LGBTQ+ as part of the ESG conversation: from words to action
How the ESG agenda could become LGBTQ+-friendly.

In recent years, the Environmental, Social & Governance (ESG) conversation has moved from marginal to mainstream as companies find themselves under pressure to secure a “social license to operate.”

The “Social” pillar within ESG focuses on corporate policies regarding human rights, business ethics, and diversity and inclusion. Historically, a handful of companies have focused their efforts on egregious violations of human rights such as child labor in the textile industry or human trafficking in the hospitality industry (see the Polaris Project), as well as gender equality.

The rationale for this is that these issues contributed to business risk that could cause lasting damage to a company’s reputation.

In the late 1990s, Italian clothes maker Benetton acknowledged using suppliers who employed child labor in Bangladesh. More recently, Apple admitted that the factories that built its devices used child labor. Similarly, the BBC gender pay gap controversy in 2017 and 2018 highlighted the business risks of gender-based discrimination.

Since 2017, the United Nations LGBTQ+ corporate Standards of conduct (that I co-wrote with my colleagues Salil Tripathi and Charles Radcliffe) have squarely placed LGBTQ+ inclusion within the Human Rights framework. It outlined companies’ responsibilities and covered the way they deal with their employees and their supply chain.

Simultaneously, companies have come to consider LGBTQ+ inclusion as a business and reputational risk of its own. The president of Chick-fil-A, Dan Cathy, created controversy when he expressed his support for “biblical families” on a Christian radio show. Ikea also experienced a backlash when a gay couple vanished from one of its catalogs in Russia. Coca-Cola was also under attack for sponsoring the Sochi Olympics.

The question of metrics is essential. Some tools are missing for companies to assess how they fare on LGBTQ+ issues. I recently highlighted shortcomings and methodology differences between the existing LGBTQ+ indexes (see the corporate LGBTQ+ equality indexes). Criteria can be superficial and focused more on process than impact. Similarly, legislation at the global level is all over the place, making it impossible for companies to use legal compliance as the goalpost for sustainable business on LGBTQ+ issues.

LGBTQ+ indexes tend to be divorced from other inclusion efforts: gender equality, racial equality, disability, etc… Recently, as an attempt to bridge that gap, James Keith Felton came up with an international ISO, the “inclusion score,” which provides a more comprehensive assessment tool. Indexes are also often ignored by ESG rating agencies such as MSCI, Sustainalytics, RepRisk, or Institutional Shareholder Services (ISS).

Indexes also ignore that companies can have a negative impact on LGBTQ+ people, which are not employees, through their products or services. Examples can include discriminating in access to credit in financial services or doing business with governments that are egregiously violating the human rights of LGBTQ+ people (which would be the case in Ghana if the current anti-LGBTQ+ bill passes).

There is a need to guide companies in carrying out due diligence on LGBTQ+ issues in the same way they would on other aspects. Such a tool could focus on:

  1. Presenting a due diligence framework and methodology for companies to assess their current global LGBTQ+ policies and practices in alignment with the United Nations Corporate Standards of Conduct.
  2. Explaining specific deliverables resulting from the assessment process.
  3. Identifying remedial steps that companies should take to address policy and/or operational deficiencies based on assessment results.
  4. Providing a resource toolkit for issues.

This September, the WEF developed a new tool around the Standards called The UN Standards of Conduct Gap Analysis ToolThe tool was developed with founding members Boston Consulting Group, OHCHR, and the UN Global Compact and produces a score. While it remains a confidential tool, it can help companies identify gaps in fulfilling their human rights responsibilities. Companies can take the self-assessment as many times as they want.

Another aspect of LGBTQ+ as part of ESG is the stake of LGBTQ+ people’s stake in other aspects of ESG, which has been largely ignored. In fact, the United Nations Sustainable Development Goals – which often drive corporate social responsibility (the UN Global Compact is the world’s largest corporate social responsibility initiative with 12,000+ member companies based in over 160 countries.) do not mention once LGBTQ+ people. Like other minorities, LGBTQ+ people’s vulnerability to climate change and disasters is worsened by their marginalization. Ten years ago, Outright Action International (where I am a board member) published an interesting paper on LGBTQ+ people in the aftermath of the Haiti earthquake. Similarly, the initiative on inclusive governance I co-lead, OutQUROUM, believes there is no good governance without fair representation in the boardroom.

For organizations interested in fostering greater inclusion of LGBTQ+ diversity in the ESG conversation, the time has come to invest in tools and guides which make it easy for companies and rating agencies to bring in existing frameworks an LGBTQ+ lens. 

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