Gender inequality is persistent in the private sector, both in entrepreneurship and business leadership, according to a report from the UK All Party Parliamentary Group on ESG, which calls for a more active use of ESG to address this.
Significant progress has been made, most notably 40% female board membership in the FTSE 350, but there are “significant gaps” among executives and in corporate lending – both in terms of volume and size – between men and women, it found the report.
Female entrepreneurs are responsible for fewer than one in eight loan applications compared to their male counterparts, with the latter applying for loans on average three times larger, according to the report.
Despite the progress, the FTSE 100 index has only nine female CEOs. At the current pace, the FTSE 100 will not achieve gender parity until 2076.
The report, Transparency, coordination and ambition, achieving gender equality through ESGidentifies New Zealand and Britain’s Co-ordinated Action on Entrepreneurship as best in class, and the latter, in the APPG’s view, should be transferred to the business side in support of the FTSE Women Leaders Review.
The coordination must be accompanied by strong signals from the top levels of government and disclosure frameworks to support benchmarking and governance management of internal talent pipelines to ensure more women move into leadership positions, it added.
The report acknowledges that there are trade-offs: disclosure regimes that provide disaggregated data are essential, but can also be burdensome. However, the report states that there must be “recognition of the material benefit of having similar businesses”, in terms of performance and also access to investment.
The report calls for ESG to be used more actively, alongside conventional policy instruments such as childcare and education, to accelerate progress towards achieving and maintaining gender equality in entrepreneurship and the corporate sector.
The application of ESG practices and principles, such as building an ecosystem of disclosure regimes, reviews and task forces, supported by visible government leadership and more direct regulation, will, according to the APPG, create the right enabling conditions for more gender-related data to “flow.” between companies and investors and other stakeholders.
Combined with stronger corporate governance and regulatory oversight, the APPG believes this will drive much-needed shifts in boardrooms and senior committees.
The APPG report makes a number of recommendations to accelerate this process, including a so-called ‘levelling’ of the 40% boardroom target for women.
According to the recommendation, the target would only be achieved if women held at least 40% of board positions. In addition, at least 40% of non-executive board positions should be held by women, in line with the existing FTSE Women Leaders Review recommendation.
The scope would also be expanded to include the 500 largest publicly traded companies and the 100 largest private companies.
At the same time, the APPG calls on the government to launch a consultation on corporate gender equality disclosure to identify the optimal balance between data volume/granularity and reporting burden.
Public companies are also required to publish post-pregnancy retention figures, including retention figures after six months and after one year.
The APPG is also calling for guidance on how to prevent gender washing, where companies make false or exaggerated claims about the gender balance of their workforce.
In addition, companies should be guided towards appropriate frameworks and metrics to help them attract sustainable investments with regard to their gender balance.
Overall, the APPG calls on the UK Government to make clear statements calling for progress towards gender equality in entrepreneurship, and for a rapid acceleration of progress in the business world, using a largely voluntary approach, but ensuring that different initiatives function in coordination with each other.
It also wants to see progress towards greater female entrepreneurship and business equality coordinated.
Alexander Stafford MP, Chair of the APPG on ESG, said: “The APPG’s findings illustrate the value ESG brings to UK businesses, investors and the wider economy. There is a strong case to be made for gender equality along purely business lines.
“It’s very simple: companies with an even balance of female and male leaders thrive. And in ESG we have a hugely useful tool to make UK businesses more resilient and profitable while achieving an important government policy objective, an objective that I believe is so clear that I fear we are missing it all too easily forget.”
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Stafford backed the APPG’s call for greater disclosure of “real data that is material to businesses”, which would improve performance and boost investment. The corporate governance regime must also go a step further in recognizing gender equality as the “big priority” it has and asking companies to do the right thing, he said.
“Some stakeholders may be wary of the idea of increased reporting to regulators. I would advise those skeptics to carefully consider how we will enable businesses to move forward without these provisions,” Stafford added.