Diversity data collection: a complex priority on ESG agendas

Collecting workforce diversity data is an essential first step to enable employers to analyse and address workplace inequalities and report on diversity metrics. However, it can be a complex exercise and employers need to be mindful of data privacy considerations and discrimination risks in the UK and any other territories where they collect and process this data. Cultural factors, systems and communications are also key to ensuring any collection exercise is successful.

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Why is diversity data collection important?

According to PwC’s Hopes and fears 2021 survey, which explores the experiences of over 32,500 working age people around the future of work, 50% of people have been held back by discrimination at work.

It is clearly essential that employers tackle this issue as a matter of priority and the impact of the COVID-19 pandemic and the Black Lives Matter movement has led to mounting pressure on employers to do so, with diversity and inclusion issues continuing to rise up the public agenda. Awareness of the benefits of a diverse workforce continues to grow and diversity has also become a key priority for employers in the context of their Environmental, Social and Corporate Governance (ESG) agendas with increased focus on action and reporting in this area.

Diversity data is essential for organisations to assess the current diversity composition of their workforce including whether it is representative of the local population or whether certain groups are unrepresented. Additionally, it allows employers to identify and analyse any problem areas and discriminatory practices. In particular, reliable employee data can be a vital tool where unconscious biases or discrimination in people processes are not necessarily immediately obvious and where analysis of the data can highlight potential issues including how employees with different characteristics are impacted by, for example, recruitment, promotions, disciplinaries and dismissals within an organisation.

Ultimately, the collection and analysis of diversity data enables employers to understand where potential problems lie and implement targeted and focused initiatives to make a real change to their workplace culture, achieve diversity and inclusion goals and help them to mitigate risks of discrimination.

Reliable diversity data is also key to enable organisations to demonstrate to the public, their stakeholders and investors how they are progressing against their key social objectives and whether diversity initiatives are having the intended effect.

What are the complications and legal risks? 

Whilst diversity data collection is important for employers, it is not without its complications. In many territories, there is no legal obligation on individuals to disclose certain personal information or for employers to collect this data. When employers choose to collect this information, there are many legal and cultural obstacles to navigate. 

Gathering diversity data will also be a more complex exercise for larger organisations with a presence in multiple territories, who will need to be aware of the legal and cultural nuances of different jurisdictions.

Data Privacy

In the UK, data relating to sensitive personal information, such as ethnicity, sexual orientation or disability, is classified as special category personal data and is tightly regulated. Some of the key data privacy considerations for UK employers when collecting and processing diversity data include whether there is a lawful basis for doing so and if any relevant specified conditions apply. It is also important to consider how to collect, store and process such data and protect employee anonymity in line with legal requirements. 

UK data privacy laws are derived from the EU’s General Data Protection Regulation (GDPR) and there are similar laws throughout EU member states. However, they are not identical. Meanwhile, non-European countries may have different data privacy laws altogether. This means that organisations cannot adopt a “one size fits all” approach to diversity data collection across jurisdictions and need to be mindful of the differences in local law requirements.

Equality and Discrimination

Similarly, different territories will also have different equality and discrimination laws and may recognise and protect different characteristics. For example, the UK’s Equality Act protects employees against discriminatory treatment related to any one of nine protected characteristics (including gender, race, sexual orientation and disability), but some territories protect and recognise different characteristics. 

Organisations will need to ensure that diversity data is not used in a manner which is (or is perceived to be) discriminatory. Any use of diversity data in a way which results in employees with a particular characteristic being treated less favourably than others will expose organisations to significant legal and reputational risk and may have implications for their ability to attract and retain a diverse range of employees. Therefore, it is important that employers implement appropriate safeguards to minimise the risk of claims for discrimination or unfair treatment.

Cultural Issues

Aside from the legal issues, employers will also need to be mindful of cultural factors when collecting data including the differences between territories. Diversity characteristics such as race and ethnicity and sexual orientation tend to be fairly nuanced concepts throughout the world which are heavily influenced by local history and culture. Questions that are reasonable to ask in one country may not be culturally acceptable in another. Additionally, even if diversity data collection is permitted by local laws in a particular country, it may not yet be culturally accepted.

Disclosure Rates

The success of any workforce diversity data gathering exercise also depends heavily on employees to disclose their data. Diversity information may be considered central to someone’s identity (such as data relating to race or sexual orientation) and is likely to be a deeply sensitive and complex issue for people across all territories and employees may not wish to disclose information about themselves for a variety of reasons. For example, in relation to sexual orientation, individuals may not always identify or associate themselves with a set classification listed on a form, or may not want to disclose their sexual orientation due to fears of discriminatory treatment if they were identified from the data. In countries where attitudes towards diversity and inclusion are not as progressive, employees’ fears about potential discriminatory treatment may be more prevalent and disclosure rates may not be as high. 

To enhance disclosure rates, it will be important for organisations to consider the most appropriate and effective ways to build trust with their employees. Transparency will also be key in communicating how personal data will be used and to highlight the positive outcomes it can achieve in relation to driving change and greater accountability. It will also be important for organisations to reassure employees that their data will remain confidential and used only for purposes that have been communicated to them.

What should employers do now? 

As a first step, employers should start considering the diversity data they currently have available and whether it is sufficient to enable them to carry out meaningful analysis of their diversity profile and tackle any workplace inequalities. 

If, as is the case for a large number of employers, either no diversity data has been collected, or there are high levels of non-disclosure, organisations should consider putting an action plan in place to collect this data. When doing so, organisations will need to be mindful of legal, cultural and employee engagement issues. Employers that successfully navigate these issues and are able to collect full and reliable diversity data will put themselves in a strong position to make a genuine change and root out, and ultimately remove, any workplace inequalities. They will also likely enhance their reputation and improve engagement with their employees in the process.

How can we help? 

We are uniquely placed to support organisations with diversity data collection projects including on a global basis. Our multi-disciplinary team combines employment and data privacy lawyers, diversity and inclusion specialists, communications and systems experts and data analysts to provide end-to-end project support and our unrivaled global presence also ensures we are able to deploy experts in multiple territories. 

If you would like to discuss these issues and explore the support that PwC can provide, please contact Ed Stacey and/or Ayesha Salahuddin in the Employment Law team at PwC.

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