ESG and Women – product design matters

But which are the Advisors who are listening and paying attention? Janus Henderson are for a start…..

September 2021 Specialty Equities

• Amarachi Seery, CEnv, MIEnvSci, PIEMA
  Sustainability Analyst

Many businesses have fallen short of the requirements that make a gender-neutral product genuinely inclusive for women. Amarachi Seery, Sustainability Analyst, discusses why it makes good investment sense to design for inclusivity.

Key Takeaways

• Despite owning 75% of discretionary consumer spend, many products and services are not designed to cater to the needs of women and there are even instances where design flaws can be dangerous.

• Athleisure company Nike recognised the negative impact surrounding lack of diversity in the workplace and has since boosted sales of its women’s apparel by hiring talented and diverse staff who have made its products more inclusive for all.

• The team believe strongly that as awareness of gender inclusive design increases, companies will need to adapt to avoid being outcompeted by those with a genuine understanding of gender requirements.

We all agree that women should be considered as part of the environmental, social and governance (ESG) analysis of a company. There are very good reasons to do this, the obvious one being that they make up half of the population. When women are considered as an ESG factor, it is often from an operational perspective. Quantitative metrics – such as percentage of women on the board, percentage of women in senior management and percentage of women employed – commonly make up the reported ESG metrics for determining how ‘woman friendly’ a company is. In addition to these, qualitative metrics such as company culture and controversies are considered. This is good practice because:

The way in which a company treats its female employees can often be indicative of the presence of other potentially damaging systemic cultural issues.

This led me to start thinking about whether these operational factors should be the only aspect that we consider.

In 2009, Harvard Business noted the growing economic power of women. While this report was produced some time ago, it provides a good baseline and highlights that women determine the majority of household spending decisions (see chart 1). A number of studies since have pointed to the trend of increasing income and spending in females. One study by Frost & Sullivan highlighted a $4 trillion increase in global female income over two years, while Boston Consulting Group anticipates that by 2028, women will own 75% of the discretionary consumer spend.1,2 Yet, consistently the needs of women are not designed into products and services.

Women determine the majority of spending decisions

Source: Harvard Business Review, The Female Economy, 2009

The McKinsey Global Institute found that truly empowering women in the economy could add as much as £12 trillion to GDP by 2025.3 If it wasn’t already, the case for the economic empowerment of women is clear.

When it comes to products specifically designed for women, efforts have at times fallen short. In the past we have seen companies make products pink in a poor attempt to attract female buyers. Unsurprisingly, this did not address the concerns and needs of female consumers, and in some cases these products are more expensive than their non-pink counterparts. In her book Invisible Women: Exposing Data Bias in a World Designed for Men, Caroline Criado Perez exposes design that fails to accommodate the needs of women, which can, in some instances, be life-threatening.

Dismissive design practices can be dangerous

Criado Perez uses the example of automobiles, a product that should be designed to be gender-neutral. She makes the point that even though men are more likely to be involved in a car crash, women are 47% more likely to be seriously injured, 71% more likely to be moderately injured and 17% more likely to die. One of the main reasons for this is that car safety is designed from the perspective of the male driver, with there being no requirement in the European Union (EU) to use an anthropometrically correct female crash-test dummy for the five tests that a car must pass before being allowed onto the market.4 The US regulations are not much better, with the standard female test dummy representative of the 5th percentile of women in the US, at 4 foot 11 and 108 pounds.5

I have personal experience of safety not being designed from the female perspective. I used to work on construction sites, where the safety coat, high-visibility vest, safety shoes and gloves were ill fitting because they were designed for men. Often my cumbersome personal protective equipment (PPE) would snag on scaffolding and climbing rigs because it was too baggy, the result of not being provided with PPE that would accommodate a female body. Another female colleague of mine took to wearing multiple pairs of thick socks because they did not make safety boots in her size.

And then I had a moment that changed the way looked at gender from an ESG perspective. I was in an engagement meeting with a company that we were conducting research on. The company had brought samples of the shoes it made, and I asked the CEO and Investor Relations team what I thought would be a simple question “did you bring any of your women’s shoes to look at?”

The CEO’s face dropped as he and his team had not factored for a woman being present or even for anyone to be interested in seeing the womenswear at all.

I started to reflect on my experiences and the fact that there are so many companies that now understand that products and services should be designed to be inclusive. These companies were taking market share from traditional incumbents. Yet still, how can inclusive design become the norm when it is estimated that 78% of the UK’s design workforce is male?6 I wanted to understand whether my experiences echoed with my female colleagues and I felt the best place to start was athleisure.

Case study: Nike

Nike, one of the world’s largest suppliers of shoes and clothing, has stated its mission to bring inspiration and innovation to every athlete in the world. In the past we had shared concerns around the shortcomings of the company’s diversity. Specifically, we believed that the dearth of female representation in senior positions within Nike was leading the company to lose market share in the women’s sportswear and athleisure market. Since then, the company has elevated its Employee Relations function, focusing on hiring those that specialise in Human Resources, Employee Relations, and Legal and, as a result, there has been an increase in Vice Presidents (VPs) that are female and/or are from underrepresented groups. We now consider Nike to be an independent centre of excellence with regards to its diverse staff. The company has also strengthened its code of conduct and increased its employee engagement and visibility with an annual employee engagement survey The company has also put all employees through unconscious bias training and expanded its manager awareness training.

As a result of this diversity, Nike has increased marketing and innovation for women, making sizing more inclusive and creating more storytelling and digital connections through social media. Heidi O’Neill, President of Nike Direct, has been key in promoting investing in women’s wear, fit and design. The company is looking at ways to be more thoughtful about how it speaks to women and has seen an increase in female engagement, especially with yoga wear and its yoga line. At the time of writing, the company has seen an increase in revenues from women’s apparel and has sighted its focus on marketing and design as reasons for this.

This is just one example of how gender diversity can add value to a company. Many other studies have indicated that a more diverse leadership team is positively correlated to innovation. Despite this, women are less likely than men to be in senior roles within design. We believe there is one simple way to reduce the data gap between innovators and consumers: by making the consumers the innovators. Just five years ago, a study by the Design Council found that in the UK only 17% of design managers and 14% of designers at a supervisory level were female.6

We believe that putting talented women in design roles can unleash a wealth of untapped potential, helping to promote alternative thinking and make businesses more cognisant of the needs of women. Without the advocators in leadership and design teams, this voice can easily be lost amid other conversations in design. Company engagement is a fundamental way in which we can hold companies to account while also looking to improve shareholder returns. On the topic of gender, we are beginning to expand our focus on whether products produced are gender inclusive as well as considering the roles held by women within the business. We believe strongly that as awareness of gender inclusive design increases, companies will need to adapt to avoid being outcompeted by those with a genuine understanding of gender requirements.

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C-0921-39479 09-15-22