Organisations that employ people on the basis of abilities alone and take steps to improve diversity, reap the most rewards, suggests a joint report by the CBI and the Trades Union Congress.

The report, Talent not Tokenism, concludes that hiring regardless of sex, race, age, disability, sexual orientation or religion can benefit in many ways including:

* Help in addressing skills shortages

* Higher morale and productivity, improved retention rates and lower recruitment costs

* Better understanding of customers' needs and greater insight to reach untapped markets

The report, which contains a dozen case studies featuring businesses of all sizes that have developed a more diverse workforce, is being launched today (Tuesday) by the director-general of the CBI, Richard Lambert; the general secretary of the TUC, Brendan Barber; Trevor Phillips, chair of the Equality & Human Rights Commission, which supported its production; and the minister for Women and Equality, Harriet Harman.

TUC general secretary Brendan Barber said: "The need to unlock the talents of all – to create a truly representative workforce – is even more crucial at a time of economic uncertainty. The issue is not whether business can afford to diversify, but whether it can afford not to.

"Employers wanting to diversify the workplace will always find unions a willing ally. Diversity policies work best when the entire workplace is involved. Our growing network of equality reps in workplaces across the UK are helping deliver diversity from the boardroom to the shop floor."

Minister for equality Harriet Harman welcomed the work that the TUC and the CBI have done on the report. "Equality and diversity is not just right in principle, but is necessary for Britain to be a modern and successful economy. This guide will be important and I look forward to seeing it used by businesses and public services alike."