EY European DEI Index: companies in Europe are still behind in improving diversity, only 7% are building a real inclusive culture

• Only 40% of managers are members of underrepresented groups (16% if you exclude gender diversity) vs 61% of non-managerial employees (31% excluding women)
  
  
• Diversity is not just gender equity, but still less than 50% of surveyed organizations have implemented measures for cultural, LGBTQIA+ and socioeconomic diversities
  
  
• Around a third of employees (30%) have encountered discrimination or bullying in their organization, but almost half didn’t report it
  
  
• European companies don’t make the grade on DEI: the average DEI Index score is 5.69 out of 10. Only Switzerland got a passing grade (6.0)
  
  
• Leading organizations in DEI – ‘DEI Leaders’ – although only 9% larger than other firms, based on average annual revenues, spend 25% more on DEI

Diversity, Equity and Inclusion (DEI) is increasingly considered a relevant part in companies’ agenda all over the world, but only 7% of organizations are concretely and genuinely building a diverse and inclusive culture inside the workplace. This is what emerges from the EY European DEI Index, a new study carried out in collaboration with FT-Longitude that draws on the perspectives of 900 managers, from first-line management positions to the C-suite, and 900 non-managerial employees from nine European countries (Austria, Belgium, The Netherlands, Switzerland, Italy, Portugal, Spain, France, Germany).

Management is less diverse: that’s a risk

Organizations in Europe are still struggling in the pursuit of their DEI goals and in improving their diversity culture. One of the reasons might be that leadership teams are still not diverse enough: only 40% of the managers interviewed stated that they are members of underrepresented groups, while the percentage of non-managerial employees is 61%. A representation that is even lower if you exclude women with 16% of managers and 31% of employees that said they are part of an underrepresented category. This lack of diversity among decision-makers brings an over-optimistic perception concerning the organization’s DEI performance and, therefore, represents a risk for deprioritizing DEI compared to other business priorities: organizations with more diverse leadership teams are more likely than those with non-diverse leadership teams to have taken steps to improve several aspects of diversity, including cultural diversity (41% vs 36%), gender diversity (70% vs 57%) and LGBTQIA+ diversity (27% vs 22%).

On the other hand, non-managerial employees – who are more diverse than organizational leaders – demonstrate a notably lower perception of the organization’s DEI progresses: less than half value as “good” their company’s performance on ethnic or cultural diversity (48%), LGBTQIA+ diversity (35%), socioeconomic (34%), and even less on disability diversity (29%). More importantly, they express a concern in the workplace experience quality: roughly 3 out of 10 of non-managerial employees surveyed have encountered discrimination or bullying and feel psychologically unsafe at work. Almost one in five (17%) say they have witnessed their colleagues experiencing harassment.

The EY European DEI Index shows the difference of perception on progress whether the respondent is from an underrepresented category or not:

• 55% of LGBTQIA+ employees give low scores for “ability to be my authentic self in the workplace”, compared with 39% of other employees
  
  
• Only 35% of women feel a sense of belonging at work, compared with 40% of men
  
  
• 43% of ethnic and cultural minorities don’t feel optimistic about their career opportunities, compared with 36% of other employees
  
  
• Only 25% of employees with a physical or mental disability feel a sense of belonging at work, compared with 39% of other employees

Gender equity is advancing, while other diversities are still behind

Experiencing diversity directly helps better understand what is required to create an inclusive environment and, since leadership teams are still not diverse enough, organizations are failing to see how much work still has to be done and how much broader inclusiveness must be. In fact, although organizations have made some progress in areas where pressure for taking action has been sustained, like gender equity, one quarter of the surveyed organizations haven’t taken any steps to improve cultural diversity, 36% haven’t taken action on LGBTQIA+ diversity; and nearly two-thirds aren’t addressing disability diversity (60%). This last point, in particular, is undervalued: 36% of managers say their diversity strategy doesn’t include disability diversity, and 24% say that although disability diversity is part of their strategy, their organization isn’t currently doing anything to improve it.

European companies don’t make the grade: the DEI index score

In recent years, we have seen consistent growth in interest towards topics like gender equity, racism and accessibility. Many of these received a boost by global movements that to some extent helped businesses to understand the importance of improving their own culture, their internal processes and their brand. For real change to happen, though, it’s important to track both progress made and concrete results obtained. To measure the progress in DEI, EY has produced the European DEI Index: a measurement system based on the analyzes of the data collected from this survey and, in particular, on how employees rated their organizations on two dimensions: the extent of a holistic DEI approach (e.g., different DEI dimensions) and the level of lived DEI culture. The companies interviewed were scored on a scale from 0 to 10 and the result is that, on average, European companies don’t make the grade, scoring 5.69 out of 10.

Switzerland emerges as the highest-ranked country, with an average score of 6.0, followed by Spain (5.92) and Portugal (5.85), followed by Austria (5.68), The Netherlands (5.65) and Italy (5.63). Germany scores the lowest (5.44), closing with Belgium (5.48) and France (5.56).

DEI brings better performance in finance and talent

Only a small group of organizations, the ‘DEI Leaders’, appeared to be more efficient, with a score of 7.86, while also showing better performance than their competitors in terms of both business metrics and employee experience. Managers of these companies have reported higher levels of employee satisfaction and productivity over the past 12 months, as well as increased financial growth, innovation and customer satisfaction. As all of these aspects are revenue critical, our findings emphasize the business case for DEI and strengthen the strategic importance of the topic.

DEI Leaders also benefit from higher staff retention than other organizations. Employees who work for DEI Leaders are less than half as likely to be job hunting right now (6% vs 13%), and are a quarter as likely to have plans to stay for less than a year (6% vs 24%). This commitment could be linked to the positive views of employees at DEI Leaders. A greater percentage of employees at these companies report high levels of productivity, belonging, psychological safety, optimism about their career and their ability to bring their authentic self to work. These aspects could have a direct influence on costs related to e.g. the replacement of employees.

7 lessons to get it right

Learning from top-performing companies in DEI, EY identified 7 lessons that all companies who want to improve their inclusiveness must learn:

1. Diversify the leadership: having diverse leadership is one of the characteristics of DEI Leaders (87% say their leadership is diverse vs 49% of other companies).
   
   
2. Invest more and better: DEI Leaders are 9% larger than other firms, based on average annual revenues, and they spend on average 25% more (compared to other organizations of same size) on DEI, demonstrating that increased investment brings better results. On average, DEI Leaders invest €5.45m on diversity initiatives every year, compared with €4.35m at other companies.
   
   
3. Promote transparency: 54% of DEI Leaders have a transparent process for assessing performance and salary, compared with 34% of other companies.
   
   
4. Get DEI on the Board’s agenda: 16% of DEI Leaders have diversity leaders who report directly to the Board, compared with 12% in other organizations, meaning DEI works more visibly as a decision-maker and, therefore, is measurable.
   
   
5. A diverse hiring team: 45% of DEI Leaders ensure that their recruitment teams are diverse vs 38% in other organizations, and 47% of DEI Leaders say they adapt interviews to suit differently-abled candidates vs 32% in other organizations.
   
   
6. Don’t ignore toxic behavior: 68% of employees at DEI Leaders feel empowered to call out non-inclusive behaviors, compared with 43% elsewhere.
   
   
7. Listen up, then act: 54% of DEI Leaders engage effectively with diverse employee networks, compared with 25% of other organizations.

About the EY European DEI Index
This report is based on research conducted for EY by FT Longitude during September and October 2023.

A total of 1,800 respondents — 900 managers and 900 non-managerial employees — took part, with 15% at C-suite or board level.

The sample excluded organizations with revenues under €50m.

The survey was conducted across nine European countries: Austria, Belgium, France, Germany, Italy, the Netherlands, Portugal, Spain and Switzerland.