Why DE&I and ROI Are Inextricably Linked for Brands, Now and Into the Future

November 30, 2023 | By The List and Ad Age Studio 30

The next article in “The Modern CMO Playbook” tells hard truths about why de-emphasizing initiatives is shortsighted and fiscally irresponsible.

Brands and marketers are under an almost constant barrage of challenges. This is the reality that chief marketing officers, chief financial officers, CEOs and other leaders have to deal with.

Welcome to the C-suite! Where each day brings a chance to tackle an ever changing business landscape and social fabric.

The List, the select group of advertising, marketing and media insiders assembled by Ad Age in partnership with Meta, introduced “The Modern CMO Playbook” in September with a wide-ranging look at the myriad issues top marketers are confronting today. Our recent article, “Navigating Creativity in an Age of Risk,” published on Oct. 30, took a deep dive into those challenges.

This month, we’re focusing on diversity, equity and inclusion. DE&I has been part of The List’s DNA from the very beginning, from the core makeup of its membership, to its advocacy for equitable parental and family leave, to its mission to help mid-career marketing professionals of diverse and under-represented backgrounds climb the ladder to senior leadership positions in the industry via its Generation Next mentorship program.

The challenge currently facing DE&I initiatives and their advocates is a more existential one.

As a result of an uncertain economy (what has been called the “vibecession“) in which every marketing-related dollar must be justified with return on investment and/or return on ad spend, the central conversation in DE&I seems to have devolved from what to do to whether to do anything at all. 

To address growing industry perceptions regarding the fiscal justification for DE&I initiatives, UM released its October 2022 “Future Impact” study. According to List member W. Joe DeMiero, U.S. CEO of IPG Mediabrands’ global media agency network, the study “correlates investment in DE&I with business outcomes. It’s a key piece of the puzzle to help CMOs convince CFOs and other stakeholders why these investments are essential.”

Among the key findings:

• Purchase intent more than doubles when socially conscious brands engage advertising media partners that share common values.
• When a brand embodies three core values—integrity, sustainability and equity—purchase intent rises by 75%.
• Brands that support sustainability and integrity values alongside media partnerships mirroring the same values provide the most efficient lift in purchase intent.
• Brands that score low on responsibility metrics cannot improve their performance simply by advertising on media partners with higher responsibility metrics; rather, brands must evolve their practices and commitment to social values to see increased results.

From ‘marginalized communities’ to the rising majority

And yet, despite UM’s report and other hard data linking ROI to DE&I initiatives, Revelio Labs found that many of the largest brands have responded to uncertain economic forecasts by disproportionately cutting its investment. Revelio’s research, released this past February, found that DE&I roles are diminishing at a faster pace than non-DE&I roles, beginning in 2021 and continuing to accelerate during layoffs in 2022. In fact, over 300 DE&I professionals have left companies that have experienced recent layoffs, with the end result sometimes being the exodus of entire diversity teams.

How did we end up here? We are not far removed from the days when brands realized they could no longer address existing or prospective customers, employees and partners through blanket messaging void of multicultural awareness and meaningful intent.

Changing demographics and societal attitudes have resulted in an array of ethnic and identity groups expecting the brands whose products they purchase to responsibly address their needs and concerns. That means taking deliberate actions clearly displaying their stance on sociocultural, political and economic realities these groups face, which in turn may impact a brand’s relevance and bottom line.

Due to the content boom of the 2010s, brands effectively became publishers and by default began building audience communities of followers and subscribers. New roles were created, ushering in an era of content and community professionals responsible for growing these audiences along the marketing funnel in collaboration with sales and performance teams. Meanwhile, as brands continued to over-index on multichannel content and messaging, society at large hit various turning points in racial, ethnic, identity and political relations.

Even before the Black Lives Matter (BLM) movement commanded headlines and corporate attention, a groundswell of startup brands, especially those founded and led by Black, Indigenous and people of color (BIPOC) entrepreneurs, recognized the value of self-publishing and leveraging digital communities to grow business.

List member Fri Forjindam, chief development officer and executive creative director at Mycotoo, noted several examples of cultural pioneers whose frontline work in inclusive brand-building paved the way for larger brands. She called out the following:

• Stuzo Clothingand WildFang, apparel brands for gender neutral, body inclusive and queer identity.
• Uncle Nearest, Las Melodias de la Lunaand McBride Sisters Wine Collection, woman- and BIPOC-owned spirits/wine brands that have championed authentic narratives and indigenous processes as the DNA of their self-made companies.
• Backstage Capital, Fearless Fundand MaC Venture Capital, focusing on funding and developing the next generation of entrepreneurs and brands.

The rise of these startups preceded and/or occurred alongside the influx of dialogue about the importance of investing in marginalized communities. This sentiment was emphasized by the BLM movement, leading to other communities that included women, LGTBQ+, persons with disabilities and more. This began a surge of calls to action for representation across the private and public sectors.

Thus, DE&I entered the forefront of discussion, and the definition of “community” gradually evolved from a hollow term describing a collection of existing/potential customers. Brands were called on to see their communities as more than dollar signs, and instead as groups of diverse people, all of whom were engaging with the same brands for distinct reasons determined by their nuanced cultural realities.

Those same brands were expected to see existing/potential talent through the same lens. Both employer and consumer brand marketing needed to be purpose-driven and culturally responsible for every action. A level of accountability held at the convergence of technology and digital media created an environment where one misstep could result in a major hit to any brand’s reputation, and even its revenue. There are various instances across industries where such missteps have led to significant decreases in audience sentiment and billions in lost market value—all due to lack of cultural awareness and shortsighted reactions to public backlash.

The lesson: Diversity, equity and inclusion done wrong can result in severe damage to any brand in terms of public perception, revenue and internal morale.

During the Modern CMO Playbook panel at The Female Quotient’s Equality Lounge during Advertising Week New York in October, List member Jenn Renoe, director, partner direct, at Publicis Health Media, touched on the fear CMOs face in taking stances for social good in the face of backlash.

“We live in a time where the world is more polarized than it’s ever been,” Renoe said. “Having to make decisions as a CMO to stand up for something is scary. A study released by Bloomberg said that people are actually twice as likely to support a brand that is inclusive of LGBTQ+ people and 4.5 times more likely to want to work for a company that does that.”

Renoe added that the question is, Are we willing to take a stand and support groups even amid the backlash? “That’s really a scary thing for CMOs to do and I think it’s truly one of the reasons being a CMO has become so hard,” she said.

Some may try to justify labeling DE&I as a counterproductive investment, by pointing to studies showing that consumer demand for corporate stances on social issues has decreased significantly (27%) since pre-pandemic times. While that may be true (and likely attributable to political and digital fatigue), the facts can’t be ignored:

• Nearly half (48%) of consumers expect corporations to take a stance on matters of social impact (but notably, 52% saying they should not), with 64% citing shared values as their primary relationship with a brand.
• By 2045, the consumer market will be majority diverse. By 2060 the multicultural population will have increased by over 70%, according to the Brookings Institution.

Brands that want to be successful in the next decade and beyond must evolve into the next era of DE&I—let’s call it DE&I 2.0. This means approaching diversity, equity and inclusion not as a pacifier to marginalized groups or a public relations play signaling for progressiveness, but as a true business imperative to effectively position corporate brands for the future by:

• Maximizing impact: Recognizing and prioritizing the value of DEI.
• Graduating to equity: Inviting multicultural voices to the decision-making table across business functions, and properly reinvesting in diverse partners and communities.
• Implementing scalable long-term commitment: Picking a stance and integrating it into short-, mid- and long-term brand strategy.

Prioritizing DE&I  

To recognize the true value of DE&I, brands must deconflate the terms diversity, equity and inclusion. According to McKinsey & Co.: Diversity is about emphasizing representation of various ethnic, cultural, political and economic realities. Inclusion is about empowering those groups by incorporating their views and priorities into every venture. Equity, potentially the most controversial and adversarial element, is about providing equal access to opportunities while also considering a person’s unique circumstances and adjusting treatment so that the end result is equal.

According to The Society of Human Resources Management, DE&I is not a priority among most companies:

• 76% of companies have no diversity or inclusion goals.
• 75% of companies do not have DE&I included in the company’s leadership development or overall learning and development curricula.
• 40% of companies view diversity work as a way to mitigate legal, compliance or reputational risks, with HR in an enforcer role.
• Only 32% of companies require some form of DE&I training for employees; 34% offer training to managers.

“Often, campaigns targeting diverse communities don’t show ROI on the same timeline as those targeting more general audiences thanks to barriers to entry caused by inequity and access, thus slowing the path to purchase,” said Renoe.

Expanding success measurement

Redefining ROI calls for brands to expand on the traditional metrics of success often used to determine if a venture or mission is investment worthy. “This requires an org culture that can endure testing, responsiveness and accountability to missteps without quitting,” Forjindam said.

The consensus of List members is that brands must abandon the “just enough” mentality when it comes to DE&I. This means setting separate and intentional KPIs for DE&I, along with objectives to not only meet those KPIs but to increase them in lockstep with company growth.

Michael Roca

According to List member Michael Roca, executive director of Elevate, Omnicom Media Group’s multicultural marketing advisory unit, this requires a keen focus on cultural capital versus measurements like reach and broad engagement.

“Businesses need to get in the weeds to identify where and how to invest in talent, partnerships and programs that harness cultural equity,” Roca said. “This does not mean that everything from product development to sales and HR will completely encompass the needs/wants of every single cultural identity. It’s not about being perfect, but about creating the opportunity for deep learning that can be iterated on over time.”

For example, a large media company partnering with a group of creators with a fraction of the target audience reach may seem counterintuitive. But those creators are likely more embedded in that target audience community with knowledge of history, colloquialism and sociopolitical/economic realities that can’t be revealed by a metric like “reach.” That level of community awareness is likely to result in messaging that resonates deeply and can facilitate brand loyalty versus simple brand interaction.

On that note, Renoe suggested that “where possible, brands must engage with agency business resource group/employee resource group leaders to provide additional insight into the appropriateness of the work being done. Remember, positive intent does not always equal positive impact.”

When this is done right, you get results like Gatorade being named one of the most culturally inclusive brands of 2022, according to the Cultural Insights Impact Measurement, which weighs impact and effectiveness of cultural insights in ads and programming.