The following report is testament to the collective effort of numerous people across Nesta. Since we began our journey, we have endeavoured to embed equity, diversity and inclusion through every facet of our organisation; with this in mind, we want to acknowledge and thank all of those who have been part of building this year's report:

Fede Andreis, Genna Barnett, Simona Capogna, Leo Chandler, Shae Harmon, Elspeth Kirkman, Christiana Markou, Simran Motiani, Sinead Mutale Mushibwe, Nathan Nalla (Be the Riot), Chris Norris, Ann Paul, Hassan Pesaran, Maja Podrzaj, Georgina Roberts, Mia Simmons, Camille Stengel, Louis Stupple-Harris, Cate Urbano, Gail Vencker and Luca Zingale.

Introduction

Our nine-goal equity, diversity and inclusion (EDI) strategy, launched in March 2021, set ambitious and measurable targets to help tackle some of society's biggest challenges in inclusion – both inside and outside the workplace.

For each of our goals, we use a data-led approach to help us track our progress and identify where we must continue to invest effort to we meet our commitments and live up to our values.

As an organisation, we believe that holding ourselves publicly accountable is imperative to the ongoing success of the strategy. We therefore publish our progress and reflections each year, in this annual EDI report. While there isn’t a playbook for advancing equity and belonging, we hope that our experience provides reasons for optimism and useful learnings for many others who share our values and ambitions.

Our EDI strategy includes specific goals for expanding staff diversity with regards to ethnicity, gender, sexual orientation, disability and socioeconomic background, so that Nesta better reflects the diversity of London and the UK overall.

Last year, we redesigned the recruitment process to ensure that everyone had a more equitable chance of being hired; we now focus on scenarios over experience in application questions, anonymise CVs (and only review them at the interview stage), allow reasonable adjustments throughout the interview process and provide detailed guidance to our hiring managers to fairly manage any discussions over starting salary. We’re starting to see some positive results. Over the past year and a half, we have seen a steady improvement in the diversity of staff across most characteristics (see Figure 1). We have exceeded our targets with regards to disability and socioeconomic background, and have maintained Nesta’s diversity across gender and sexual orientation. While our targets help hold us accountable for change, we will continue to strive to make Nesta a more and more diverse workplace, across all levels of the organisation and many facets of identity.

What’s next?

We know the steps that we’ve taken have enabled us to grow the diversity of our staff, yet this has been more true in the more junior levels of our organisation compared to more senior levels. We are therefore exploring additional steps we can take – we want to make every effort to hire diverse talent into our most senior roles and support our diverse talent to grow at Nesta.

Additionally, while we have seen positive change in the diversity of Nesta over the past two years, we know we still have further work to do to reach and recruit Black talent in particular, at all levels of our organisation. This is a top priority for us across our recruitment and inclusion goals, discussed further below.

Our goal is to eliminate gender and ethnicity pay gaps at Nesta.

Median pay gaps are calculated by finding the midpoint in all employees' hourly pay. This takes into account variations in hours for people who work compressed hours or part-time. Importantly, a pay gap is not the same as an equal pay issue; pay gaps calculate and compare the median hourly pay of different groups across the organisation, including all different bands and roles in one analysis. This means that the representation of people from different backgrounds in more junior and more senior levels of the organisation significantly affects the median pay gap. Equal pay calculations, on the other hand, compare the hourly pay of people doing similar roles.

As of July 2023, our median gender pay gap is 6%, down significantly from 14% in September last year – a highly positive improvement that puts us below the charity sector average (9.1%). However, our median ethnicity pay gap remains stubbornly high at 14.5% – down just slightly from 16.1% from earlier this year (no sector benchmark available).

Our efforts to ensure equity in our pay, progression and starting salary negotiation processes has likely played a role in reducing our pay gaps. Yet given the relationship between representation and median pay gaps, we believe to a large extent the reduction in Nesta’s median gender pay gap has been driven by an increased proportion of women in senior leadership roles (including two new women executives), a more balanced distribution of women across all quartiles of the organisation, and salary and equal pay adjustments that were made following market benchmarking last year.

Concerningly, we have not yet seen the same changes with regards to ethnicity; our staff from minoritised ethnic backgrounds are more represented in lower paid roles than higher-paid, more senior roles. Moreover, this median ethnicity pay gap figure also masks significant differences between ethnic groups; in comparison to white staff, Black staff are experiencing the largest pay gap (36%), followed by Asian staff (15%) and mixed ethnicity staff (10%).

Unbalanced representation of minoritised staff across levels of the organisation is the primary driver of our ethnicity pay gaps. This is deeply concerning to us. It is concerning from a pay equity perspective, but also because it reveals a gap in our leadership diversity, with implications on our work and on workplace inclusion. We will be doing everything we can to shift the current reality.

Knowing we had a long way to go to reach our goal of zeroing Nesta’s gender and ethnicity pay gaps, we engaged in a rigorous data analysis to better understand what other factors contribute to pay gaps at Nesta. Federico Andres, Nesta’s Head of Statistical Methods, built a causal model to explore whether, and to what extent, factors such as disability disclosure, parental leave, socioeconomic background and team/department, amongst several others, affect median hourly pay.

This analysis revealed both reassuring and concerning insights. For example, on the one hand, our data does not suggest that parental leave absences, attendance of a private school or disability disclosure have a meaningful effect on gender or ethnicity differences in hourly pay. On the other hand, we found that where women were line managed by other women, the gender pay gap was higher (12% as opposed to 4%).

This could perhaps be something cultural, a reflection of women line managers holding higher performance standards for women, or something more structural, with men on average managing women in higher paid roles than the women who manage women – a question we are now exploring through focus groups with line managers and further data analysis.

Our analysis also explored whether new interventions could help close Nesta’s pay gaps. We found that frequently cited approaches to close pay gaps, such as promoting a greater proportion of staff of minoritised backgrounds or weighting annual cost-of-living pay increases towards those in lower bands, would have a minimal effect on Nesta’s median ethnicity pay gaps. This is likely because the distribution of staff of diverse ethnic backgrounds is imbalanced, so our median pay gap would not be significantly affected by small pay increases or promotions for lower pay bands. Nonetheless, as mentioned earlier, we will still be exploring ways of better supporting diverse talent to progress and grow their careers at Nesta, given the importance of diverse leadership to our work and workplace.

What’s next?

To reduce the ethnicity pay gap, our analysis points to the need to promote or recruit more staff from minoritised ethnic backgrounds into middle management and senior leadership roles, in order to achieve a more balanced distribution of ethnicities across the organisation. This is a key priority for Nesta next year and in the years to come.

We’re focused on ensuring that everyone at Nesta feels a sense of belonging.

Nesta is made up of – and made better by – people with diverse lived experiences. We are committed to ensuring that people feel that they can bring their whole selves to work and find a sense of community within the workplace. We seek to ensure that our people are supported through market-leading HR policies in relation to flexible working, bereavement leave, menopause support, domestic violence support, birthing, non-birthing and adoptive parental leave – and more. We also challenge ourselves to learn, reflect, adapt and improve, so that we may create a culture that is continuously fostering community and bolstering inclusion.

We measure belonging annually through our employee engagement survey, and between June 2021 and October 2022, we saw an 11-point increase in people’s sense of belonging at Nesta, from 46% to 57%. While we are aiming for far higher, and know that this data point reveals work we must do to support Nesta staff, we are happy to see positive change. Importantly, qualitative follow-ups revealed that, for most people, their sense of belonging at work is driven by many factors beyond EDI, related to their role and team.

Our engagement survey showed progress in other areas too; 59% of respondents believe , on average, everyone receives the same treatment, respect and opportunities at Nesta (+26% from last year), and 60% of respondents said that leaders behave in an inclusive way (+20% from last year).

Crucially, we wanted to ensure that the views of minoritised ethnic staff were not being overlooked in our organisation-wide survey, so we also analysed our engagement survey based on demographic characteristics. 60% of minoritised ethnic staff scored EDI-focused questions favourably, a significant improvement of 39 percentage points from last year.

While belonging is nuanced and evolving, and therefore difficult to attribute actions to outcomes, we believe these positive changes are driven at least in part by our efforts to advance EDI across Nesta, making demonstrable progress against our goals. From staff feedback, we believe our efforts to ensure we have a fair and transparent pay and promotion process, and ensuring that all staff (including new joiners) – and particularly all managers – have a strong awareness of EDI issues, may have played a particularly important role in supporting workplace inclusion.

In October, we completed our first Nesta-wide EDI learning program, facilitated by learning provider Be the Riot. Through this, approximately 80% of staff engaged in five hours of facilitated learning in small groups and over multiple sessions. The curriculum covered anti-racism, inclusive language, inclusive behaviours, psychological safety and understanding intersectionality, among many other topics. On an ongoing basis, this training is available to new joiners at Nesta, alongside other EDI induction sessions, so that all Nesta employees start with a foundation of EDI awareness and a strong understanding of the importance of equity, inclusion and allyship to who we are and what we do.

To supplement our learning program, we’ve launched a monthly internal speaker series, titled “Diversity dialogues”. The initiative has inclusion at its heart and we endeavour to promote and platform speakers from minoritised groups. Since its inception in September 2022 we have hosted ten speakers who have spoken on topics ranging from conquering imposter syndrome to understanding how to manage menopause symptoms at work. 66% of speakers were from a minoritised ethnic background, 66% were women and 44% were women of colour. The goal of the speaker series is to educate and spark engagement among our people, and foster an environment for open dialogue on EDI-related topics we may not regularly discuss.

Our Employee Resource Groups (ERGs) continue to provide an important space for minoritised colleagues to gather and find a sense of belonging and community. We now have grassroots groups that focus on disability and long term health conditions, neurodiversity, people of colour, and the queer community.

What’s next?

We are always learning about what staff wish to see at Nesta and how we can support a stronger sense of belonging and inclusion in the workplace. In the next few months, we will be rolling out our 2023 engagement survey, as well as a separate inclusion survey specifically focused on race and racism in the workplace. We will be using this feedback from staff to help us identify and design new initiatives to support a growing sense of belonging at Nesta.

We are working to ensure that our missions are actively considering and measuring the impact of our work on minoritised and disadvantaged groups throughout the entire innovation process.

EDI is embedded throughout all three of our missions; a healthy life, a sustainable future and a fairer start. Across all our work, we aim to generate the greatest impact for the greatest number of people, disproportionately benefiting people of minoritised and disadvantaged backgrounds.

This means our work must consider the diverse experiences of minoritised and disadvantaged communities in how we prioritise, design, test and scale solutions – even if those solutions may be aimed at more advantaged people. For example, in our sustainable future mission, while the long-term impact of decarbonisation will disproportionately benefit those with disadvantaged backgrounds, most of our projects are focused on the shorter-term aim of increasing takeup of heat pumps among (typically more advantaged) homeowners. Still, our aim is to take a nuanced and intersectional approach to designing and testing solutions in this space, so as to ensure our work is scalable and can ultimately have a positive impact on the greatest number of people.

At a minimum, all of our work goes through an ethics and quality assurance forum named EMERALD (early stage methods, ethics, resourcing and legal discussion), who meet weekly. In this forum, we reflect equity and inclusion in our project plans, discuss potential areas of bias and consider additional steps we might take to ensure we do no harm to minoritised groups. In addition, we have developed three methods to help project teams understand and consider the impact that our work might have on the minoritised communities that we work with.

Firstly, we used a set of EDI prompts to help teams think through how minoritised groups may be affected by decisions made across the different stages of the project, and ensure mission teams are actively considering and mitigating potential negative impacts from the project-design stage. Many of our projects – particularly in the fairer start mission – also involve parents and families affected by poverty in research advisory groups and qualitative design work to inform the scope and progress of a project from start to end.

Secondly, we have established a standardised approach for collecting project and research participants’ demographic data in a consistent and appropriate way that is sensitive to the nuances of identity and the wide range of lived experiences people may have.

Thirdly, we have integrated EDI into our overarching impact measurement framework, through an equalities impact assessment (EIA),scoring each project from one to five based on the extent to which each project considers and has a positive impact on minoritised groups. To date, we have assessed 41 completed projects across the three missions using our EIA criteria and the results of where our projects score are listed below.

The majority of our higher-scoring projects are focused on achieving our a fairer start mission, a mission that is explicitly focused on supporting parents and children from disadvantaged backgrounds. On the other hand, the majority of the projects that score a one or a two are desk research projects or those focused on achieving our a sustainable future mission, where the long-term impact of decarbonisation will disproportionately benefit those with disadvantaged backgrounds, but where most of our projects are focused on the shorter-term aim of increasing takeup of heat pumps amongst typically more advantaged homeowners.

What’s next?

Defining these assessments required balancing rigour and simplicity so that the assessment could be quickly replicated across projects but still provide us with meaningful results. We expect that our approach to doing so will evolve over time as the missions grow in size, scale and complexity, and will be evaluating whether further iteration in our approach is necessary next year.

In addition, we will be looking in more detail at our projects with an EIA score of one, to learn whether there is more we can be doing to consider the impact of our work on minoritised communities from the start.

We aim to equitably distribute investments among businesses founded and run by minoritised groups.

Goal five of our EDI strategy sets out that “by 2025, 25% of our investees and 50% of our suppliers will be led by people from minoritised and disadvantaged groups.” The intention behind this goal is to drive EDI impact through our non-staff expenditure and to bring Nesta in line with best practice for large companies.

We manage our investment and supply-chain targets separately. In investments, we’re seeing really positive progress. Nesta Impact Investments has made seven mission-aligned investments to date with two further investments that have been approved but not yet completed. Of these, five are led by women and one founder is visually impaired. This represents 67% of our portfolio, more than double our target of 25%. As well as this, Nesta Impact Investments was accredited as a Level 2 fund as part of the Diversity VC Standard, which is the highest possible rating for funds committed to best practice around EDI in the venture capital industry.

Mission Studio, a partnership between Nesta and Founders Factory, creates, spins out and scales new tech startups that tackle some of the UK’s most pressing social challenges. The studio aims to drive forward Nesta’s three missions: a fairer start, a healthy life and a sustainable future. In the Mission Studio, six venture concepts have been spun out by the Investment Committee and another venture concept approved (yet to spin out) and we have recruited seven founders and six co-founders. Five of these twelve leaders are women or from minoritised ethnic backgrounds, and we are exploring new approaches to attract more women candidates to founder and co-founder roles for our remaining ventures.

What’s next?

We’re committed to improving the representation of our founders so have set recruitment targets on inbound (candidates apply) and outbound (we approach candidates) applications for minoritised groups. Alongside recruitment efforts, our focus will be to collaborate with our design and technology practice to kick off founder training on inclusive design, and assess what support founders require to improve their awareness and capability on EDI whilst growing their own teams.

Our objective is to equitably distribute our corporate spend and investments among businesses run by minoritised groups.

On our supply chain goal, we were starting from a point of limited knowledge: we set this goal and target in 2021 without access to any baseline data, and until very recently, we still did not know much about the companies and organisations we contract with. Through a survey of 115 companies, we collected information about the demographic makeup of the CEOs and founders who run the businesses that we contract with, as well as the social purpose and/or socially responsible business practices of these suppliers. 26% of survey respondent CEOs were women, and 9% were from minoritised ethnic backgrounds. Removing double counting of minoritised ethnic women, we found that 28% of the suppliers we contracted with were led by someone from a minoritised background.

While stretching, we believe our 50% target is attainable, and we will be giving this goal due focus over the next year, refining our procurement processes to ensure minoritised business leaders have the best possible chance of being selected.

What’s next?

Our primary focus will be on reviewing and updating our procurement processes, developing preferred supplier frameworks for commonly procured goods and services that have a high representation of businesses led by people of minoritised backgrounds and supporting staff to adopt any changes we make to the procurement process through training and guidance. We will also be establishing a measurement approach, so that we can track our progress and assess if we need to adopt further interventions to achieve our goal. Once these critical foundations are in place, in the future, we may consider the feasibility and impact of introducing additional guidance around sustainable procurement.

We are proud of everything we have achieved over the last year but know the journey is ongoing and ever evolving. We endeavour, as much as possible, to be transparent with both our people and the public and will continue to share our successes, our learnings and our progress on all measurable goals.

Our focus over the next year will primarily be towards increasing the recruitment and retention of staff from minoritised ethnic backgrounds into our middle management and senior management roles, to increase staff diversity, improve balanced representation and close our median pay gaps. We will also look at operationalising some of the key decisions we make in relation to our supplier base.

As ever, we will continue our EDI inclusion efforts, particularly around ensuring that people of colour and those from lower socioeconomic backgrounds feel supported and that they belong at Nesta.

This work, and our progress to date, would not be possible without the generous contributions of staff, leaders and consultants with whom we have worked. Your supportive and challenging feedback, ideas and advice are invaluable as we continue to learn and improve – thank you.