For years, sceptics have questioned whether Diversity, Equity, and Inclusion (DEI) initiatives genuinely benefit businesses or if they are merely symbolic gestures. A recent study conducted by researchers from the London School of Economics and Citi Global Data Insights provides compelling evidence: DEI is not just good for workplace culture—it’s good for business.
One of the main challenges in assessing DEI’s impact is the lack of reliable measurement tools. Traditional surveys often suffer from self-reporting biases, and corporate DEI policies don’t always reflect employees’ real experiences. To address this, the researchers analyzed over 3.2 million anonymous employee reviews on Glassdoor from 945 publicly listed firms in the UK and US between 2015 and 2022. Using advanced textual analysis and machine learning, they developed a DEI Signal, capturing real perceptions of diversity, equity, and inclusion within organizations.
The findings reveal a clear positive relationship between DEI and long-term market performance, measured by Tobin’s Q, a key indicator of investor confidence. Companies that score higher in DEI tend to show greater future growth potential. Furthermore, DEI enhances innovation, as firms with stronger DEI signals file more patents, demonstrating their ability to foster diverse thinking and creativity. However, the study also finds that DEI has little impact on short-term stock returns, suggesting that investors may not immediately recognize DEI as a performance driver. Additionally, while DEI is linked to improved financial performance in high-growth firms, the relationship with accounting-based metrics, like return on assets, varies by industry.
A key insight from the study is that DEI works best when it extends to leadership. Firms with greater ethnic diversity in senior management experience amplified benefits in both market performance and innovation. This underscores the importance of inclusive leadership, ensuring decision-making reflects diverse perspectives. This research dismantles the myth that DEI is a mere corporate social responsibility initiative with no business relevance. Instead, DEI emerges as a strategic intangible asset, contributing to long-term value creation, stronger innovation, and sustainable growth. As companies and investors navigate an increasingly competitive landscape, embracing DEI is not just about ethics—it’s about smart business.
Serra Húnter Fellow of Sociology at Universitat Rovira i Virgili.
Former DAAD-Gastprofessorin at Julius-Maximilians-Universität Würzburg