Racial equity audits: a tool to support good corporate governance

What is a racial equity audit?

A racial equity audit is an assessment of a company’s inclusivity (including its policies, practices, services, etc.), with a particular focus on identifying and remediating any actual or perceived disparate outcomes for racialized employees and other stakeholders.

While the scope of a racial equity audit will depend on the goals and objectives of the relevant company, a racial equity audit may include, among other things, a review of a company’s:

• DEI policies, procedures and initiatives;
• compensation philosophy and practices;
• recruitment procedures;
• promotion process and career development opportunities; and
• supplier and/or customer diversity and related equity initiatives.

Best practices and key considerations

The following are key considerations and best practices relating to racial equity audits:

• Use of third parties. Audits should typically be conducted by an independent third party to ensure the process is defensible and credible, and so that employees and stakeholders may share sensitive information in a discreet and confidential setting. Third parties should be well-versed in DEI principles.
• Scope. The scope of a racial equity audit should be considered carefully, depending on the goals of the audit. Some racial equity audits are limited to employment issues, while others look more broadly at a company’s inclusiveness (i.e., considering overall employee and customer experience, leadership diversity, supplier diversity, etc.).
• Audit methodology. The audit can utilize both qualitative and quantitative methodologies for data collection. The third party responsible for the audit may review information provided by the company (i.e., survey results, policies, etc.) and may also collect fresh information (i.e., through employee interviews, etc.).
• Use of audit for trust-building. A racial equity audit can be an opportunity to build trust with employees and other stakeholders. Consider being transparent with relevant stakeholders about the fact that an audit is being undertaken, any recommendations arising from the audit and the measures the company is taking to address those recommendations.
• Privilege considerations. It is important to consider and address issues of privilege at the outset. Racial equity audits are typically conducted by legal counsel (often with the assistance of data analytics professionals), with a view to maintaining a claim of solicitor-client privilege over the findings and analysis. Although a decision may later be made to disclose certain aspects of an audit (in which case, the impact, if any, on a privilege claim will need to be considered), failing to involve counsel at the outset prevents a company from making any claim of privilege, if it chooses to do so.
• Confidentiality and privacy. It is critical to ensure that data privacy and confidentiality concerns are considered and addressed. Employees and other stakeholders may be reticent to engage in a racial equity audit if their responses may later be attributable to them.