Knowledge

The biggest DEI trend 2024: Organizations scrambling to catch up to EU’s gender balance directive

By Heidi R. Andersen, CEO and founder of Living Institute

Listed companies must by June 30th 2026 reach one of two goals:

1. The minority gender must account for at least 40% of the seats on the board.

2. The minority gender must account for at least 33% of the overall leadership in the organization.

Massive demand for moving the needle on DEI

EU just introduced new directives to accelerate the pace of the companies when it comes to women and equal representation. Men and women both on boards of directors, but also at the management level in general.

While the contents of these directives should hardly be news to the boards out there, this will hit hard this year because the targets are demanding, and time is running out. Listed organizations get one and a half years to improve significantly on their gender balance.

No company has been able to move that fast before, so I’m not sure they’re going to move that fast in the future.

When companies begin to realize what happens that they could potentially get penalized for in-action, it will create a massive demand for moving the needle on DEI. That will be one of the biggest trends in DEI during 2024 and up to 2026.

Some organizations are not sure what to do. But I think what’s clear to most companies now is that something needs to be done. And they need to start now. It is a bit late to jump on the wagon – but late is better than never.

So why invest in DEI?

You can look at DEI from two angles. You can say it’s the right thing to do. It’s for the greater good, it’s good for society, it’s good for our children, it’s good for you and me, and you are righting the wrong. That is one reason to invest in DEI.

You can also go for the other angle and say: “We will probably be out of business if we don’t have diversity and inclusion in our organization in the future.” You just need a glimpse of the business case to say, that if my competitors are great at this and I’m not, they will outcompete me.

Do you think you’ll be here five years from now if you can’t attract talents or retain the best people in your organization?

If you are on the business case team, there’s so much documentation supporting the financial advantage of investing in DEI.

For one, DEI is now a due diligence matter.

It’s bad business to invest in companies that don’t have a high degree of diversity and inclusion. It is a very simple argument. For instance, Goldman Sachs doesn’t list companies with less than two women on their board of directors.

McKinsey’s recently published study and data from the World Economic Forum prove that DEI is a financial upside when running a business today. Top-quartile companies in terms of diversity have a 39 percent greater likelihood of financially outperforming their bottom-quartile peers.

You can go with the business case or the greater good angle, but you should do it either way.

First steps for faster DEI-transformation

If change is to happen fast, two things must happen.

First, I would advise the CEOs to join the agenda. When we see top management not committed to DEI, nothing happens.

Secondly, the companies must know why their organizations look like they do.

If there are very few women in management positions or on the board of directors, they need to know.

Ask yourself: Why is that, and what is the DNA of our company? Why do we even have a problem? 50% of the population are women, so why are they underrepresented?

To find the answers, the first step is an inclusion survey. That will show you what goes on inside people’s heads and hearts when they go to work every day and how do they perceive going to work.

In those answers, you will find the reasons why there are few women and provide the right actions to change. A trial and error approach cannot be applied here. We need focus – and not the DEI flavor of the month.

Know the diagnosis to get better. It is that simple.