Why bringing women-owned business into the supply chain makes business sense

By sourcing from women-owned businesses, companies operating in emerging markets can increase their profit margins, writes BCLC's Kara Valikai. Photo: Arne Hoel, World Bank, (CC BY-NC-ND 2.0).

The world market relies heavily on male-owned businesses. WEConnect International, a corporate-led non-profit that certifies women-owned businesses around the world, estimates that on average less than 1% of global corporate or government spend is on women-owned businesses in any country.

This staggering gap between male and female businesses reminds us that women’s economic energy is still an enormous untapped resource for global growth. This gap is partially due to persistent challenges including discriminatory regulation, less access to education, and societal norms.

In fact, women’s difficulty in achieving economic success is a big reason why women make up 70% of the global poor. They have the highest rates of unemployment and underemployment, less access to credit, and are often not equally represented in public education and training programs. In addition, women are often underrepresented in stakeholder discussions and the political arena.

Many private sector corporations, such as Walmart and Cisco, are taking on the challenge of improving the economic status of women. One of the primary ways that large companies can sustainably empower women is through supplier diversity and inclusion.

Supplier diversity is when a company actively promotes and develops the inclusion of minority and women-owned businesses in their procurement processes. Many businesses like Walmart, General Motors, IBM, Toyota, and Microsoft have been enormously successful with supplier diversity in the U.S. – each company reaching more than a $1B per year on diverse procurement. Now, they are replicating the successes and lessons learned to other countries – linking women from all over the globe to their massive supply chains.

Many companies are setting ambitious targets for meeting these goals. Domestically Walmart plans to source $20 billion from women-owned businesses for its U.S. business. Globally it plans to double its sourcing from women-owned businesses in its international markets over a five-year period ending in 2016. The global program aims to expand supplier diversity to 26 countries. At the domestic level, Walmart has created a variety of tools to support women-owned suppliers. For example, Walmart is creating a set of training modules that teach women-owned businesses the requirements and processes for becoming a supplier to Walmart. 

Another example is Cisco, which was one of the earliest companies to understand the importance of supplier diversity – launching their program more than 14 years ago. Cisco has set the goal of reaching 10 percent of their procurement expenditures on diverse businesses. The company has successfully launched supplier diversity efforts in Australia, Canada, the U.K., China, India, and South Africa. Similar to other companies, Cisco recognizes that supplier diversity is not a one-size-fits-all strategy and has tailored its programs to each country.

There is a strong business case for investing in women.  In a recent McKinsey & Company survey, 34% of senior executives reported that a company’s efforts to empower women in emerging markets increased profits.   An additional 38% reported that they expect an increase in profits in the future.

Walmart believes that empowering women economically is smart business for many reasons. Their Senior Manager for Women’s Economic Empowerment, Ellie Bertani, said, “It is important we build a business case for supplier diversity to ensure that our results are sustainable over the long-term.” She adds that there are multiple aspects to the business case. For starters, the majority of its 200 million customers are women.

If Walmart includes more women-owned businesses in its supply chain, the company represents women both internally and externally. The company believes that women suppliers often know the needs of female customers and create products with women in mind. Also, estimates show that women-owned businesses tend to be growing at a faster rate than traditional suppliers. Walmart has the opportunity to capture the top-line growth opportunities in women-owned businesses through their supply chain.

But challenges do exist. For starters, how do large corporations identify women-owned businesses that have or want to develop the capacity to meet the often high procurement standards of large corporations? One answer is WEConnect’s global database of self-registered and certified women-owned businesses that have demonstrated a high capacity and potential to scale.

WEConnect’s CEO, Elizabeth Vazquez, co-founded her NGO to connect large corporations with small and medium-sized women-owned businesses, believing that it is both good for women and good for corporations. “While women-owned businesses are almost invisible as suppliers to large organizations, women now make or influence the majority of consumer purchasing decisions around the globe,” she said. “Smart corporations understand that incorporating women-owned enterprises into their global supply chain is good business. It helps corporations anticipate and meet the needs of the market, while also building their brand with female buyers.”

I would encourage other companies to explore their potential to include more women-owned businesses in their supply chain. Each company will have a different business case and a different approach, but there is plenty of evidence to suggest that investing in women is not only about supporting a consistently marginalized group, but also about capturing growth potential for the company. The next challenge will be for companies to work together and share their learning to ensure that women-owned businesses continue to receive better training and opportunities on a more equal playing field.  

BCLC will be delving further into this issue at our annual Corporate Responsibility Conference running from October 9th to 11th. Walmart, Cisco, and WEConnect International will share their vision for why supplier diversity is one of the best and most sustainable means to empower women and how they plan on doing it.

Explore related content:

Join Devex, the largest online community for international development, to network with peers, discover talent and forge new partnerships - it’s free! Then sign up for the Devex Impact newsletter to receive cutting-edge news and analysis every month on the intersection of business and development.

The views in this opinion piece do not necessarily reflect Devex's editorial views.

About the author

  • Kara Valikai

    Kara Valikai is the Director of the Health and Wellness and Women's Economic Empowerment Issue Networks within the U.S. Chamber of Commerce Foundation's Corporate Citizenship Center.