A Tool to Measure and Advance Corporate Commitments to Racial Equity
October 14, 2021
Corporate Racial Equity Tracker Provides an On-the-Ground Look at Company Action
A recent survey shows that nearly 80% of Americans believe it is important for companies to promote racial equity. Certified B Corporations are assessed on their treatment and inclusion of all stakeholders, and many are legally bound as benefit corporations to focus on stakeholders.
Alternatively, corporate directors at companies with traditional legal structures are bound by law and culture to maximize shareholder value. This fiduciary duty can sometimes limit the choices a director can make, including ones that would promote racial equity, if the decision would negatively impact profits.
We are witnessing increasing calls from corporate leaders, policymakers, consumers, and investors for companies to have a broader purpose beyond creating profit for shareholders. This activity is spurring increased interest in an economy driven by stakeholder capitalism that incorporates racial equity and climate justice — the three impact areas for B Lab U.S. & Canada.
JUST Capital, a partner with B Lab in the Corporate Racial Equity Alliance, is developing resources and tools to help companies navigate this era of social and economic change. These include the 2021 CEO Blueprint for Racial Equity, created by JUST Capital in collaboration with FSG and PolicyLink, that provides racial equity strategies for organizations.
Another JUST Capital resource, the Corporate Racial Equity Tracker, examines racial equity actions from the 100 largest U.S. employers in six areas:
- Anti-discrimination policies
- Pay equity
- Racial/ethnic diversity data
- Education and training programs
- Response to mass incarceration
- Community investments
Recognizing the limitations of current policies that govern public corporations, the Equity Tracker reports on what companies are currently doing and will follow changes in racial equity actions over time.
An On-the-Ground Look at Corporate Action on Racial Equity
As one element in JUST Capital’s multiyear racial equity initiative, the Equity Tracker incorporates information from public company documents and other resources, says Kavya Vaghul, Senior Director of Research. She and the team at JUST Capital launched the first version of the Equity Tracker in April 2021. The tool is for market participants to use to benchmark and measure corporate progress on racial equity.
While the CEO Blueprint serves as a guide for leaders with an eye on broader social change, the Equity Tracker is more of an on-the-ground look at what is happening at these large companies that have an outsized impact, Vaghul says. “We are taking a look if they have an Equal Employment Opportunity (EEO) policy, pay equity analyses, re-entry or second chance policy, among other important issues — tangible steps of that broader strategy that exists in the CEO Blueprint,” she says.
Through its research, the Equity Tracker team draws a distinction between commitments and actions. Vaghul says commitments include the general policies, such as EEO, while actions are more specific — for example, establishing a second chance hiring policy for job seekers with criminal histories.
“It is meant to be both a comparative tool and a tool where you can look at the breadth of policies and actions that companies actually have made,” she says.
The Board Playbook: A New Way of Doing Business
To help business leaders navigate the journey to adopt benefit corporation status as a requirement of B Corp Certification, B Lab U.S. & Canada provides this downloadable resource, the Board Playbook, to lay out the process and demystify the risks.
The Equity Tracker allows users to see what each company is and isn’t doing on racial equity, Vaghul says, with links to the original information sources. “This gives consumers an opportunity to look at companies they might shop at to see what they’re doing on racial equity issues for workers as well as communities.”
Kelley Frances Fenelon, Senior Manager of Programs and Engagement at JUST Capital, says the Equity Tracker-related outputs also include resources to help companies determine their more specific actions. “The research team has really taken the lead on digging more deeply into some of the best practices that are included in the Equity Tracker and demonstrating the steps needed to develop them, like a pay equity analysis,” she says. These reflect JUST Capital’s ongoing programming on worker financial security that organizations also can pursue to advance equity, according to Fenelon.
“Racial equity work cannot be about making donations and having the right policies online,” she says. “Instead it involves implementing policies and practices enterprise-wide that recognize people’s whole selves and allow people to live full lives. Financial security and health are at the core of what many Americans see as driving racial equity in the workplace.”
Fenelon shares that one of the Equity Tracker’s key takeaways is that company leaders are much more likely to publicly talk about their racial equity commitments and much less likely to publicly disclose things that demonstrate real progress, true accountability, and action. Leaders can use the CEO Blueprint to identify those action steps and show they are willing to be accountable for change.
Prompting More Stakeholder Considerations and Conversations
Vaghul notes that the events of 2020 that amplified the Black Lives Matter movement and sparked new conversations about racism were a galvanizing moment for companies. That has led some businesses to take a deeper look at their impact on workers, communities, and societies. “More leaders are seeing how diversity, equity, and inclusion actually cut across all of these stakeholder issues,” she says.
Through its annual rankings, JUST Capital measures companies’ progress on stakeholder capitalism. “All of the data that we’re collecting is showing trends in disclosure on certain topics. On the policy and company disclosure side, we’ve seen companies start talking more about the environment and human capital — stakeholder capitalism superseding shareholder primary,” Vaghul says.
The challenge now for companies is determining how to move forward, she says. “That’s where the CEO Blueprint and the Equity Tracker start meeting the conversation and helping them move forward on racial equity issues in a bite-size way. There’s a lot more work to be done to address deep-seated racism, sexism, and other issues.”
Thanks to its design as an interactive tool, the Equity Tracker has attracted attention from a variety of users, including investors with an eye on long-term benefit, Vaghul says.
“One big boon of the tracker is that it’s a set of comprehensive data on diversity, equity, and inclusion (DEI) at these companies, and investors are really interested in it,” she says. “A lot of use is from investor communities who leverage the tool and are driving capital toward companies that have a DEI focus.”
Fenelon says JUST Capital would like to expand the Equity Tracker to include additional companies on the Russell 1000 Index. This would provide a broader look at how businesses are addressing and advancing racial equity and considering their impact on a broader range of stakeholders, she says.
“The movement did galvanize a long-overdue reckoning. Now it’s not only workers, community and customers that are beginning to hold companies more accountable and have higher expectations. Shareholders and investors are increasingly expecting that companies are attentive to these issues and taking real, measurable steps,” Fenelon says. “There’s recognition that stakeholder issues are shareholder issues. Shareholders care about the long-term value of a company. To ignore stakeholder issues comes at a cost rather than prioritizing stakeholder issues being a cost.”
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