Previously published @Forbes
The editors changed my headline, but it's ok.
DEI Supports Capitalism: Inclusion As A Driver Of Profitability And Innovation
Deliberate equity and inclusion, or whichever acronym you’ve come to use as DEI, is good capitalism. The American Equal Employment Opportunity Commission (EEOC) reports that discrimination charges are up around 10% from 2022 to 2023, and McKinsey found companies that are deliberate about equity and inclusion are about 35% more profitable.
The Forms Of Technology
DEI is not a political framework or a social framework, but the result of one of our most used technologies: capital.
Technologies exist in three rigid forms:
1. Methodologies: processes that humans may create, like language or law
2. Hardware: things that we can touch that humans may create, like computers or hammers
3. Software: things that we cannot touch that humans may create, like fire or computer code
Capital, in the form of all three of these technological types, has been a prolific tool in incentivizing cultures to clash and cooperate.
The demand for value, across all communities, and the demand of capital, across all cultures, is the invisible hand that compels corporate leaders to make the decision to engage the next market of cultural contributors in their efforts to identify a community of consumers. For example, the philosophy behind some companies' steadfast support for diversity, equity and inclusion is because their product is looking for more opportunities to be distributed.
Changing Perspectives On DEI
While there have been many articles and op-eds about the end of diversity, equity and inclusion, and many historical perspectives that the ideal of DEI went by another name in previous decades, inclusion has helped the transactions of capital and gross domestic product (GDP) scale since the death of Feudalism around the 16th century. It was inefficient and ineffective at satisfying local cultures that needed a better distribution of resources of all sorts.
In every ending, there is a new beginning. The branding of DEI may morph, but inclusion is an essential part of reaching every possible market and customer.
Intangible Assets And The Need For Data
If you are skeptical of my use of language, just follow the money. In the next year, we will re-examine the S&P 500’s claim on assets, both tangible and intangible. Ocean Tomo reports that in this decade, 90% of the S&P's balance sheets are considered "intangible assets."
If you are not familiar, an intangible asset is a non-physical asset that has value to a business but lacks physical substance. Intangible assets can include patents, copyrights, franchises, goodwill, trademarks, trade names, software, business reputation, branding, unique business processes and so much more.
One could argue that these numbers are a result of the 5-10 largest tech companies in the S&P 500 and their claim on data and personal-data versus the leaders of the index in 1975. In 1975, the top five companies were IBM, Exxon Mobil, P&G, GE and 3M. Today the top five are Apple, Microsoft, Nvidia, Amazon and Meta. That’s my point. The technology they use is often based on data either derived from or designed as intellectual property by individual product managers.
These company’s valuations make the point for me, as many of the other 493 companies in the S&P 500 are customers of the top seven—or the Magnificent Seven—tech companies in some capacity. Many of the other companies are either hosting or sourcing information about a consumer’s identity.
As DEI becomes professionalized through standardization methodologies like the ISO standards and other industry-recognized DEI standards, the market’s thirst for individuals’ data will require it.
How To Implement DEI Next
For companies still committed or becoming committed to DEI, you'll likely need to provide evidence that both the insurance and finance industries can recognize. It is my prediction that DEI will go the way of cyber and accounting audits, because we are anticipating the publishing of the new technical specification of the international standard ISO-30436. This subordinate specification could allow regulators to implement auditing capabilities world-wide.
Each company can start by building the necessary pipelines of identity feedback that are outlined in the ISO-30415 standard. Consider these four risk categories:
1. Governance
2. Human resources
3. Product delivery
4. Supplier diversity
I think it's important to note that each of these categories have different reporting structures and it's not through the chief HR officer's desk. As your organization’s value is appraised by your ability to see and engage all its stakeholder identities, your organization can put a price on a lack-of-inclusivity by adding the cost of: (professional liability insurance) + (ad-hoc DEI services) + (human resources risk management).
There is also still time to join us at the ISO-30415 Diversity & Inclusion Service Management Forum. Get certified in The Standard so that you can deploy DEI in a way that regulators can understand it.
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