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Welcome to the Transforming for the Future podcast series, where we discuss the pressing issues facing leaders today, how to shape the future of work. So that both your businesses and people thrive. I'm your host today. I'm Milan Taylor, Partner and Leader for Mercer's Energy Vertical. And I'm really excited to have with us today, Lea Lonsted, who is Mercer's pay equity leader for Europe and the UK.

Lea, welcome. Glad to have you with us.

Thank you so much for the invitation.

So Lea, you've been a senior HR professional at an energy firm, and in your current role at Mercer you work extensively with companies as they grapple through some of the challenges to DE&I pay equity. From your experience, why should DE&I be a priority for energy companies right now?

Yeah. Thank you so much, Milan. Well, basically many energy companies they are in a transition towards a more sustainable business models. And this requires new ways of thinking, which comes through having different minds thus a more diverse workforce. One example that comes to mind is the Danish company, Orsted. The former-- it's the former Danish oil and natural gas company, which was established in 1973 to secure oil resources to the Danish population.

And they basically transitioned entirely to green energy in 2017. So this of course didn't happen overnight. It was a transition that began in 1991 with the world's first establishment of offshore wind farms through a liberalization of energy in the Danish market. So the transition from oil to renewables meant both a change in business focus as well as a change in employee skills required to succeed and a change in corporate culture.

And what is really exciting is that today Orsted stands out as one of the world's fastest growing energy groups with a vision of a world that runs entirely on green energy. So in order to be able to attract talent as well as investors to support this growth and continuous change towards sustainability, Orsted they need to attract diverse talent from other industries. And they also need to be able to show investors that their efforts pay off.

So it's interesting, isn't it as we think about sustainability and how we link that through to the ESG agenda. And certainly working with a number of energy organizations what we're seeing and hearing is that very much that the S in ESG around the social is where they can make a significant contribution. And I guess in the world of HR that's where we see a lot of our clients focused at the moment. So how do you-- how do you see DE&I within that broader ESG framework and what are the advantages for organizations in the energy industry to be developing strategies and really driving that agenda?

Yes. So basically we get an increasing amount of requests from organizations who want to focus on DE&I but stemming from a desire to improve their ESG scores, so to say. And this is typically-- it comes from the board level. Boards are interested in discussing with investors of course. And investors then asking them so how are you doing with ESG and how do you measure the S in ESG? And that's when they reach out to us.

And so typically how companies can measure that is related to pay or related to representation marks. So my area of expertise right now is around pay equity. And I would say pay equity is an amazing starting point because pay equity is relevant and it's measurable. It's basically-- it covers all employees of the organization.

And you can also argue that it's to a great extent an indication of how a company values its employees. So most companies they would arguably want to pay fairly. We want to be fair et cetera. And that is actually something we can detect through analysis in an organization. And furthermore, it-- sorry. Furthermore, it is comparable at a macro level.

So you can also compare gender pay gap across companies, across countries, and so on. And this is what we start seeing happening in legislation as well.

And what instead is that move to pay equity more a journey rather than a sprint. It seems to me from a lot of the conversations that we have with NGO organizations that they get that this is a longer term player. They have to get their foundations correct and get that data correct in order to make the right decisions. Are you seeing this with the work that you're currently doing?

Yes, absolutely. I mean, pay equity is not a one off. And there is a lot of debate today as to how effective the legal requirements or the disclosure requirements as we see them, for example, in the UK, in Ireland, in France, and in Sweden et cetera. And so companies are coming out, and they're saying, OK, so how can we-- what is actually required? What are the root causes behind the gender pay gap or pay equity gaps we continue to see?

And this is where we start looking into bias, for example. So in our process when we look at pay equity we will try to detect OK, so what are the explainable pay gaps? And that could be a career level. It could be experience location, and so on. And so we try to isolate that and say, OK so what is left? What is the residual that's left?

And that could be bias. It could be that we are favoring people who went to the same university. It could be that we're favoring people for a variety of reasons. Maybe because they have the same gender as ourselves. So this is quite interesting, and let's not forget that bias is typically unconscious. It's not something we do to be unfair consciously. It is unconscious.

So we're working with a lot of companies to put in bias bloggers, so to say, or basically create better foundations that prevent us from acting with our bias. And--

So I think I'm hearing that the pay equity number is a valuable number in its own right but actually it drives immense amount of insights that helps guide and change and evolve people strategies and managing people risk in organizations. I just wanted to pick up because earlier in our conversation you mentioned that it was also important to have a diverse workforce. Could you just expand a little bit on that and why do you think that is the case for the energy industry given your experience of being a senior HR leader in the industry?

Yeah, absolutely. I think-- I mean, the oil or the energy industry is diverse by nature. There is a requirement-- I mean, typically you have headquarter in one country and then you actually have concession rights if it's an oil company in a bunch of other locations. And the local knowledge is important. Having-- hiring local staff is important for a variety of reasons.

But if your management team or decision makers are only composed of one gender or one nationality you may simply miss out. And the same thing-- I mean, we've been discussing talent pipelines in the energy business for years. I remember when I started in the oil business some 20 years ago, I was working on recruiting graduates because it just took so long time to train drilling engineers et cetera. And we're still having the same discussions today.

And again, we will not be able to attract diverse talent, whether diversity is related to gender or is related to the non headquarter nationality. We will not be able to attract them if they can't see themselves represented at the higher levels of the organization. So there's a lot of evidence showing the importance.

One thing that I wanted to mention actually just tying it back to pay equity is when we-- so when we look at all the explainable factors we can see that one explainable factor is difference in career level and that makes sense. But that's often also what we see reflected when we look at the gender pay gap. So if we have an organization where say the senior specialists who are often highly paid or senior managers who are also often highly paid. If they are primarily composed of say men or headquarter nationalities we see very, very high pay gaps.

So it might be an explainable factor but it's still a route towards career inequity or inequity in the organization. So these are also some of the dialogues we have with organizations.

So clearly it's not a simple thing to fix. It's systemic and a lot of data analytics to get to root causes. I did want to just to pivot just to get your view on employee experiences. It's something that we hear a lot about. It's critical. I suppose at the time when the industry has got a challenge for both attraction and retention.

So from your perspective, how are employee experiences in the energy business any different from other industries that you work in? And how does that play out from a gendered perspective?

Yeah. Thank you so much, Milan. That's a really interesting question. And I would say that's the third leg we're looking at often as well because it's tempting just to look at what we can measure in terms of representation or pay. But employee experience is basically how do people feel? What is their experience of working in a particular organization?

And we had a look at some data from our employee experience team, and they basically showed us that specifically for employees who work in the energy business. We can see that their female group they are less satisfied with their overall career and development opportunities when you compare them with other sectors.

So that's one point of concern. The other point of concern is that they also have a less favorable view in terms of having a safe working space. So if we think about do we have an environment that is free from harassment, discrimination? So these are quite interesting insights. So if you visit an oil rig or a production platform or such an environment it is typically quite male dominated. And it shows in terms of what are the posters on the wall, what's the tone but also it shows in the design.

So, for example, you have shared bathrooms. I mean-- that might be great if you're all one gender. But if you're a woman-- and I've tried this myself-- it's not so great to take a shower together with a bunch of guys to be completely honest. So there back to your point around structural differences. There are some structural changes we need to make in such environments to actually create it a little bit more inviting and appealing for female colleagues but also for other colleagues.

Lea, you're deeply experienced and widely respected and you're grappling with some of the most pressing issues that oil and gas and energy and indeed companies across other industries are trying to resolve. So what's Mercer's [INAUDIBLE] as subject matter experience in DE&I pay and equity, and why should-- why should our clients look to reach out to you and work with you and your team to help them resolve some of these challenges?

Yeah. Well, I think basically at most we're very occupied with what works. So we are data-driven. So we test our hypotheses. We test them with data. And that can be data both related to workforce movements, fair pay, equitable pay et cetera. But it's also data related to employee engagement.

So I think with Mercer you will-- I mean, you will also experience we have a global network of DEI experts and change management experts who also have industry experience. So typically we combine the very data-based approach with empathy and with knowledge of the local environments that our clients are in. And we are location agnostic.

So most of the projects I do I do them from my home in Copenhagen. And that goes even if I work with clients in Australia or in the US or in South Africa. So we are quite flexible in that manner. And I think we had a lot of learnings during COVID to help us work in a very agile and collaborative fashion with our clients.

Lea, thank you so much for sharing your perspectives today. You've given us an awful lot to think about. And for those who are listening, if you'd like to learn more about how we can help you through your pay equity and DE&I, please visit "mercer.com" to read some of our latest research on the subject. Please subscribe to our channel to listen to our upcoming episodes, where we'll be sharing new content and having more in-depth conversations about how we're transforming the future of work.

Thank you for listening.

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