Public conversations on racial justice reveal a growing recognition that systemic racism is deeply ingrained within our society. In the corporate world, many investors have attempted to respond by increasing spending on Environmental, Social, and Governance (ESG) issues, developing a framework for evaluating a company’s sustainability and ethical impact. ESG investment has exploded over the past few years, with racial equity audits being one tool to advance racial justice.
In 2016 when Airbnb, Inc. faced allegations of discrimination by guests, officials commissioned a racial equity audit. They partnered with several civil rights-centered organizations and got input from multiple stakeholders including guests, hosts, and victims of discrimination to employees, civil rights organizations, regulatory agencies, officials, academics, and travel industry executives.
The online marketplace’s publicly available document included recommendations to remove guest profile pictures, increased the number of listings available for instant booking, and created an anti-discrimination task force to implement changes. Airbnb also published a six-year follow-up report to show the success of their policies and strategy adjustments.
These changes led to a 20% decrease in the disparity in booking success rate between Black and White customers. Company officials also appointed full-time data scientists and economists to explore new methods to target racial inequities. This particular case showed how racial equity audits could make a difference.
In 2021, companies invested $685 billion into ESG funds, up from $285 billion in 2019. While these investments can be defined many ways, investment firms (including prominent groups such as Black Rock, Inc. and The Vanguard Group, Inc.) do so through indicators such as carbon emissions, employee diversity, and other quantifiable metrics. The firms also pledged to increase investments in companies that prioritize ESG. Shareholders, wanting continued investment from major firms, have increasingly requested racial equity audits to determine how they can promote such equity within companies.
Well-designed and conducted racial equity audits identify which areas (and to what extent) racial inequities exist, and they can provide organizations with roadmaps for implementing strategic changes to promote racial equity. The first documented audits emerged in 2011 as a way for municipalities to “track laws, policies, and procedures that contribute to racial disparities within the municipality,” according to Georgetown University Law Center Prof. Alicia Plerhoples. Since then, a variety of companies have adapted and conducted racial equity audits to help meet their goals in achieving the “social” part of ESG by evaluating policies, procedures, and practices to identify racial bias and discrimination in the workplace.
However, to be truly effective, racial equity audits should have some standardization. Currently, no such methodology or tool exists. Consistency in how audits are conducted would provide a more comprehensive assessment of the extent of inequities within a given institution or organization. This is an important step toward promoting racial equity and combating structural racism.
For example, Amazon’s racial equity audit was limited to hourly employees in the U.S., and excluded salaried employees and its corporate structure from assessment. A more comprehensive, antiracist approach would have included running assessments across the board, with all employees, consumers, and the communities in which they operated.
Well-defined guiding principles can better position companies interested in promoting racial equity through audits. These include:
Routine assessment by an external party: Where possible, racial equity audits should be performed routinely (vs. in response or as a remedy to allegations) and by external teams to enhance objectivity and impartiality in collecting and analyzing results. New York State Comptroller Thomas P. DiNapoli, who has experience in this area, said discrimination within a company could be “deep-seated,” and internal assessments may not effectively identify and address these inequities.
Tailoring racial equity audits to meet needs and growth: Structures, products, services, goals, and cultures vary at each stage of growth. For tech-based companies, reviewing applications of automated processes and potential AI-based discrimination are priorities. Consumer goods companies may need to review policies to avoid targeted marketing of more harmful products (e.g., known carcinogens, unhealthy foods) toward communities of color.
Using different methods to gather intel: Applying mixed methods approaches provides complementary insights; quantitative data to answer questions about where and to what extent racial inequities may exist, and qualitative data to answer questions about how and why they exist, and what solutions might work.
Analyzing information across functions: This includes individual recruitment, retention, professional development, performance, salary, promotion, termination, and by group level and type of employee approaches that can locate patterns of inequity and provide testable outcomes. Regardless of the type of data gathered, getting representative samples of employees across ranks, with a focus on groups most harmed by organizational inequities, is critical to identify drivers and symptoms of racial inequities, and to provide nuanced views of organizational challenges and potential solutions.
Be transparent: Organizations that use open communication between leadership and employees on things like processes, expectations, setbacks, and outcomes cultivate trust and satisfaction. Communicating relevant findings from racial equity audits (including strengths and weaknesses) and highlighting detailed plans for new goals and next steps with employees, stakeholders, and, wherever relevant and possible, the public, is one strategy to demonstrate accountability and actionable commitment to racial equity.
No matter the sector, size, or stage of development, all organizations have room for improvement when it comes to racial equity. Strategic and responsible use of standardized racial equity audits, with appropriate follow-up changes, is one approach companies can use to bring investments in ESG to life.
Adam Shamsi is majoring in political science at the Boston University (BU) College of Arts and Sciences. Dr. Monica Wang is chair of the Narrative Office at the BU Center for Antiracist Research (CAR) and a professor at the BU School of Public Health. Hannah McKinney is program director for the Antiracist Tech Initiative at CAR.