With companies pledging $50 billion to advance racial justice following the murder of George Floyd, many are looking beyond the borders of their workplaces to take action. That includes addressing barriers to opportunity and prosperity that more frequently plague communities of color.
Discriminatory housing policies in the United States have segregated communities, and spurred a cycle of disinvestment in communities of color – leaving them cut off from quality jobs, education, healthcare, and transit, among other infrastructure. Gentrification has also displaced many people of color, shrinking affordable housing options and forcing them into further disinvested communities. Research from Opportunity Insights shows that the neighborhood a child grows up remains a key predictor of their health, economic, and other life outcomes.
In a survey JUST Capital and The Harris Poll conducted, 90% of Black Americans and 78% of Americans overall said that they believe it’s important for large companies to advance racial equity by supporting their local communities through sourcing products or services from minority-owned businesses and donating to schools and/or scholarship programs. The Corporate Racial Equity Alliance’s CEO Blueprint for Racial Equity also highlights community investment as a key pillar of advancing racial equity – and one that’s intertwined with a company’s internal actions and workforce-focused efforts.
“We are a part of society as businesses,” Dawn Jones, Intel’s Chief Diversity Officer said in an interview with JUST on the company’s racial equity commitments. “We employ thousands of people who go out into these communities and their families are impacted by some of the things that are happening. And when your family is impacted, you bring that with you to work and that impacts your ability to perform. So it is all interconnected.”
Our Corporate Racial Equity Tracker examines which of the 100 largest U.S. employers are investing in their communities by sourcing from minority-owned (84) and local (34) businesses, and funding local schools and scholarship programs (65). Just 26 of these 100 companies disclose all three policies and practices.
More companies, like GM, Target, and UPS are recognizing that investing in their communities is not a one-off, charitable gesture. With programs aimed at investing in locally and minority-owned suppliers and local education programs, they’re fulfilling a responsibility to one of their stakeholders – and one that the American public wants them to look after. As an early economic recovery takes shape, their leadership can help set the bar for how corporate America ensures long-term growth is inclusive of the communities of color that have been disproportionately affected by the health and economic impacts of the pandemic.
Investing in diverse suppliers is one of the key ways companies can follow through on their racial equity commitments. In fact, when we asked Black Americans what actions were the most important ones companies should take to advance DEI in the workplace, 89% of respondents selected “increase business with Black-owned suppliers.”
By allocating their supplier spend to certified diverse businesses – defined as privately-held companies that are 51% owned and operated by individuals from marginalized groups including women, racial and ethnic minorities, veterans, people with disabilities, and lesbian, gay, bisexual or transgender (LGBT) individuals – companies can help spur greater economic growth for communities.
According to the National Minority Supplier Diversity Council, certified minority-owned business enterprises (MBEs) generate $400 billion in economic output that lead to the creation or preservation of 2.2 million jobs. The U.S. Senate Committee on Small Business and Entrepreneurship reports that, over the last 10 years, MBEs have accounted for more than 50% of the two million new businesses started in the country. While these are encouraging signs, the Committee also notes that access to contracting opportunities and revenue hasn’t kept pace.
Initiatives like Ariel Investments’ Project Black, which develops and scales MBEs to compete as Tier 1 suppliers, is one way companies can address the unequal footing these businesses have in the bidding market and help close the racial wealth gap. The firm’s leadership sees purchasing as a way for companies to embed diversity more deeply into their business practices. And, by going beyond traditional procurement categories to work with diverse firms across all areas of spend including professional services, financial services, and technology, they can have significant impact on communities of color.
“We think the whole idea of supplier diversity is a last-century term, and we like the idea of business diversity. Corporate spend creates a tremendous opportunity to affect meaningful change in society,” Ariel co-CEO and President, Mellody Hobson, said in a JUST-hosted fireside chat. “Companies can, by virtue of what they need to buy to exist, actually lift up Black, brown communities, women business owners in a way that I don’t think they truly understand.”
Those companies that heed Hobson’s words also reap the financial reward. A report from The Hackett Group found that companies with long-term supplier diversity programs saw a 133% greater return on investment, and, for every $1 million spent on procurement, a $3.6 million boost to their bottom line.
Of the 100 companies our Tracker examines, 84% disclose having a supplier diversity policy. One of these companies is UPS, which sees investing in diverse suppliers as part of an “authentic and intentional” commitment to DEI. It also recognizes that diverse suppliers are not starting with the equivalent level of resources and access to opportunity as their counterparts. The company partners with organizations to help businesses become certified diverse suppliers, and recognizes that, by doing so, all of their stakeholders benefit.
“Supplier Diversity at UPS involves working to ensure that small and diverse businesses have equal footing in the competitive bidding process,” Jose Turkienicz, Chief Procurement, Real Estate & Global Business Services Officer at UPS, said in an overview of the company’s policy. “Their solutions provide tremendous value to our customers and shareowners.”
While disclosure of a supplier diversity policy is an important step, it’s also one that is required of certain companies that contract with the federal government. Companies looking to advance racial equity through the influence of their supply chain should go further to disclose their spend with diverse suppliers. In 2019, UPS reported spending $2.4 billion with over 5,400 small and diverse suppliers – with approximately half of this amount going to 1,200 diverse businesses. By sharing these spend numbers, companies can help set a new standard for corporate America that goes beyond legally required disclosure.
In addition to sourcing from diverse suppliers, companies that source from local businesses can also help generate greater economic opportunity for communities. For every $100 spent with a local business, Local First research shows that $68 stays within that community – as compared to $43 when spent at a non-local business.
When companies that operate in communities of color keep spending local, they create a multiplier effect that can have lasting impact on the prosperity of local residents, organizations, and businesses. In addition, local sourcing is one way for companies to better manage their impact on the environment. As communities of color across the U.S. are disproportionately affected by pollution, rising temperatures, natural disasters and other environmental risks, local sourcing serves as a way to mitigate this impact.
Our Tracker looks at whether companies disclose a policy, commitment, or effort to give preference to locally produced goods and services, purchased from a local and independent business, over those produced more distantly. We found that only 34% of the companies in our Tracker disclose a local sourcing policy.
These companies include GM, which reports that local sourcing comprises approximately 90% of its regional spend in North America. GM recognizes that keeping supplier spend local helps to contribute to the long-term economic growth of their communities – and also of its business. The company’s latest report on its supplier impact states that, “when we build where we sell, and buy where we build, our vehicles are more competitive.”
Outside of their supply chains, companies are also investing in their communities through funding local education programs. By contributing to community colleges, high schools, after-school programs, and scholarships, they’re helping to open up job and other economic opportunities for populations that have faced chronic educational disinvestment and segregation. And, similar to local sourcing, funding local education programs can ultimately help companies build a stronger talent pipeline, workforce, and customer base for them and the broader market.
Our Tracker shows that 65% of the country’s 100 largest employers are investing in these efforts. Of these, Target’s approach enables it to have an amplified impact on Black communities. In partnership with the United Negro College Fund, the company launched the Target Scholars Program earlier this year. The Program provides 1,000 first-year Black students, with an interest in technology, leadership or design, at more than a dozen historically Black colleges and universities scholarships of up to $5,000. These students also receive access to mentoring, internships, networking, and other opportunities during their four years as an undergraduate through the Program.
The Target Scholars Program is one way of demonstrating that community investment is not a one-time action, and that by funding education programs, and sourcing from locally and minority-owned businesses, companies can advance racial equity. Target is one of the 26 companies our Tracker shows having policies addressing all three of these aspects of community investment.
In April, the company committed to spending more than $2 billion with Black-owned businesses by 2025. And, between 2016 and 2018, Target increased its business with diverse suppliers by nearly 65%. Target helps broaden its diverse supplier pool by hosting a summit where indirect vendors can learn more about Target’s supplier processes, and access company leadership. A Minneapolis-headquartered company, Target also joined the OneTen coalition to train, hire, and advance one million Black Americans without four-year degrees in the Twin Cities region over the next 10 years.
While Target’s holistic approach is a leading example of how companies can wield their influence outside of the workplace, the company also recognizes that this is just a start. “We are proud of the recent progress we’ve made,” Amanda Nusz, Senior Vice President of Corporate Responsibility at Target and President of the Target Foundation, said. “We also know that there is more work ahead, but we remain steadfast in our commitment to driving this work and will continue to listen, learn and hold ourselves accountable to the goals we’ve set.”
For corporate America, upholding commitments to racial equity will require building relationships with communities that allow for continued listening, learning, and action. Last summer, we saw companies pledge their support for communities of color – whether through monetary contributions or statements of solidarity. Now, as the country gradually recovers from the pandemic, a sustained, long-term investment in communities offers an opportunity for corporate America to shape a more racially equitable, inclusive economy.
You can explore which of the 100 companies we track have supplier diversity, local sourcing, and funding for local education policies in the “Community Investments” drill-down section of the Corporate Racial Equity Tracker below. For more information on our Tracker and racial equity work, please contact Yusuf George.
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