Over the past few years, companies have taken a harder look at their culture and inclusivity. The #MeToo movement, the 2020 murder of George Floyd, and the uprising that followed caused executives, directors and corporate stakeholders to consider their role in advancing diversity, equity & inclusion. Initially, companies focused on their workforce, with many creating or elevating roles for DEI officers. Now, there is a growing trend to also examine whether companies are contributing to broader societal inequalities.

That focus on societal impact often goes beyond the scope of a DEI officer’s role. Let’s face it: they already have their hands full addressing issues within the workforce. To address this gap and pave the way toward systemic change, some shareholders and other stakeholders have been pushing companies to conduct third-party “racial equity audits” – or more broadly, “civil rights audits.” This 40-page report from Laura Murphy, who is the former Director of the ACLU’s Washington Legislative Office and one of the pioneers in this space, gives an overview of what that means.

The “What” & “Why” of a Civil Rights Audit

A civil rights audit is an assessment that identifies how the organization contributes to or combats systemic inequity in society. It also provides an action plan for change. From the report:

“A civil rights audit is an independent, systemic examination of significant civil rights and racial equity issues that may exist in a company and provides a plan of action to address those issues in a thorough, deliberate, timely, and transparent manner.  Auditors with civil rights expertise will assess a company’s business policies, practices, products, and services to determine whether and how those components have a discriminatory effect and disparate impact on people historically subject to discrimination. ”

So far, most companies that have conducted civil rights audits addressed a reputational incident that came to light and/or in response to shareholder engagements. Yet there is reason to believe that this will become a more common practice – and that some companies might proactively conduct an audit. According to Laura’s report, the business case for such audits includes:

  1. Reducing reputational risks
  2. Failing to address inequality harms the economic environment that makes business success possible – for example, by reducing consumer spending and education levels
  3. Discrimination is of great concern to the emerging workforce, which is particularly important in our tight labor market
  4. Investor groups are demanding greater accountability on civil rights
  5. Give greater insight into culture – beyond diversity, equity, and inclusion initiatives
  6. Identify litigation & regulatory risks under U.S. civil rights law that are not captured by human rights impact assessments

Audit Recommendations

Here are the report’s 10 recommendations to companies interested in conducting a civil rights audit:

  1. Gain the support and active engagement of senior executives, including the CEO and board of directors.
  2. Be rooted in U.S. civil rights law – focusing on race, gender, and other protected classes.
  3. Have an established purpose within a company and a shared understanding of why an audit is being conducted.
  4. Be led by an independent person or firm with deep civil rights and racial justice expertise and adequate resources to complete the audit. (Ed. note: This is not an area of expertise that financial, EHS or social auditors typically have.)
  5. Identify various external and internal challenges facing the company.
  6. Be supported by a team of executives and staff who will ensure the auditor has access to its policies, practices, products, and services throughout the review for their potential discriminatory impact.
  7. Result in a clear plan of action.
  8. Publicly state the findings in a report that identifies civil rights concerns and addresses where the company will take action. Some companies may choose to keep recommendations private, but there is often stakeholder pressure for public disclosure.
  9. Have a clear timeline.
  10. Consult with stakeholders throughout the process, including civil rights advocates and organizations.

Takeaways

“Companies across corporate America have made commitments to implement more equitable practices, and now we need to make good on those commitments and show the proof…”

Kenneth I. Chenault, Catalyst

The DEI function is an impactful way to create change in your organization; however, a civil rights audit can be a powerful tool to address systemic inequities beyond the walls of the company, reduce risk, and improve culture and performance. While widespread adoption has not yet occurred, some big names are paving the way for others. Companies that have conducted civil rights audits include Airbnb, Meta (Facebook’s parent), Starbucks, and Uber. We expect there will be plenty more to come on this.

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