Equity, diversity and inclusion: a moral issue or an economic one?

This article was published in Portuguese in my monthly eInvestidor column.

I am involved in several discussion groups with the participation of Brazilian CEOs and public figures concerned with issues of equity, diversity and inclusion (EDI). In one of these groups, a large proportion of the participants are white people committed to the cause and the design of solutions to the problem of ethnic-racial inequalities. So, it is very interesting to follow the discussions and their views as well as what calls their attention and what they share about it. This week a debate arose regarding the need (or not) of having to justify EDI in economic terms.

The discussion started after one of the participants shared an article that asked an important question “if the data proves that diversity is good for the company, what's missing now?”. One of the comments was about the constant need of having to justify with evidence that EDI is good for business. A very important question was then raised "if these studies [on the economic benefits of EDI] indicated that diversity does not matter, would this be a reason to leave everything as it is?". In other words, suggesting that EDI should be seen more as a moral issue than an economic one.

This discussion is at the heart of the advancement or paralysis of investments in EDI, particularly in the black population. This is because it is easy to disconnect from the racial issue if you are not a black person. But it is more difficult to disconnect from the impact of a drop in your company's shares. The strategy, therefore, has been to create a narrative with the objective of convincing those who are alienated from EDI, but who could make a real difference, either because they control capital flows, or because they have the power to make critical political decisions that directly affect the black population.

Often within the multilateral and multinationals where I worked for I heard the following phrase "here we do not do activism, but what is economically intelligent for countries and companies". Therefore, studies that demonstrate the negative impact of inequalities or the benefits of EDI are crucial to increase investments and prioritize actions.

The purpose of the data is not to convince the convinced, but the skeptics, who are comfortable with the status quo.

Data and evidence were crucial for advancing the issues of sustainability and gender equality, therefore, it will not be different with racial equality. EDI undoubtedly produces economic value, is more efficient and reduces institutional risks. So the important question is not "why do we always have to prove that EDI is good?", but "who needs convincing?"

It may seem surreal, but for a long time economists invested intellectual capital trying to prove that racial ethnic diversity produces economic costs, that is, it is bad for countries' economy. And that racial segregation in neighborhoods or inside factories was good, because it would reduce conflicts between ethnic groups. Therefore, the separation of blacks and whites would be an optimal solution to increase the productivity of the workforce. The objective of these economists was to convince governments and legislators to pass laws sanctioning said policy or have judges to decide in favor of segregation and racial discrimination. As immoral as the segregation policies could be, they were based on an economic argument in the North American courts.

Our story telling, or what I call evidence-based activism, therefore, aims to convince skeptics, those where morality has no intrinsic value. However, we do not know our audience.

Nowadays, everyone says they are in favor of EDI, but in practice, many still wonder why they really need to do it.

Ignorance about the costs and greed often prevails over morality. And if we don't make it obvious that exclusion hurts your pocket, disbelief in EDI policies will prevail. The morality discourse may convince a few, but EDI will once again be seen as philanthropy. If we want effective changes, our story telling will have to speak directly to whoever holds the capital, and they speak the language called Internal Rate of Return (IRR).

If it is possible to continue making money in a context of exclusion, why do they need to change? If policies protect the interests of those who discriminate and exclude, why leave the comfort zone? And that is the situation we find ourselves today in Brazil. Celebrating a surplus even if 400 thousand people have died. I am not saying that the economic narrative is the best one, but that we have to use every single tool available to convince skeptics. And the sad part is that these are the ones who have no interest in being part of EDI discussions or spend much time thinking about what is the “right thing to do”. At the end of the day, we need tools and strategies that are capable of undermining the foundations of the hegemonic economic narrative that places capital accumulation above human lives, be it on moral grounds or economic ones, whatever works.