Should Diversity Reporting Be Mandatory?

IN UNION BUDGET 2024-25, finance minister Nirmala Sitharaman announced a ₹3 lakh crore outlay for empowering women. It not just includes imparting skill-based education to women, but a public-private model to build creches and playschools. The challenge, however, is that not too many organisations consider it important to hire women. Hence, it’s not surprising that though 37% of the workforce in India is women, most are employed in unorganised sectors such as agriculture. So, how does one ensure a higher participation of women in the workforce? India Inc. leaders believe diversity reporting, if mandated by the government, would compel organisations to take diversity hiring seriously.

“Listed companies are already reporting their diversity percentage,” says Rituparna Chakraborty, co-founder, Teamlease. “Some unlisted MNCs governed by global diktats are also reporting diversity initiatives in their annual report. The government needs to mandate diversity reporting for both listed and unlisted companies,” she adds.

Madhura DasGupta Sinha, founder of diversity hiring platform, Aspire For Her, stresses for incentives to be given to organisations (especially MSMEs) which are taking diversity hiring seriously. “Just as we have PLI in manufacturing, can we have a similar incentive for diversity hiring, too? It will automatically lead to reporting,” she explains.

Reporting Helps

The gender pay gap is still a hard reality in many advanced economies. Across the European Union, the pay gap differs widely, from 20.5% in Estonia to 3.6% in Romania. But, there is change in the air, with countries, including France, Spain and Australia, taking significant strides. (See: Global Efforts Towards DEI.)

Women leaders in India believe a nudge by the government to make such disclosures will help the cause. “Just as the CSR policy where firms have to invest in social causes and report, we can design a programme for greater diversity and inclusion at the workplace and ask organisations to mandatorily report,” says Vaishali Nigam Sinha, co-founder, Renew Power.

“With mandatory reporting, companies can track their progress and benchmark against industry standards to help identify areas of improvement” says Achal Khanna, CEO, SHRM India, APAC and MENA.

Advantage India

Recent data shows India is way ahead of peers and even the U.S. in certain gender-related disclosures. According to Equileap, a global organisation that provides data on DEI, companies in Taiwan, India and South Korea are setting the pace on gender pay gap transparency, leaving the U.S. behind. In its Gender Equality Report & Ranking 2024 for emerging markets, the firm noted that 38% of companies published gender pay gap data, compared to 33% in developed markets. Equileap evaluated 1,494 listed companies in emerging markets representing 43 million employees. While India was among the lowest in women representation in management and workforce, it was among the top eight markets where gender pay parity (65%) is disclosed.

India is among countries where the right to equality is enshrined in the Constitution. There are laws like the Equal Remuneration (ER) Act 1976 which mandates equal pay to men and women for doing the same work or work of a similar nature. It prohibits discrimination against women in recruitment, training, transfers and promotions. The Maternity Benefit (MB) Act which has been in place since 1961 mandates six months of paid leave. The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act 2013 (POSH Act) introduced a requirement for employers to provide women with a workplace free from sexual harassment. There is also the Equality (Prohibition of Discrimination) Bill 2021 aimed at promoting equality and to prevent and prohibit all forms of discrimination against persons on multiple grounds that is yet to be passed.

Over the last few years, large companies in India have sharpened their focus on gender diversity through mentoring programmes and women leadership training to improve the ratio in leadership roles. Legal support such as decriminalising homosexuality, and conversations around LGBTQ+ has also mainstreamed talks around reducing gender bias.

Pride Circle, which works on diversity & inclusion advisory consultancy for LGBTQ+ community in India, connects 350 companies to help with hiring from the community. “The growing awareness helped in better engagement with looking at the talent from the community, with IT & BFSI at the forefront,” says Ramakrishna Sinha, co-founder, Pride Circle. To help LGBTQ+ assimilation into the workforce there are allyship programmes, insurance benefit extension and adoption leave that firms have incorporated.”

“Mandatory reporting of DEI (diversity, equity and inclusion) initiatives presents significant challenges that outweigh their benefits,” says Sunil Chemmankotil, country manager, Adecco India. “The focus should be on fostering a workplace culture where diversity thrives naturally and inclusivity is embedded in organisational values, rather than solely on meeting regulatory mandates.”

Even though the industry has evolved in its outlook, diverse social perspectives across regions in India pose their own challenges, due to the nature of extensive personally sensitive information that needs to be collected and scrutinised to draw up initiatives around DEI especially when it comes to the LGBTQ+ community, says Anshul Prakash, partner, Khaitan & Co. “While DEI reporting can be a voluntary exercise, any statutory mandate for such reporting would bring in difficulties for the industry that operates in more traditional regional polity that do not yet find themselves inclined towards overly accepting people from LGBTQ+ as members in the workforce.” While the Transgender Persons Act tends to define processes for addressing any discrimination and relevant grievances, its effective enforcement is still elusive.

Ashwini Vittalachar, senior equity partner at Samvad Partners says laws that prescribe a straight-jacket solution or fixed standard of compliance for all, is not dynamic and often does more damage than good both to individuals and organisations.

Implementing policies around DEI requires collecting, analysing, and reporting that can be resource-intensive. The time, effort, and investment required would be difficult to meet for smaller firms. In the U.S., according to reports, even Microsoft had laid off an internal team focused on DEI since it was not critical to business earlier this year. Zoom, Meta and Google have also scaled back on their DEI programmes.

In India, there is sometimes a lack of understanding and sensitivity on gender issues even with judicial and quasi-judicial authorities. “It is important to put in place a legislative framework that solves DEI issues in a manner that is both people- and business-sensitive,” says Ashwini.