An expanding business case stands

This report presents evidence that diversity in leadership contributes significantly to financial outperformance, especially in times of disruption. Companies with diverse executive teams and boards continue to show a competitive edge. The likelihood of financial outperformance for top-quartile companies for gender diversity has grown from 15% in 2015 to 39% in 2023. Ethnic diversity also shows a consistent advantage, with top-quartile companies having a 39% greater likelihood of outperforming financially compared to their bottom-quartile peers. The findings are consistent across different industries and regions, highlighting that diversity remains essential for financial success even in complex and changing environments. For example, IHG Hotels & Resorts demonstrates a local-to-global approach to diversity, tailoring DEI initiatives to specific regional needs while sharing successful strategies across the organisation.

Equitable representation at the top is within reach

The report reveals substantial growth in gender representation on executive teams. Top-performing companies have achieved significant progress, with some nearing gender parity. Eight in ten companies now have at least one woman on their executive teams, and representation of women has increased by a third since 2020. The UK and US lead in ethnic representation, with companies in these regions showing average ethnic representation that exceeds the general population, such as 28% in the UK and 39% in the US. However, companies in the bottom quartile for both gender and ethnic diversity are 66% less likely to financially outperform their peers, indicating that poor diversity is becoming more costly. DHL Group exemplifies a strong focus on employee belonging, expanding diversity to include factors like cultural heritage and gender identity, fostering an inclusive environment for all.

Diversity and inclusive growth

The report connects leadership diversity with positive social and environmental outcomes, reinforcing the broader business case for diversity. Across all industries, increased diversity at board and executive levels correlates with higher social and environmental impact scores. Companies with diverse leadership teams are better positioned to meet their sustainability goals and contribute to inclusive growth. For example, a 10% increase in ethnic representation is associated with nearly a 4-point rise in climate strategy scores. This highlights the role of diverse leadership in driving holistic growth that benefits not just the business but also the wider community and environment. Air New Zealand showcases how diversity initiatives, including employee networks and partnerships with community organisations, contribute to leadership representation and broader social impact.

From commitment to action: 5 levers for change

The report suggests five key strategies for companies to translate diversity, equity, and inclusion (DEI) commitments into actionable steps. These include embedding DEI in company-wide initiatives, fostering a culture of belonging, and supporting DEI champions. Companies are encouraged to collect feedback, including dissenting voices, to improve their DEI strategies. It also highlights that companies with diverse leadership teams are more likely to make public, mature DEI commitments. Companies should take a systematic, purpose-led approach to integrate DEI into their core missions, with insights showing that this leads to better business outcomes and improved employee satisfaction.

Conclusion

The evidence is clear: diversity in leadership enhances financial performance and holistic impact. Companies that embrace diversity, both in terms of gender and ethnicity, are more likely to outperform their peers. Financial professionals should note that poor diversity can lead to underperformance, as highlighted by the penalties faced by bottom-quartile companies in diversity representation. To maintain competitiveness, companies must continue to focus on inclusive practices, leveraging diversity to drive growth, improve employee retention, and meet evolving social and environmental expectations.