28/07/15

Focus on Private Sector: Female suppliers drive profits

Woman on phone supply chain.jpg
Copyright: Aubrey Wade / Panos

Speed read

  • Adding women-owned firms to supply chains can raise corporate revenues
  • Women’s lack of assets increases global gender inequality
  • Companies should train businesswomen as well as buy from them

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The UN Global Compact and UN Women announced last month that 1,000 companies have signed up to their Women’s empowerment principles. [1] These seven principles, launched in 2010 with 39 companies, require businesses to take steps to advance gender equality throughout their operations. The 1,000-strong group spans diverse sectors, from telecommunications to pharmaceuticals, with many operating across the global South.

While several principles — such as cracking down on harassment and promoting female managers — echo previous gender equality campaigns, one initiative stands out as unique. Principle 5, on enterprise development, includes a commitment for companies to source supplies from women-owned businesses.

“These results can be considered as the reference number for natural emissions for African rivers.”

Frédéric Guérin, Institute of Research for Development 

While gender campaigns focused on managers and office culture benefit corporate elites, supplier development can transform women’s position across the world economy, for various reasons.

First, research suggests that integration into global supply chains is vital to economic growth in the global South, with the World Bank reporting that this will “make or break” developing economies. A 2013 World Economic Forum paper concluded that improving developing countries’ supply chains could lift global GDP (gross domestic product) by five per cent. And such growth will benefit women within these economies as well as men.

Second, focusing on women-owned suppliers rewards women as asset-owners, rather than simply as employees. This is critical because women’s lack of assets is a key source of global gender inequality: women currently produce 50 per cent of food and contribute 66 per cent of labour but own only one to two per cent of property.

A growing wave of research on inequality — including French economist Thomas Piketty’s 2013 book Capital in the twenty-first century — has concluded that inequality of asset ownership, or wealth inequality, is as important to overall economic inequality as income inequality. [2] So in addition to campaigns centred on income inequality — a traditional focus for gender equality activists — structuring campaigns around asset ownership could bring new benefits for women.

Third, supplier diversity can drive corporate profits, increasing the size of the economic pie in addition to expanding women’s share of it. The telecoms business AT&T, which spends US$2 billion on women-owned suppliers a year, says these suppliers are directly responsible for US$26 billion of its annual revenue. And a McKinsey survey of executives found a third attributed profit growth to supplier diversity in emerging markets, not least because women-owned suppliers can help firms make the products female consumers want.

Working with women-owned suppliers is not without challenges. [3] Women-owned companies can face barriers to accessing the finance to expand businesses, may lack the formal accounting expertise to comply with multinationals’ auditing systems and might lack a marketing presence, making them hard to find. This calls for companies committed to supply diversity to invest in developing women-owned supply chains — through training for example — in addition to purchasing from them. For example, the energy giant Exxon-Mobil’s philanthropic foundation has trained Nigerian women who want to join global supply chains, and Exxon-Mobil has launched official procurement contracts with two companies that took part.

So while the 1,000 signatories to the Women’s empowerment principles is a milestone, there’s still a long way to go. Perhaps the seventh principle on transparency, which requires signatories to measure and report publicly on their gender equality progress, could provide a valuable blueprint of best practices for other firms to follow.

Maha Rafi Atal is a PhD candidate at the University of Cambridge, United Kingdom, where she is researching the political effects of multinational firms acting as public service providers in the developing world. She was previously a journalist, including at Forbes, where she covered the intersection of business, development and international affairs. You can contact her on mra42@cam.ac.uk or follow her on Twitter: @MahaRafiAtal

References

[1] Women’s empowerment principles (UN Women, 2011)
[2] Thomas Piketty Capital in the twenty-first century (Harvard University Press, August 2013)
[3] Ana Maria Esteves Women-owned SMEs in supply chains of the corporate resources sector In Kuntala Lahiri-Dutt (editor) Gendering the field: towards sustainable livelihoods for mining communities (Australia National University Press, 2008)