#44: DEI and SCI

The SCI podcast cited in last week's post briefly discussed growing pushback in the US against Diversity, Equity and Inclusion (DEI) programs. This post discusses the benefits DEI, causes of pushback, and how SCI can promote a more diverse, equitable and inclusive economy and society.

DEI Benefits

Studies by McKinsey and many others show that companies with more diversity and inclusiveness produce numerous benefits. These often include superior profits, productivity, cash flow, decision making, and new market penetration.

Two important reasons why DEI leaders outperform are emulating nature and superior management. As discussed in the Global System Change framework, the laws of nature have controlled all life on Earth for 3.8 billion years. To survive and prosper, humanity must align our systems and society with these laws.

Diversity, equity and inclusiveness are implied laws of nature. They are qualities consistently seen in healthy living systems. These systems produce vastly higher sophistication and prosperity than human systems. DEI leaders more closely align with the laws of nature, and therefore frequently achieve superior performance and prosperity.

Seeking to emulate the diversity of society in a company’s leadership structure and workforce is a sign of management sophistication. Most analysts say that management quality is the primary factor influencing profitability and investment returns. Superior DEI performance indicates sophisticated management that is likely to outperform.

Causes of DEI Pushback

There are many reasons why DEI pushback is occurring in the US and some other places. As discussed in previous posts, one of the most important is system turbulence and potential collapse.

Reductionistic economic, political, financial and other systems unintentionally put humans in conflict with nature and business in conflict with society. These systems compel companies to harm the environment and society. As seen throughout history, flawed, unintentionally destructive systems always change, usually by collapsing quickly. Rapidly growing problems strongly indicate that humanity has entered another phase of system change.

During times of system change and turbulence, there often is a reversion to old ideas. This appears to be occurring in the US. Arguments used to oppose affirmative action programs in the 1960s and 1970s are being used again. These include the ideas that DEI is unfair to white males, introduces discrimination and bias, and places race/gender above competence.

However, the purpose of DEI is not to introduce bias and discrimination. It is to remove it. White males often dominate business, financial and political areas. This does not occur because they are more intelligent or competent than women and people of color. It is due in part to flawed systems that unfairly concentrate wealth and power. DEI seeks to remove the discrimination and bias of current systems and align them with the innate diversity of society.

DEI does not compel companies to hire less competent leaders and employees. It seeks to remove the white male bias and give all people a fair chance. Companies would not hire someone who could not do the job. Objectively determining which candidate is most qualified often is difficult due to intangibles, such as attitude and ability to get along with others.

How SCI Promotes DEI

SCI combines traditional ESG metrics with system change analysis at the sector and overarching system levels. The ESG component of SCI assesses DEI performance within companies. The system change component assesses the extent to which companies promote systemic changes that support more diverse, equitable and inclusive business and economic structures.

SCI expands the focus from changing companies to changing the systems that largely control corporate behavior. The approach uses the capital markets to drive voluntary system change. This is essential for resolving inequality and other major challenges. SCI is intended to protect and benefit business, investors and society.

For more information, listen to the recent SCI podcast or visit our website SystemChangeInvesting.com