Diversity, Equity & Inclusion: a must-have for employers!

Over 4,900 companies and institutions in Germany representing 14.7 Million Employees have already signed up to the Charta der Vielfalt¹.

As part of their commitment to the Charta der Vielfalt, employers in Germany are taking active steps to recruit diversity managers and put in place DE&I initiatives.

Diversity, Equity & Inclusion (DE&I) has evolved to become more than just a ‘nice to have’. For any employer that wants to truly maximise the potential of their workforce, ensure talent retention and encourage innovation, DE&I must be prioritised. But what does DE&I really stand for?

• ‘Diversity’ focusses on the ‘who’, i.e. the makeup of a workforce and understanding, accepting, and valuing the different personal, physical, and social characteristics of the people within it. Its benefits are, by now, well established: improving diversity of thought, reducing the likelihood of ‘group think’, and ensuring the workplace is a more accurate reflection of society at large, to name a few. (The 2019 German press release by McKinsey „Zusammenhang zwischen Diversität und Geschäftserfolg so deutlich wie nie“², is a must-read in this respect.)

• ‘Equity’ focusses on ‘action’ and remedying the fact that certain minority groups may be disadvantaged in comparison to others. Equity goes beyond equal treatment and requires thoughtful consideration of what changes should be made to policies, practices and working environments to ensure that all groups are able to reach their full potential, and may necessitate treating certain groups or individuals differently in order to do so (for example, through mentoring or sponsorship programs, or targeted recruitment measures).

• ‘Inclusion’ focuses on the ‘how’, i.e. the creation of a work environment and culture that empowers all employees to participate in and thrive at work. Inclusion, in other words, is what brings together a diverse workforce and motivates people to stay. There can be no true diversity without inclusion.

Whilst DE&I may have historically been considered an HR or personnel issue, we are increasingly seeing it being elevated to a board and management level issue. This is – in part – due to recognition of the fact that diversity offers different opinions, ideas, ways of working, life experiences, social backgrounds and cultures for businesses to draw from. But it is also – in part - due to an increasing volume of regulation in this space.

For example, on 5 March 2020, the European Commission presented its Gender Equality Strategy, which framed the Commission’s work on gender equality and set out the policy objectives and key actions for the period from 2020 to 2025, including legal measures to criminalise violence against women, public consultation on pay transparency and greater gender balance in business and politics. We are now in the third year of the strategy and the following progress has been made.

The EU Parliament has on 22 November 2022 adopted a Women on Boards Directive, which will require (among other things) that, by 30 June 2026, at least 40% of non-executive director positions in listed companies must be held by members of the underrepresented sex. If companies decide to apply the target to both executive and non-executive and executive directors, the target will be 33% of all director positions. The EU Directive was published in the Official Journal of the EU on 7 December. Member States will have two years i.e. until 27 December 2024 to transpose the Directive into national law.

The EU Pay Transparency Directive has been published in the Official Journal of the EU and Member States will have until 7 June 2026 to transpose the Directive into national law.. Under this Directive, EU companies will be required to disclose relevant information so that their employees can compare salaries. Companies with at least 100 employees will be required to provide information about their gender pay gap. Where the gender pay gap is found to be 5% or more, employers will be required to conduct a joint pay assessment in conjunction with workers’ representatives. The Directive also seeks to: (i) ban terms in employment contracts which prevent employees from discussing salaries or seeking information about the same or other categories of workers’ pay; (ii) require Member States to impose penalties on companies in breach of the rules; and (iii) shift the burden of proof in pay discrimination claims from the worker on to employers. The Directive also includes intersectional discrimination and will require job vacancies and titles to be gender neutral.

For more information on how the Linklaters Diversity Faculty can help your business to keep on top of legal and regulatory developments relating to Diversity, Equity & Inclusion, please reach out to Matthew Devey, Yukiko Hitzelberger-Kijima and/or your regular Linklaters contact.

^₁Charta der Vielfalt - Für Diversity in der Arbeitswelt (charta-der-vielfalt.de)
₂Zusammenhang zwischen Diversität und Geschäftserfolg so deutlich wie nie | McKinsey & Company