Solving The Depth Vs Breadth Tradeoff, Plus Influx of EOO-1 Data

Scaling Our Coverage: Solving The Depth Vs Breadth Tradeoff

Since we started DiversIQ in 2021, we have struggled with balancing the breadth of our coverage—more companies, vs. the depth of our coverage—more information about those companies.

Our prototype covered 20-25 quantitative measures of the S&P 100 based on: 

  • The overlap of emerging ESG frameworks 
  • What investors were encouraging companies to disclose, and 
  • What companies themselves said they use internally to track performance

By mid-2023 we had built up our coverage to over 1,000 companies with 70-75 data points for each company, with processes and systems built for timeliness—information in our products is up-to-date within a week of being published by a company.

We were proud but also frustrated as we aspired to significantly broader coverage—S&P 1500, Russell 3000, MSCI World. We also wanted to go deeper for all companies: policies, goals/targets, and benefits.

Most of the information we source is unstructured and distributed across multiple documents (incl. several hundred-page PDFs) and requires a lot of manual research and understanding/analysis from our team. There’s no way to automate a lot of this – and without investing in more humans, we couldn’t do both depth and breadth, we’d have to pick just one.

Over the last 6 months we’ve made two fundamental changes that make it possible to significantly scale the depth and breadth of our coverage simultaneously:

  • Technology: We’ve recently overhauled our tech stack, moving from independent tools/processes to an enterprise-grade system. This helps us quickly and seamlessly turn raw information into data and insights for clients.
  • Team structure: We have tested out different combinations of in-house analysts, on-shore and off-shore contractors, and building our own tools to enable us to move faster. We now have the right teams and the ability to scale up and down seasonally allowing us to balance speed, accuracy, and continuity to enable both maintenance and new coverage at scale.

Initially, our offering was geared towards investors for stewardship/engagement and integration. Now, our client roster includes professional services firms, law firms, executive search firms, Fortune 500 companies, and nonprofit organizations. 

With our new tech stack and a better understanding of the needs of different users at those organizations, we are excited to start building a platform that is much more of a do-it-yourself engine than a one-size-fits-all platform, so we are excited to start rolling out new features and tools soon.

A Lot More EEO-1 Data Could Be Made Public Soon

In April 2022, the Office of Federal Contract Compliance Programs (OFCCP) released data from 50,000+ EEO-1 reports of nearly 20,000 federal contractors and subcontractors covering 2016-2020, following a FOIA lawsuit by the Center for Investigative Reporting. Over 4,000 companies objected to releasing their data and the OFCCP was in the process of reviewing the reasoning behind the objections and deciding whether the data should be made public on a case-by-case basis.

Recently, the court ruled that the OFCCP must produce the reports from the remaining companies by Feb 20th. We wouldn’t be surprised to see the ruling appealed, but nonetheless we expect EEO-1 data from a large portion of these holdout companies to be made public sometime this year.

This additional data dump will enable deeper analysis of the ties between diversity and performance. Check out the recent study and webinar we participated in from As You Sow.

Additional Thoughts: SEC Human Capital Rules Delayed Again

 In September, the SEC Investor Advisory Committee released a draft recommendation of updated human capital disclosure rules, expected to be published in October 2022. 

In December, the SEC published an updated regulatory agenda, anticipating the final rule being published in April 2024.

The new rules require breaking down the workforce by full-time/part-time/contingent as well as by demographic group, as well as turnover rates and the cost of the workforce by compensation components (compared to just total headcount + qualitative info about financially material human capital info). 

Several Democratic senators wrote directly to the SEC urging them to “act quickly” to implement the new rule. While there has been Republican pushback on the Nasdaq Board Diversity Rule and an anti-ESG anti-woke agenda from conservatives, this rule is less controversial than other items on the SEC agenda. Nothing is certain in an election year, but we still think there is a good chance this happens in the first half of 2024.

For more insight, check out our white paper on human capital disclosure and trends.

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