How-to guide: How to promote diversity and inclusion within an organisation (UK)

Introduction

This guide provides in-house counsel, private practitioners and human resources (HR) professionals with an overview of the laws and principles underpinning diversity and inclusion, why these areas are important, and the steps organisations can take to promote diversity and inclusion within their business.

This guide covers the following:

Understanding diversity and inclusion
Why the concepts of diversity and inclusion are important
Legal drivers
Challenges to diversity and inclusion
Voluntary reporting
Role of in-house counsel
Steps to encourage diversity and inclusion

It can be read in conjunction with How-to guides: Understanding environmental, social and governance (ESG), What general counsel (GC) need to know about environmental, social and governance (ESG), Overview of employment law (UK), How to understand and implement the ‘S’ in environmental, social and governance (ESG) and How to consider and navigate the consequences of ESG risks.

Section 1 – Understanding diversity and inclusion

Diversity and inclusion are two words that are often seen together; however, they are two distinct concepts:

diversity is the physical presence and representation of different groups and individuals within an organisation; and
inclusion is giving a meaningful place to different voices and perspectives within an organisation. For example, inclusion can mean giving everyone an equal opportunity to develop through the organisation, regardless of their background.

Diversity encompasses both the ‘S’ (social) and ‘G’ (governance) elements of ESG. It applies to the S insofar as it relates to the composition of the workforce, suppliers and customers and it encompasses the G in the sense that it concerns the makeup of the board, recruitment and promotion policies and decision making.

It is commonly thought that commitment to diversity and inclusion simply means increasing the presence of those with underrepresented protected characteristics, such as those of a particular race, sex, age, or sexual orientation. However, embracing diversity and inclusion is not just about employing or engaging with people from diverse backgrounds. A key aspect is also allowing employees and other stakeholders to express their views and opinions safely. Therefore, for diversity to be meaningful, there must also be inclusion.

Section 2 – Why are the concepts of diversity and inclusion important

2.1 Policy and decision making

Diversity and inclusion are important for an organisation to gain a wide range of insights and a range of voices contributing to organisation policy and decision making. This is vital for a number of reasons, including helping to avoid insensitive decisions. For example, in 2018, fashion retailer H&M faced controversy after using a black child to model sweatshirts that read ‘coolest monkey in the jungle’. Critics found this decision to be at best, insensitive, and at worst, racist. In its apology, H&M stated ‘We believe in diversity and inclusion in all we do’. Having a more diverse range of voices may have helped to avoid this scandal, as there would have been more insight into the effects such a decision could have.

Similar controversies have occurred in other large companies. For example, in 2019, Gucci and in 2018, Prada faced backlash after introducing products that evoked “blackface” imagery, leading to public outrage and subsequent commitments to strengthen their internal diversity and inclusion frameworks. More recently, in 2025, Swatch withdrew an advertising campaign featuring a model making a “slanted eyes” gesture, following widespread condemnation for perpetuating racist caricatures of East Asian communities. Collectively, these incidents highlight the persistent gaps in cultural sensitivity and representation across the global fashion industry These controversies can cause reputational damage, with companies coming under increased scrutiny from consumers and stakeholders alike, especially following recent social movements such as Black Lives Matter. Having better diversity and inclusion is key to avoiding reputational damage, or even litigation, resulting from controversial public messaging.

In 2023, McKinsey published a report entitled ‘Diversity Matters Even More: The case for holistic impact’. The report found that companies in the top quartile for gender diversity in executive teams were 39% more likely to be above average in profitability than those in the fourth quartile. This is a notable increase of 25% from 2020. Similarly, Forbes in 2018 found that diverse teams produce 60% better results with regards to making business decisions that can bring about faster change and improve an organisation’s bottom line. A Catalyst study of US Fortune 500 companies also found that those with a high representation of women on their board of directors outperformed their peers by 42% in sales returns.

2.2 Investor requirements

Certain investors and stakeholders expect organisations to make a commitment to diversity, for example, in their 2022 Business and Sustainability report, Coca-Cola stated that they would continue to look to make investments in diversity, equity and inclusion. As a form of accountability to these commitments, Coca-Cola has produced Workplace Representation Data Updates to report the data on certain workplace metrics and their progress on their commitments.

Promoting diversity and inclusion in the workplace can also lead to an organisation becoming more attractive to job applicants, which means an increased range of talents and expertise within the workforce. A 2015 report by PwC featuring a survey of 10,000 millennials found that 80% of participants considered strong diversity and inclusion important when considering whether or not to work for an organisation. Further research from Deloitte found that 69% of Gen Z and millennials are more likely to stay for five or more years at a company with a diverse workforce. Glassdoor added that 76% of employees believe that DEI in strategy is “non-negotiable.”

2.3 Workforce issues

Promoting diversity and inclusion can also reduce the risk of employee grievances and employment tribunal claims alleging discrimination and harassment. In 2020, professor Shiu-Yik Au, assistant professor at the University of Manitoba produced research on board gender diversity, finding that an increase of just one female director resulted in a reduction in an organisation’s harassment rate by 20.71%. The report concluded that increased gender diversity in the composition of an organisation’s board of directors can reduce instances of harassment.

The positive effects of diversity and inclusion also extend to improved employee morale, leading to better productivity. In 2021, the Network for Business Sustainability highlighted the results of research that found that companies with racial diversity in both upper and lower management have productivity that is 1.32 times higher than companies that lack diversity. Inclusivity has also been shown to boost morale and encourage meaningful contributions throughout an organisation.

Section 3 – Legal drivers

Despite the importance of diversity and inclusion, there are currently no legal obligations on an employer to introduce a diversity and inclusion policy, to take positive steps towards a diversity and inclusion agenda or to conduct diversity audits within their business. See GTDT Practice Guide: When Worlds Collide: Protecting and Reconciling Divergent Views in a Diverse Workforce.

However, there is legislation that indirectly supports diversity and inclusion and legislation that prohibits discrimination and harassment in the form of the Equality Act 2010 (‘Equality Act’). Section 4 of the Equality Act prohibits discrimination due to the following protected characteristics:

age
disability
gender reassignment
marriage and civil partnership
pregnancy and maternity
race
religion or belief
sex
sexual orientation

The law protects individuals from discrimination at work, amongst other places such as in education, as a consumer, as a member or guest of a private club or association, when buying or renting a property, or when using public services.

Under the Equality Act there are different types of discrimination. As well as direct discrimination, which is where someone is treated less favourably because of one or more of their protected characteristics, individuals are also protected from indirect discrimination, harassment and victimisation. There are additional protections for individuals with disabilities.

For further information about types of discrimination under the Equality Act see Overview of employment law (UK).

The Equality Act 2010 (Gender Pay Gap Information) Regulations 2017 amended the Equality Act to require companies with over 250 employees to publish an annual report showing whether or not there is a difference in the average pay between their male and female employees.

The Equality Act 2010 (Amendment) Regulations 2023 came into effect on 1 January 2024 with the purpose of enshrining protections from EU law, which would have otherwise ceased.

The Worker Protection (Amendment of Equality Act 2010) Act 2023 came into effect on 26 October 2024 and adds in s.40A into the Equality Act. This Amendment requires employers, under a mandatory duty, to prevent sexual harassment of employees by taking reasonable steps to prevent it. See How-to guide: How to comply with the employers’ duty to take reasonable steps to prevent sexual harassment in the workplace (UK).

The UK Companies (Miscellaneous Reporting) Regulations 2018 amended the Companies Act 2006 to add a requirement that in-scope companies must include information in their annual report outlining the ratio of the chief executive’s annual pay in comparison to other less senior employees.

In January 2024, the Financial Reporting Council published the UK Corporate Governance Code 2024 which will begin applying on 1 January 2025. This includes an update to Principle J, which previously stated that board appointments and succession plans should promote “diversity of gender, social and ethnic backgrounds, cognitive and personal strengths,” and now applies widely to “diversity, inclusion and equal opportunity.”

The requirements of regulators may also be relevant. For example, the Financial Conduct Authority (FCA) requires listed companies to report on the diversity of their board on a ‘comply or explain’ basis. The targets are as follows:

at least 40% of the board and at least one of the senior board positions should be women; and
at least one member of the board should be from a non-white ethnic minority background.

Also, in June 2023, the British Standards Institution (BSI) published PAS 1948:2023, a Code of Practice aiming to help organisations develop and implement an effective framework to support diversity, equity and inclusion in their workplace(s), through a series of recommended practical steps.

In December 2024, the Gender Balance on Corporate Boards Directive entered into application for all EU Member States, which sets the target for EU large, listed companies to have women as 40% of their non-executive directors and 33% among all directors. Companies must meet this target by 30 June 2026. The EU has also passed the EU Pay Transparency Directive which aims to enforce equal pay for equal work or work of equal value between genders through enhanced pay transparency and enforcement mechanisms. The obligations under this directive come into force 7 June 2026, with EU Member States required to transpose the directive into national by that date.

Section 4 – Challenges to diversity and inclusion

Whilst important for the reasons outlined above, enabling diversity and inclusion in a meaningful way is not without its challenges.

4.1 Data protection

The EU General Data Protection Regulation (GDPR), and the national laws that implement GDPR, provide interesting challenges to gathering data about employees. Under the GDPR organisations are restricted in terms of how much, and what, data they can collect and must also ensure that the data is stored securely. Collecting data about employees to ensure diversity and inclusion within the organisation can lead to the organisation having a large build-up of personal information. In addition, storing information about employees’ protected characteristics could put companies at risk of accusations of discrimination, for example, if an employee felt they were being treated differently after sharing this information.

For more information on GDPR, see How-to guides: How to establish a valid lawful basis for processing personal data under the GDPR (UK), How to deal with a GDPR data breach (UK), and Checklist: Lawful processing of personal data under the GDPR (UK).

4.2 Conflicting protected characteristics

Conflicts can arise between individuals with different protected characteristics. A particular area where this has arisen is in relation to the protected characteristic of religion or belief, which can extend to protecting certain philosophical beliefs.

The principle of protected beliefs has been affirmed and refined by UK employment tribunals and appellate bodies in recent years. While Grainger plc v Nicholson remains foundational, the Employment Appeals Tribunal’s decision in Forstater v Centre for Global Development (2021) confirmed that non-religious “philosophical beliefs” such as gender-critical views may meet the legal test for protection. More recent cases, including disputes over gender-critical beliefs (Higgs v Farmor’s School) and political beliefs (eg, anti-Zionist views), further illustrate how courts grapple with the boundaries of belief protection in practice. The EAT clarified that a philosophical belief is protected by the Equality Act if it meets the criteria listed below:

The belief must be genuinely held.
It must be a belief and not, [simply], an opinion or viewpoint based on the present state of information available.
It must be a belief as to a weighty and substantial aspect of human life and behaviour.
It must attain a certain level of cogency, seriousness, cohesion, and importance.
It must be worthy of respect in a democratic society, not be incompatible with human dignity and not conflict with the fundamental rights of others

Whilst there are clear public policy reasons for the decision, the principle has led to conflicts in rights that can be challenging to navigate.

For example, the case of Ladele v London Borough of Islington [2009] concerned a situation where a registrar in the UK lost their job for refusing to conduct same-sex civil partnerships due to their religious beliefs. The individual in question claimed that they had been discriminated against on the grounds of their religion. However, the Court of Appeal found that this did not amount to discrimination, on the basis that all registrars were required to conduct civil partnerships and the claimant was therefore not treated differently on the grounds of their religion or belief. Similarly, any indirect discrimination was objectively justified (a defence to indirect discrimination claims) on the grounds that the requirement to conduct same-sex civil partnerships promoted equal opportunities and fought discrimination. Similar circumstances were seen in the case of Smith v Trafford Housing Trust [2012].

This can be contrasted with the case of Ms A Bailey v Stonewall Equality Ltd and Others [2020] in which the plaintiff brought a discrimination claim against her previous employer after she was dismissed for gender critical beliefs that she expressed on Twitter. The tribunal in the case found that Ms Bailey’s gender critical beliefs were protected by the Equality Act.

The key distinguishing factor in the cases mentioned above is the way in which the beliefs are manifested. For example, if someone is dismissed for refusing to do part of their job due to a protected belief, it may not be discrimination if the reason for the dismissal is that they are failing to do their job, as opposed to it being due to their beliefs. If anyone would have been dismissed, regardless of their beliefs, for failing to meet part of their job description, this is less likely to constitute discrimination. As seen in Ladele, but also in Dr David Mackereth v the Department of Work and Pensions [2022] it is also possible that this would not constitute indirect discrimination either, on the basis that the decision could be objectively justified due to the aim of protecting vulnerable groups and promoting equality.

4.3 Protected characteristics and job duties

Employers should carefully consider any possible exceptions for employees in situations where a protected characteristic leads to the employee being unable or unwilling to undertake certain elements of their role. This may arise in many situations. Some examples are listed below.

Health and safety and dress code requirements – employees may decline to wear certain personal protective equipment (PPE) due to the clothing or hairstyle requirements arising out of their religion.
Handling products – employees may decline to handle alcohol or meat-based products due to their religion.
Working hours and duties – pregnant employees may be unable to carry out certain elements of their role.

4.4 Anti-DEI policies

In the US, in early 2025, a presidential action mandated the termination of all DEI programmes, policies and activities, labelling them discriminatory. In March 2025, the US Equal Employment Opportunity Commission (‘EEOC’), together with the US Department of Justice (DOJ), issued a press release cautioning employers against discrimination arising from DEI programmes. This shift creates compliance concerns for employers and challenges for multinational companies with operations in other regions, such as the EU, where DEI programmes are supported by legislation.

Section 5 – Voluntary reporting

There are a number of voluntary frameworks that organisations can use to meaningfully consider diversity and inclusion.

The UK Government has published Voluntary Reporting on Disability, Mental Health, and wellbeing in order to help organisations carry out voluntary reporting on pay gaps in these areas.

The Prince’s Responsible Business Network published the Business in the Community Race at Work Charter. This voluntary charter includes seven calls to action that signatories should implement:

appoint an executive sponsor for race.
capture ethnicity data and publicise progress.
commit at board level to zero tolerance of harassment and bullying.
make clear that supporting equality in the workplace is the responsibility of all leaders and managers.
take action that supports ethnic minority career progression.
support race inclusion allies in the workplace
include Black, Asian, mixed-race and other ethnically diverse-led enterprise owners in supply chains.

There are currently over 1,000 organisations signed up to the charter.

The UK Government has also published guidance for employers on ethnicity pay reporting that aims to support employers regarding measuring, reporting on and addressing any ethnicity pay differences within their workforce. In addition, the government has published guidance on positive action in the workplace for employers who want to widen opportunities in a way that is consistent with equalities legislation.

Section 6 – Role of in-house counsel

An organisation’s in-house counsel play a key role in assisting the organisation to ensure good diversity and inclusion practices. These are a few key ways (listed below) in which in-house counsel can contribute towards diversity and inclusion:

Ensure GDPR compliance when collecting data.
Ensure there is a proper process in place to deal with grievances, whistleblowing and any other complaints that arise in relation to discrimination and harassment.
Understand legislation surrounding discrimination and harassment as well as the difficulties that can arise in relation to conflicts between rights, (eg, religious beliefs and sexual orientation as referred to in section 4.2 above).
Provide input into appropriate company policies such as in relation to diversity and inclusion and anti-discrimination.
Ensure that policies are communicated to the workforce and staff training is provided.
Provide advice to the board, executive team and other relevant staff members (such as HR) on diversity and inclusion matters and discrimination risks.

Section 7 – Steps to encourage diversity and inclusion

The following steps are ways in which organisations can start to, or continue to build upon, meaningful diversity and inclusion in the workplace:

Take responsibility from the top, by ensuring that diversity and inclusion starts with the board of directors, both in terms of ensuring diversity on the board and also tasking the board with signing off on company policy that promotes diversity and inclusion.
Devise a strategy on diversity, equality and inclusion (DEI) and ensure it is endorsed at the highest level. Make sure you dedicate time and sufficient resources to its implementation and you set clear lines of accountability for attaining DEI goals.
Break down traditions and ensure everyone has access to fair opportunities.
Consider establishing a set of company values or a code of conduct that includes commitments in relation to diversity and inclusion.
Ensure that the organisation makes appropriate policy commitments, including processes to disseminate applicable policies to stakeholders.
Provide diversity and inclusion training in the workplace to all employees.
Consider ways in which diversity and inclusion can be promoted outside of the organisation’s direct workforce – for example by requiring diversity and inclusion commitments from suppliers, distributors and agents.
Establish a mechanism that allows all views to be heard (eg, through employee forums and networks) and complaints to be raised (eg, through grievance and whistleblowing procedures). Seek out and value different opinions.
Gather information on employees to assess the diversity of the organisation, whilst ensuring compliance with GDPR.
Ensure that policies and practices in areas such as recruitment, promotion and redundancy are not discriminatory.
Ensure that there are reasonable adjustment processes in place and avoid making assumptions about what employees and prospective applicants with disabilities can or cannot do.
Provide all employees, regardless of their gender, ethnicity etc. with opportunities to demonstrate their skills and progress in their career. Enabling people to grow in their role and providing them with the opportunities to do so is seen as inclusive.
Ensure that the organisation has exceptions processes in place to accommodate individuals with protected characteristics.
Ensure that the organisation has an effective flexible working policy to accommodate the needs of those with caring responsibilities.
Review the entitlements and policies in place to support individuals with caring responsibilities and those with disabilities (for further information on family friendly rights and disability discrimination, see Overview of employment law (UK)).
Use data to drive change as well as track achievement.

Additional resources

McKinsey & Company – Diversity Matters Even More: The case for holistic impact
Coca-Cola – 2022 Business & Environmental, Social and Governance Report
Financial Conduct Authority – Diversity and inclusion in the financial sector – working together to drive change
McKinsey & Co – Women Matter: Time to Accelerate – Ten years of insights into gender diversity
XpertHR – Ladele v London Borough of Islington [2009] EWCA Civ 1357 CA
UK government – The Equality Act 2010
The Department for Work and Pensions – Voluntary Reporting on Disability, Mental Health and Wellbeing

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Equality Act 2010 (UK)