Imagine there was a method that Denmark could use to improve its GDP by 9% or DKK 167bn annually. And that the same method could boost employee satisfaction, motivation, innovation, management, and corporate bottom lines significantly.
Worth looking into? Most people would probably think so.
“What we have neglected to do – envisioning economic scenarios for gender equality in Denmark – McKinsey has managed to do at a global level. And the research institute hands Denmark important proposals on a silver platter.”
One of the corporate sector’s most trusted strategy advisers, McKinsey Global Institute, has just published a global research report which confirms that there is unleashed economic potential of historical dimensions both nationally and globally in promoting gender equality.
In the report “The power of parity: How advancing women’s equality can add 12 trillion dollars to global growth” McKinsey takes stock of gender parity and economic potential worldwide.
The report is the most comprehensive of its kind to date, as the countries examined are home to 93% of the world’s female population and represent 97% of the global GDP. The 150-page report delivers an in-depth analysis of global and regional/national gender gaps. Moreover, it outlines the economic potential in creating a world with more equal opportunities for men and women. The report proposes how to set in motion the world’s next wave of inclusive growth, with gender equality being the lever for new inclusive growth in the global economy.
The report identifies 75 possible interventions that could change the world to the better for all of us. And even generate an economic profit.
The purpose of the report is to make policymakers and corporate heads understand the powers that can drive, transform and create new sustainable impetus in the global economy. What we have neglected to do – envisioning economic scenarios for gender equality in Denmark – McKinsey has managed to do at a global level. And the research institute hands Denmark important proposals on a silver platter.
Astronomical potential
McKinsey points out that in a “full-potential” scenario in which women participate in the economy identically to men, it would add up to $28tn or 26% to annual global GDP in 2025.
This impact is roughly equivalent to the size of the combined US and Chinese economies today. McKinsey points out that a full-scale scenario is a thought experiment and a distant goal due to its complexity. But at the same time, the report emphasises that it is a thought experiment worth striving for.
However, the report also offers a more realistic scenario with a 10-year horizon. This is based on all countries managing to bridge the economic gender gap at the same rate as observed in their best-performing regional peers; this would add USD 12trn in 2025. This represents the current combined GDP of Japan, Germany and Great Britain.
Staggering sums and positive scenarios within reach over the coming ten years.
Zooming in on Western Europe, McKinsey’s gender equality scenarios translate into an economic boost of 9% of GDP. If we apply this scenario to Denmark, GDP could be increased by DKK 167bn if we could match the gender equality progress of Iceland, which is currently the best in the region.
The projected national economic gain of improved gender equality is based on a set of complex growth drivers. Their composition varies with the performance level of each economy and the character of the national inequality. The drivers include increased labour force participation, improved distribution of labour, competence and talent lift, removal of barriers to growth and empirically proven positive effects of increased diversity, especially at management level.
Denmark has major equality level challenges
All in all 15 indicators/themes for equality, which are the “buttons” that can be adjusted to achieve the desired effect. For Western Europe the report points out that we have both major challenges and opportunities in respect of what is termed “blocked economic potential”. In Western Europe one of the main issues is gender equality in leadership positions. Here Denmark falls into the category “extremely high inequality”. Another hurdle is equal pay of men and women where Denmark gets the label “high inequality”.
The link between better equality at management level and improved business performance has been well documented through a number of studies. In an analysis of 353 global companies, the consultancy firm Catalyst in 2004 concluded that the companies that achieved the best results were those with the highest number of women in their top management teams.
“In my view, we should have brought out the national pocket calculator long ago and Claus Hjort Frederiksen and the officials at the Danish Ministry of Finance and Ministry of Economic and Business Affairs should have delved deeply into the gender equality potential. However, instead nobody seems to have taken ownership of the project.”
Exactly like Catalyst, McKinsey found that the companies with the highest female representation at board room and top management level were also the top performers. Later McKinsey proved that companies with three or more women in top management scored higher in terms of all nine indicators of improved performance and on the bottom line.
Credit Suisse Research followed 2,400 companies globally over a 6-year period from 2005 and established that it would beyond doubt have been most profitable to invest in the companies with three or more female board members rather than the companies without female board members. Lastly, a study of 215 global companies and their performance over 19 years concluded that companies which had promoted women to top leadership positions could boast 18-69% higher profitability.
The scenarios at organisation level have been available for more than ten years. And they show plenty of economic incentives for prioritising gender equality in order to achieve better results based on existing resources.
In my view, we should have brought out the national pocket calculator long ago and Claus Hjort Frederiksen and the officials at the Danish Ministry of Finance and Ministry of Economic and Business Affairs should have delved deeply into the gender equality potential. However, instead nobody seems to have taken ownership of the project. Or as the Danish daily Politiken wrote in an invitation for debate with the political spokespersons for gender equality last month – “What is happening with gender equality?”. ”… there has been no response from the policymakers at Christiansborg. The last government and the new opposition have been criticised for not doing enough, while the ruling Liberal Party and its alliance partners have not mentioned gender equality at all”.
Very apt description and such a shame
As the McKinsey report makes clear, a broad range of measures across national, political and organisational boundaries are needed to reach the goal. This requires good collaboration between political, private, public and voluntary organisations. Luckily, we have a good tradition for this. Hopefully, the McKinsey report will now be an eye-opener and a motivating factor to do something.
Note: The research for the report was a collaborate effort by the IMF, the International Finance Corporation and the International Centre for Research on Women based on data from the World Values Survey, the OECD, the UN, the WEF, the ILO and the EU. Add to this hundreds of private and public organisations and companies and almost 300 other sources. The McKinsey Global Institute has for several years published in-depth reports on gender equality. The report thus builds on McKinsey’s long-standing interest in the link between women’s working and living conditions and economic and business opportunities and correlations. It provides insight into possible interventions and best practice initiatives worldwide.
This article was originally created and published in the Danish news site Berlingske Business (link: http://siig.blogs.business.dk/). The article was translated to English and published internally as the ‘Gender Diversity blog’.