UK: Moving Disability Up The Governance Agenda

Last Updated: 27 July 2018
Article by David Gracie and Mike Adams

With disability affecting 15% of the world's population, forward-thinking organisations are already building a more inclusive future

Disability affects approximately one billion people – 15% of the world's population. For a long time, the predominant narrative in business has been to see disability as a social responsibility issue. However, faced with talent shortages and the socio-economic costs of an ageing population, more companies are re-evaluating the contribution disabled people can make. There is now a growing evidence base that suggests many of us have been guilty of underestimating the size of the opportunity.

KPMG and Purple, a not-for-profit that works with business on disability inclusion, recently partnered to publish 'Leading from the front – Disability and the role of the Board', the first review of its kind looking at the current research and best practice in the field of disability. One of its three main areas of focus is the intensifying influence of corporate governance.

The case for building disability-inclusive organisations is compelling from a number of different viewpoints. First, there is the size of the commercial opportunity. In the UK, the collective economic impact of disabled people and their families – the 'Purple Pound' – is worth an estimated £249 billion. The global equivalent – let us call it the 'Purple Dollar' – is valued at $8 trillion.

Following high-profile scandals involving some of the world's best-known consumer brands, governments, regulators and shareholders have their sights trained on company culture, starting right at the top. As part of that focus, all aspects of inclusion, including disability, are attracting greater scrutiny.

That said, forward-thinking organisations are already looking beyond compliance to the potential positive impact over the long term.

Changing culture

The Financial Reporting Council (FRC) is one of the regulators taking a greater interest in this agenda. In July 2016, it published its observations following interviews with more than 80 chief executives and chairmen in its 'Corporate Culture and the Role of Boards' report. It concluded a healthy corporate culture 'is a valuable asset, a source of competitive advantage and vital to the creation and protection of long-term value.'

Increasing diversity at the board level and throughout the workforce is one clear way that companies can boost their cultural awareness and access a wider pool of experience to inform their approach. Lack of diversity was one of the priority areas flagged in the corporate culture report.

"There is a need to create a work environment in which your people feel comfortable talking about disability"

The FRC has now formalised its views on culture by embedding them in its changes to the new UK Corporate Governance Code.

The code challenges directors to look closely at the composition of their boards and management pipelines and consider how they can access more diverse thinking, through wider engagement with their stakeholders and, in particular, their workforces.

A number of different mechanisms are already being explored, including employee representatives on boards, assigning a named director responsible for understanding the workforce and running employee forums that are attended by directors. By exposing boards to a greater volume and variety of insights from staff, the aim is to create more opportunities for diversity issues to be raised at the highest levels.

Breaking down barriers

One of the barriers to greater diversity and inclusion that is particularly relevant to disability is disclosure.

It is not uncommon for organisations to underestimate the prevalence of disability in their workforce.

Four in every five disabled people have a 'hidden' impairment (that is, not visible to the eye, such as those related to mental health), so companies must rely on self-disclosure from their staff to get a reliable picture. However, current and prospective employees can be reluctant to do so, fearing it will harm their career prospects.

To go back to culture, there is a need to create a work environment in which your people feel comfortable talking about disability. The benefit is mutual – they can receive better support in their roles and the company can more accurately measure and assess how it, and they, are performing and what further action may be required.

In 'Leading from the front', we share the experience of Channel 4, whose culture shift resulted in a four-fold increase in the disability disclosure rate. They changed the language used to talk about disability – 'sharing' became preferred to 'disclosure', and 'diversity' became 'difference' in order to reframe the conversation. Their 'Tell Us' internal communications campaign was then launched and promoted across the organisation to encourage staff to share their disability status with their manager.

Another key element in Channel 4's success was the support of senior leadership, who helped set the tone at the very top of the company. Having more senior figures talking openly about disability, including their own impairments, de-stigmatises the issue and combats the lingering perception that showing weakness or vulnerability is career-limiting. As does promoting more disabled people to board and senior leadership roles.

Investor attitudes

It is not just regulators that have put diversity in their crosshairs – it is becoming a bigger priority for investors too. Leading global investors are expanding their corporate governance teams to support their shift in emphasis to sustainable investment practices. This is being driven in part by the preferences of the younger generation, who are a growing source of capital as they get on the property ladder and start saving for the future.

Research from asset manager Schroders found that sustainability is an important investment criterion for 52% of millennials. This will fuel demand for financial products that combine performance with positive impact.

According to one large institutional investor, adopting an environmental, social and governance (ESG) framework for its investments is not just about corporate responsibility. It also believes it will improve financial performance.

BNP Paribas (with almost €2 trillion in assets) says the integration of ESG criteria into their investment processes 'helps our clients to create financial value over the long term and protect themselves from the reputational, financial and operational risks involved in investing in companies with poor environmental, social or governance practices.'

There is emerging evidence to suggest that organisational diversity can help deliver better returns for investors, supporting BNP Paribas' position on the impact of ESG on performance. McKinsey's 2015 'Diversity Matters' report found strong correlations between company diversity and financial performance across multiple territories. Companies in the top quartile for racial and ethnic diversity were found to be 35% more likely to have financial returns above their respective national industry medians.

Other large investors are using their market strength to influence board level thinking. BlackRock is responsible for $6 trillion in assets, making it the world's largest investment company.

"There is emerging evidence to suggest that organisational diversity can help deliver better returns for investors"

Earlier this year, chief executive Larry Fink sent a letter to publicly listed companies warning them that they must show they care about more than just their profit margins by making a positive contribution to society.

Finally, with impact investing on the rise, there is a growing interest amongst a sub-set of investors in opportunities with a strong social responsibility element.

Begin with the board

Put simply, disability is board business. Forward-thinking leaders and organisations are already building a more inclusive and prosperous future in which the potential of disabled people can be fully realised.

The window of opportunity is currently wide open and those involved in corporate governance can play a pivotal role in helping the organisations they represent to take advantage. All it takes is a commitment to make it happen.

Here are five simple steps any organisation can take to build their disability knowledge and capacity:

1 Put disability on the board agenda

One of the simplest but most effective changes you can make is to commit to tabling disability as an agenda item during at least one board meeting a year.

2 Appoint a board-level disability champion

As with any important project or initiative, there needs to be accountability and ownership at the highest level of the organisation to make it happen.

Naming a senior director as your disability champion will help ensure that ideas and initiatives are followed through, especially when input is required from multiple departments and functions.

3 Sign up to Disability Confident

The government's 'Disability Confident' accreditation helps companies to be identified by customers, prospective employees and partner businesses as an equal opportunities employer.

More than 6,000 employers, including leading brands such as Sainsbury's, Virgin Money and Fujitsu, have already signed up.

Becoming Disability Confident sends a strong message that your organisation welcomes disabled talent and is dedicated to serving the needs of your diverse customer base.

4 Become a disability advocate

If you already employ disabled people, tell your network how good it is for business and how you make it work within your organisation.

Ask your suppliers to show that they value your custom by sharing your commitment to employing more disabled people. And use your external communications platforms to share success stories.

5 Consider external partnerships

Disability can be a complex, sometimes sensitive, issue, and organisations can always benefit from external advice and inspiration from those leading the way.

The right specialist support can help the organisation navigate those potentially tricky first conversations and get the right policies in place from the very start.

David Gracie FCIS is director, legal services at KPMG and chair of the ICSA Essex branch; and Mike Adams OBE is CEO of Purple

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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