Corporate Strategies for Employee Diversity

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Corporate Strategies for Employee Diversity

C-2021-001-6-WE

Workplace diversity is not simply a social responsibility issue but can also be an important source of corporate competitiveness. Gender and management expert Estuko Saito calls for greater sensitivity to underlying structures that promote inequality and discrimination and the promotion of synergies between CSR and diversity management.

1. CSR Issues Related to Employees

(1) Employees as Stakeholders

CSR has been defined in various ways by various commentators, but here we will use Kanji Tanimoto’s definition of CSR as the building of a responsible management system, incorporating social fairness, ethics, environmental, and human rights considerations into management processes and being accountable to stakeholders.[1] Stakeholders can be thought of as parties with an interest in corporate management. According to a CSR survey conducted by the Tokyo Foundation for Policy Research from December 2019 to February 2020, 80% of the responding companies were engaged in dialogue with stakeholders; among them, employees (85%) accounted for the highest share of dialogue partners.[2] In other words, employees—the topic of this paper—are among the most important stakeholders for these companies.

(2) Human Rights and Labor Practices in the ISO26000 Guidance

CSR in Japan began in earnest in 2003 and expanded rapidly thereafter. As companies expanded globally, they were made aware of the need to consider international frameworks for CSR. Figure 1 shows the six guidelines that are frequently used as such frameworks. Areas such as human rights and labor practices are important for employees and are included in all guidelines. Let us look at the content of the guidelines in Figure 1, using the ISO26000 guidance as an example, to gain an idea of which specific issues are considered most important.

Figure 1: International Guidelines on CSR

The ISO26000 guidance “is an international standard on social responsibility” issued by the International Organization for Standardization (ISO) in November 2010 in collaboration with the United Nations, the International Labor Organization, governments, and civil society. Initially, “corporate” social responsibility was the topic under consideration, but after considerable dialogue among such stakeholders as the government, consumers, industry, labor unions, and NGOs, a common understanding was reached that not only corporations but others like consumers, workers, and government also have social responsibilities. Therefore, the focus shifted to the social responsibility of corporations and other organizations. The goal of social responsibility is sustainable development, for which seven core subjects have been established: (1) organizational governance, (2) human rights, (3) labor practices, (4) the environment, (5) fair operating practices, (6) consumer issues, and (7) community involvement and development. The subjects related directly to employees are human rights and labor practices. Let us examine these in detail.

First, eight issues have been established for human rights (see Figure 2). Issue 1, due diligence, refers to human rights due diligence as advocated by John Ruggie, special representative of the UN secretary-general, for establishing mechanisms to identify, prevent, and mitigate negative impacts on human rights caused by organizations. Issue 2 is about paying special attention to human rights risk situations, and issue 3 is about avoidance of complicity. Complicity is a concept that has not been much discussed, but the ISO26000 guidance explains it by categorizing it into (1) actively helping (direct complicity), (2) knowingly remaining silent (implicit complicity), and (3) benefiting from these actions (beneficial complicity). Organizations may be considered complicit in human rights violations if they remain knowingly silent, even if they are not violating rights themselves, and they are to be held accountable for such complicity.[3] Issue 4 is about developing a mechanism for resolving grievances regarding human rights violations, and issue 5 is about prohibiting discrimination against vulnerable groups and all people associated with the organization (both direct and indirect), ensuring equal opportunity, and respecting the rights of vulnerable people.

Figure 2: Subjects and Issues Related to Employees in the ISO26000 Guidance

The civil and political rights involved in issue 6 and the economic, social, and cultural rights involved in issue 7 are subject to UN Human Rights Covenants. The fundamental principles and rights at work in issue 8 concern respecting the ILO’s Fundamental Rights at Work.

Labor practices comprise five issues. In issue 1, concerning employment and employment relationships, it is stated that the employing organization shall help improve living standards through full and stable employment and decent work (fulfilling work that respects the human rights of the worker) and shall provide rights and fulfill obligations to both employers and employees for the benefit of the organization and society. Issue 2, regarding conditions of work and social protection, states that working conditions must stipulate wages, working hours, rest periods, holidays, maternity protection, sanitary facilities, and access to medical services—many of which are determined by domestic laws and regulations—and that fair and appropriate consideration should be given to the quality of working conditions. Social protection provides assistance in the event of work-related injury, illness, pregnancy, old age, unemployment, disability, or reduced or lost income due to deteriorating corporate finances, with the government being primarily responsible for this protection.

Issue 3, on social dialogue, involves various types of negotiations, consultations, and exchanges of information between representatives of governments, employers, and workers. Issue 4, on health and safety at work, concerns promoting and maintaining the higher-order physical, mental, and social well-being of workers and preventing health hazards caused by working conditions. Issue 5, on human resource development and training in the workplace, involves processes that broaden people’s choices by expanding their personal and professional abilities, enabling them to maintain healthy lives and high living standards. In addition, organizations can promote human resource development by addressing social issues, such as by fighting discrimination, helping balance family responsibilities, and promoting a diverse workforce.

This kind of CSR related to human rights and labor practices is called “labor CSR,” and it has been attracting attention since the beginning of the growth of CSR in Japan. For example, in 2004, the Ministry of Health, Labor, and Welfare established the Study Group on the Ideal Form of Labor CSR, which compiled a report in 2008 that included a checklist of labor CSR items. The report also mentions the need for appropriate management through dialogue with employees designed to promote corporate information disclosure and labor CSR. The next section explains the relationship between labor CSR and diversity.

2. Diversity

(1) What Is Diversity?

Studies categorize diversity broadly into diversity based on surface-level and external differences and deep-level, internal differences. The former includes race, gender, age, and disability status, while the latter include values, religion, education, lifestyles, ways of thinking, sexual orientation, hobbies, and work styles. Perceptions of diversity have changed over time and due to changes in society; the notion has expanded from being a set of limited attributes to encompassing all types of attributes that individuals possess. Kitani (2016) states that to manage diversity is to “create an environment in which all people, regardless of their external or internal differences, can fully demonstrate their abilities and contribute to the organization” and to “accept not only external differences but also internal differences, such as values, religion, lifestyles, way of thinking, livelihood, sexual orientation, hobbies, preferences, work styles, and even time constraints, in addition to personal circumstances.” These are the factors that need to be considered in diversity management.[4]

There are two types of diversity management: European and American. The latter was introduced to Japan in 2000[5] and brought to people’s attention when Keidanren (Japan Business Federation) launched the Diversity Work Rules Study Group.[6]

Figure 3: Labor CSR and Diversity

Source: “Labor CSR” added by the author to Figure 1-2-2 in Nakamura (2018).

According to the results of a recent study, Japanese companies’ interest in diversity is focused on women, the elderly, disabled persons, foreigners, and LGBTQ.[7] Deep-level, internal differences have been found to be more important than surface-level, external differences when diversity is considered as a way to enhance performance.[8]

(2) Common Features of Labor CSR and Diversity

Given the focus on human rights and labor practices in labor CSR, there are great similarities with the way companies handle diversity issues. Figure 3 is a schematic diagram of labor CSR superimposed on diversity.[9] As mentioned above, diversity includes both surface-level, external differences and deep-level, internal differences, and human rights must be respected in either case. Respect for human rights is thus the ground on which diversity rests. In addition, the five labor CSR issues of employment and employment relationships, working conditions, social dialogue, health and safety, and human resource development need to be considered in a way that is fair at both the external and internal levels so that individuals with various attributes are not thwarted from obtaining decent work.

3. Integration of CSR and Diversity Management

While CSR and diversity management have much in common as corporate initiatives for employees, the two have been treated as separate domains for many years, mainly because diversity management is construed as a source of competitiveness, not as a matter of legal compliance or CSR. This argument seems to have overlooked the strategic element of CSR. Experts have recently been calling for greater synergies between CSR and diversity management.[10] Below, I introduce a model for integrating CSR and diversity management.

(1) Multilevel Model

Hansen and Seierstad (2017) introduce a multilevel model[11] using the concept of intersectionality that has emerged as an important concept in diversity studies in recent years. Intersectionality represents a deeper understanding of individual diversity through the intersection of multiple attributes (class, gender, race, religion, ethnicity, among others). To explain this concept, Figure 3 presents an example wherein being a woman constitutes a surface-level, external difference, and the fact that she is raising children is a deep-level, internal attribute. An individual has a number of attributes, and their combination may place them in a situation where they are unable to fully realize their own potential. By using the perspective of intersectionality, it is possible to focus not only on surface-level differences but also on deeper-level differences between individuals, thus realizing diversity management that is more accommodating of individual circumstances.

The multilevel model has three levels: macro (transnational, national), meso (organization/strategic team), and micro (inter- and intraindividual processes). The implementation of CSR and diversity management initiatives occurs at each level.

Figure 4: Multilevel Model of Hansen and Seierstad

Note: Hansen and Seierstad (2017), p.50, Figure 1.

The left-hand side of Figure 4 shows that “CSR mission and strategy” initiatives occur at the macro- and meso-levels, while “responsible leadership and sensemaking of CSR activities” are conducted at the meso- and micro-levels. Responsible leadership is emphasized in this model because CSR activities involve responsible leaders who coordinate the interests of various stakeholders and integrate ethical considerations into corporate decision-making.

“Diversity mission and strategy” on the right-hand side of the figure are implemented at the macro- and meso-levels. This strategy is a combination of “outside-in” forces (such as market demands and regulatory pressures) and “inside-out” measures (company strengths and weaknesses). “Sensemaking of inclusion” becomes necessary at the meso- and micro-levels.

“Sensemaking of CSR activities” and “sensemaking of inclusion,” which are conducted at both the meso- and micro-levels, involve three steps in the sensemaking process. According to Hansen and Seierstad, these are cognitive (what the company thinks), linguistic (what the company says), and motivational (how the company tends to act). Clarifying the attitudes and stances of CSR activities and inclusion, their consistency, and the commitment of the organization (how it will act) through sensemaking conducted at the micro- and meso-levels will enable an understanding and acceptance of all the stakeholders involved, thus creating synergies between CSR and diversity management.

(2) Summary

One reason for this discussion on the interaction between CSR and diversity management is the growing awareness that CSR can be an effective form of corporate strategy. Kuramochi (2016) provides a detailed history of CSR theory and states that, since the beginning of the 2010s, creating shared value has integrated traditional CSR and strategy, leading to the development of strategic CSR.[12] This has boosted financial performance and increased employee motivation and loyalty, and the growing importance of socially responsible and ESG investment has also fostered the integration of CSR and business strategy. Reporting diversity management results has become as important as CSR-related information disclosures; the two areas mutually support each other’s strategies.

That said, the actual state of diversity management at Japanese companies raises several concerns. A survey conducted by Mitsubishi UFJ Research and Consulting found that 75% of responding companies have positioned the promotion of diversity as a management policy or issue, and steady progress has been made to promote diversity.[13] However, Iwabuchi (2021) pointedly notes that most corporate efforts regarding diversity center on issuing pleasant-sounding slogans, rather than removing existing discriminatory practices or addressing disparities and divisions that actually exist, as if these issues have already been resolved and no longer exist.”[14]

What is crucial in advancing diversity management is to gain a deeper understanding of diversity, to be sensitive to underlying structures that promote inequality and discrimination, and to create an environment where everyone has access to decent work. There needs to be much stronger compliance with human rights and labor practices outlined in the CSR guidelines and the implementation of initiatives consistent with those practices.

[1] Kanji Tanimoto, Kigyo to shakai (Business and Society), Chuokeizai-sha, 2020, p. 81.

[2] Tokyo Foundation for Policy Research, “CSR White Paper 2020,” pp. 71-72.

[3] Masao Seki, “ISO26000 o yomu” (Reading ISO26000), Union of Japanese Scientists and Engineers, 2011, p. 80.

[4] Hiroshi Kitani, “Jinji kanri ron” saiko (Rethinking Personnel Management Theory), Japan Productivity Center Publishing, 2016, p. 105.

[5] Mami Taniguchi, Daibashiti manejimento tayosei o ikasu soshiki (Diversity Management: Organizations That Make the Most of Diversity), Hakuto Shobo, 2005.

[6] Aya Hotta, “A Study of Future Research of Diversity Management in Japan,” Hiroshima University Management Review, 2015, pp. 16, 19.

[7] Kyawt Kyawt Win and Satomi Kato, “The Case of Diversity Management: Diversity Management with a Focus on CSV,” Nihon Keiei Shindan Gakkai Ronshu, 2020, pp. 20, 65.

[8] Yuya Takamatsu, “A Study of Group Conflict and Group Performance in Organizations: In Terms of Faultlines and Diversity,” Seinan Gakuin Daigaku Daigakuin Keieigaku Kenkyu Ronshu, 2015, pp. 61, 16.

[9] Figure 3 compiled by the authored based on Figure 1-2-2 of Yutaka Nakamura’s “Current Situation and Issues of Diversity and Inclusion in Japanese Companies,” Takachiho Ronso, 53, 2018, pp. 21-99. “Labor CSR” added by the author.

[10] Mariko Nohata, “Managing Diversity in Perspective of CSR,” Tsuru University Graduate School Review, 2010, pp. 14, 1-21.

Kazuyuki Katsuda, “The Contributions of Women in the Workforce from the Viewpoint of CSR: Advocating True Diversity in the Japanese Workplace,” Journal of the Japan Society for Business Ethics, 2014, pp. 21, 273-285.

Miho Yamada, “The Consideration on the Commonality in the Employment Policy of Persons with Disabilities and Diversity & Inclusion Policy in Japanese Corporations: Based on the Comparison among Corporate Policies of Women, LGBT and Cancer Survivors,” The Annual of the Institute of Economic Research, Chuo University, 2020, pp. 52, 63-81.

[11] Katrin Hansen and Cathrine Seierstad (eds.), Corporate Social Responsibility and Diversity Management: CSR, Sustainability, Ethics & Governance, Springer, 2017.

[12] Hajime Kuramochi, “CSR no 50-nen: Outside-in (shakai ariki) no hasso e” (50 Years of CSR: Toward the Idea of Outside-In), CSR White Paper 2016, Tokyo Foundation for Policy Research, 2016, pp. 68–84.

[13] Mitsubishi UFJ Research & Consulting, “Kigyo ni okeru daibashiti suishin ni kansuru anketo chosa” (Questionnaire Survey on Promotion of Diversity in Companies), 2017, https://www.murc.jp/report/rc/policy_rearch/politics/seiken_170629/ (accessed November 7, 2021).

[14] Koichi Iwabuchi, Tayosei to no taiwa (Dialogue with Diversity), Seikyusha, 2021, p. 140.

Etsuko Saito

  • Professor, Faculty of Core Research, Ochanomizu University