Despite three-quarters (72%) of HR directors stating that employee demands for a diversity, equity and inclusion (DEI) strategy are a major concern, just 17% introduced or invested in one in the past year, according to research by Barnett Waddingham.
The risk, pensions, investment and insurance consultancy, which surveyed 300 HR directors and C-suite professionals, also found that growing pressures regarding operational costs (83%), supply chain costs (80%) and demands for higher employee pay (79%) forced employers to reduce investment in DEI strategies.
Among respondents which have introduced or invested in a DEI strategy, 40% did so because they believed it was morally right, 37% said it aligned with their values and purpose and 31% felt it made financial sense for their business.
Respondents agreed that treating employees fairly improves their business performance in the long-run (73%), and that employee happiness is critical to productivity (70%).
Meanwhile, nearly one in five (17%) said more guidance from the government on solving the ethnicity pay gap would have the best impact on their business, with 15% citing advice on closing the gender pay gap as the most helpful option.
Julia Turney, partner and head of platform and benefits at Barnett Waddingham, said: “There is a very real risk that short-term thinking will come at the cost of long-term success, and this is evidenced by the de-prioritisation of DEI. Business leaders know that DEI improves performance in the long-run, but are grappling with rising costs and mounting pressures from employees, leading to a very squeezed C-suite. It can be costly and resource-intensive to implement a good DEI strategy, and difficult to measure return on investment immediately.
“The solution lies in data: only what is measured is actioned, and firms must ensure they have effective measurements and metrics in place to be able to prioritise and spend effectively. Only then will long-term investment in critical areas like DEI be possible.”