equality and women's empowerment in the workplace, marketplace, and community. 

Despite the growing recognition of the importance of gender diversity and equality, there is still much work to be done to integrate these issues into mainstream ESG frameworks. Gender equality is not just a peripheral issue but a central component of corporate social responsibility.

To truly advance social responsibility among companies, it is imperative to prioritize diversity issues by solidifying them as comprehensive reporting metrics in the different frameworks. Doing so could contribute to companies’ success as well as help them lower risks. Reducing risks and increasing transparency could also benefit investors, allowing them to leverage standardized KPIs when selecting companies to invest in. 

Companies, investors, and policymakers must continue to push for greater transparency and accountability in this area, ensuring that gender equality is not overlooked or marginalized in the broader conversation about sustainability and responsible business practices.

*Disclaimer: This summary is for general education purposes only and may be subject to change. ESGgo, Inc., and its affiliates (the “Company”, “ESGgo”, “we”, or “us”) cannot guarantee the accuracy of the statements made or conclusions reached in this summary and we expressly disclaim all representations and warranties (whether express or implied by statute or otherwise) whatsoever.

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