Diversity & Inclusion is something that resonates very deeply with me. As a fresh grad I pursued roles in commercial law, management consulting, and finance. During interviews, I struggled to connect with many of my interviewers, which hindered my ability to effectively showcase my relevant skills and attributes. So it’s a pain point for me that there is a significant lack of it in the cleantech space. Of course, implementing D&I policies and targets is extremely important from a social perspective, but it can also provide your company with a competitive advantage over your competitors if done early on.
According to McKinsey research, companies in the top 25% for ethnic and cultural diversity were found to be 36% more profitable than those in the bottom quarter. Naturally, diverse teams bring varied perspectives and viewpoints. This fosters innovation, decision-making, and better problem-solving. Not to mention the benefits to talent attraction, retention, and brand image – all benefiting a company’s bottom line.
On the other hand, failing to recognise D&I’s importance leads to what is called ‘Diversity Debt’.
What is Diversity Debt?
Diversity debt refers to the long-term and compounding consequences of delaying D&I implementation. It has an overarching and holistic effect that can hinder all aspects of a company’s growth. This leads to:
- Missed Business Opportunities: In today’s globalised markets, a lack of diversity at the top results in missed opportunities to reach and understand diverse markets. This, in turn, limits business growth and expansion. Varied perspectives can open doors to new markets or consumer segments that a homogeneous workforce might overlook.
- Echo Chambers Limiting Innovation: Homogeneous groups tend to reinforce existing ideas, leading to groupthink. Conforming to prevailing opinions greatly limits the exploration of innovative ideas. A team with members from varied backgrounds brings different viewpoints that, when combined, can lead to groundbreaking ideas and solutions.
- Cultural Challenges: Workplaces that lack diversity can easily create a one-dimensional company culture that does not resonate with a broader audience. This can hinder the creation of an inclusive environment where all employees feel valued and heard.
- Low Employee Morale and Retention: A lack of diversity at the leadership level can send a negative signal to employees, especially those from underrepresented groups. It may contribute to feelings of exclusion, impacting morale and potentially leading to higher turnover rates.
How does Diversity Debt occur?
It’s understandable how Diversity Debt can occur and go unnoticed for so long. Founders often rely on their own networks to build their initial teams, and these teams continue to expand within the same network. Unfortunately, the longer diversity debt is allowed to fester, the harder it becomes to eradicate. There’s many reasons for this, but the biggest drivers behind Diversity Debt are:
- Cultural Entrenchment: Over time, cultural norms develop in a company, making it difficult to change the status quo. Existing structures and processes will unconsciously favour certain groups, making it difficult to introduce and implement inclusive practices.
- Cumulative Effects: The longer D&I is postponed, the more defined the issues become. The effects snowball – impacting decision-making, company culture, and innovation potential.
- Reputational Challenges: If a company has a history of diversity debt, they have difficulties attracting diverse talent and gaining public trust. Positioning away from this image requires a sustained, well-defined, and, most importantly, genuine effort.
What does this mean for the US Cleantech market and the fight against Climate Change?
The US has set a Net Zero target for 2050. To achieve this goal, cleantech companies need to constantly innovate. We have determined that innovation thrives in a diverse environment. However, in order to sustain this in the long-term, the talent market must be actively engaged by cleantech companies for the next 30 years and beyond.
This is crucial as Gen Z is the most racially diverse generation in US history. To be clear, that’s today’s 26 year olds. Gen Z has been in the workforce for 5+ years and they represent your future executives, founders, and board members. For the sake of the climate mission, it’s worth questioning whether your company is positioned to engage this talent market or if you also face diversity debt.
The cleantech industry stands at a pivotal juncture – the pursuit of sustainability and innovation intersects with the imperative for diversity and inclusion. McKinsey’s research underscores the immense impact of diversity on a company’s bottom line, and its potential as a catalyst for profitability, innovation, and problem-solving.
As we navigate climate change and work towards ambitious net-zero targets, it’s clear that the power of diversity in driving innovation cannot be overlooked. Diverse voices, perspectives, and experiences harbour an environment ripe for groundbreaking ideas and inclusive practices. It’s paramount that we actively engage the incredibly diverse Gen Z cohort already revolutionising the workforce. Harnessing their creativity, fresh perspectives, and diverse insights will be fundamental in propelling the cleantech sector towards transformative success and fighting climate change.
I sincerely hope this article has been insightful. If you are a founder or senior leader that has resonated with this article, we are here to help. At WeEngage, we aim to increase diversity in our placements by 30% in 2024 – so I am keen to support founders and leaders looking to improve their D&I strategies.