Until recently, most corporations have treated equity issues as a check-the-box public relations strategy designed to deflect public criticism – if they gave much thought to it at all. But that is changing as more powerful investors are demanding accountability, arguing companies that are truly committed to the issue are not only doing the right thing socially but also benefitting their bottom lines. And frankly, equity is about the bottom line: attracting the best talent is critical in any industry; understanding the next generation’s values (they may not be represented in the board room yet, but they have real dollars to spend) is critical to maintaining a customer/client base; building trust in communities means the difference between successful corporate expansion or capital deployment and skepticism or derailment.
New York State Comptroller Thomas DiNapoli, the sole trustee of one of the largest public pension funds in the country, has been a leader in filing shareholder resolutions pushing major companies like Amazon, Chipotle, and Match to conduct independent audits of their own racial equity practices so that shareholders have transparency into a company’s internal and external equity impact.
Critics argue such resolutions are examples of political correctness and social engineering. But in reality, equity is a business imperative, not a philanthropic exercise. Rather than fight the tide, corporations would be better off recognizing how willingly conducting civil rights audits can lead to more fairness AND absolutely help their bottom lines. And proactively conducting such an audit (instead of waiting for shareholder demands) offers the benefit of flexibility to the corporation.
Also known as a “Racial Equity Audit,” a Civil Rights Audit is an independent deep review into a company’s policies, practices, products, and services related to equity and discrimination. The audits aim to uncover conscious and unconscious biases and discrimination at the company level and help the business achieve racial equity goals by digging into such aspects as hiring and retention practices and the existence of Diversity, Equity and Inclusion (DEI) info and racial equity data (e.g., whether the company is tracking pay equity for underrepresented groups).
And there are growing examples where Racial Equity Audits led to transformational change.
After a Harvard Business School study found that Airbnb requests from guests with distinctively African American names were roughly 16% less likely to be accepted than identical guests with distinctively white names, the company underwent a Civil Rights Audit. As part of the process, the independent auditor engaged victims of this discrimination, Airbnb hosts, employees, elected officials, civil rights leaders, regulators, and travel and tourism executives.
Following the audit’s publication, Airbnb revealed it removed 1.5 million hosts from Airbnb for discriminatory practices. The company also announced it created an anti-discrimination products team, partnered with the NAACP and the League of United Latin American Citizens to bring more hosting opportunities to communities of color, and distributed antiracism guides to hosts and guests in the U.S. In partnership with Color of Change, Airbnb also launched Project Lighthouse in 2020, a data collection tool used to evaluate discrimination against its users trying to rent homes.
Coffee giant Starbucks also undertook a Civil Rights Audit headed by former U.S. Attorney General Eric Holder after two Black men in 2018 were arrested in one of its Philadelphia stores as they awaited a business meeting, sparking national outrage. This included extensive on-the-ground engagement, including more than 20 roundtables focused on operations with over 50 of the company’s partners and senior leaders and listening sessions with store managers in D.C., Atlanta, Seattle, and L.A. The auditors reviewed trainings, policies, and initiatives tied to customer relations, store operations, supplier and leadership diversity, and social impact.
Following the audit, Starbucks began requiring implicit bias training for employees and set public corporate diversity goals, designed a personal development series for employees on topics such as community and inclusion and developed a curriculum with Arizona State University on “how individual and systemic biases impact interactions in public spaces.”
Both Starbucks and Airbnb have subsequently completed follow-up audits to measure progress over time—showing other companies that these audits are not a one-and-done process employed as part of a crisis communication strategy, but rather an ongoing iterative undertaking that requires a sincere openness to change.
A number of other major companies, from Meta, Citi, Microsoft, and BlackRock, have undertaken their own civil rights audits.
For still-reluctant companies, the writing should be on the wall. The SEC and a growing number of major investors, both public and private, want to see a real commitment to equity. And analysts predict a sharp increase in civil rights audits in 2023 and beyond.
Companies would benefit from being proactive, setting clear metrics and timelines, ensuring transparency and accountability, developing a plan, and checking in how they’re doing, including releasing follow-up reports.
For corporate leadership, this comes down to moving at the “speed of culture” and being responsive to today’s employees, customers, and investors to gain a competitive advantage instead of reluctantly and reactively playing “catch up” while alienating important stakeholders.
