Companies Are Spending with Diverse Suppliers to Advance Racial Equity in Their Communities

(Luis Alvarez/Getty Images)

Report by Junior Research Analyst Daniel Krasner.

Two years after what many refer to as the “Summer of Racial Reckoning,” the American public is looking for companies to show how they’re actually advancing racial equity. Companies have pledged billions of dollars to racial equity across a number of areas such as education, health, and criminal justice, with significantly more commitments in loans than grants. But, the public thinks there’s more they need to do to fulfill these promises.

In recent JUST Capital polling conducted in partnership with SRSS, 68% of Americans agreed that companies have more work to do to achieve racial equity in the workplace. Majorities of the public are also looking to companies to take action beyond the borders of their workplaces. Of those we polled, 80% said they believe it is important for companies to support their communities by sourcing from minority-owned businesses and donating to local education programs. An additional 77% agreed that these efforts have a positive impact on a company’s long-term success.

Institutions, investors, corporate leaders, and other stakeholders also recognize that advancing racial equity in communities requires corporate action beyond philanthropic donations. The Black Corporate Directors Conference, founded 18 years ago by Ariel Investments, has developed the three P’s framework to advance corporate diversity. Philanthropy is last on its list, behind Purchasing and People, with the framework noting that “deep-seated economic inequality will not be fixed by donations and scholarships.” Further Brookings Institution research provides a regional action plan for advancing racial equity that pushes companies to focus on internal practices including, but not limited to, local partnerships with HBCUs, procurement, supplier diversity, and minority business growth.

Our Corporate Racial Equity Tracker looks at company action across six major dimensions on policies and actions that corporations can take to address racial equity, including community investments. We’ve updated the Community Investment metrics in our second iteration of the Tracker to focus on the following:

• Diverse Supplier Spend Disclosure: An assessment of whether a company discloses a dollar amount of its supplier diversity spend.
• Local Supplier Spend Disclosure: An assessment of whether a company discloses the dollar amount of its local or small business supplier spend.
• Funding for Local Schools: An assessment of whether a company donates to educational programs for primary or secondary school students, excluding employee donation-matching programs to schools and scholarships.

Several companies have made multi-year, multi-billion dollar commitments to advance racial equity in communities, spanning philanthropic contributions and other investments, over the past two years. Our Tracker, however, measures disclosure on the above points as we’re able to track them across the 100 largest U.S. employers and they align with leading research and analysis on how companies can best invest in communities as part of their racial equity efforts. The billion-dollar corporate commitments we’ve seen tend to be a complex combination of product, service, and philanthropic offerings including grants, loans, and investments as well as supporting Black entrepreneurs, brands, and businesses, and we took a look at how some of the largest investments are sharing their progress in this companion article.

Out of the 100 largest companies by U.S. employment size in the Russell 1000 Index, we found that 51 are addressing at least one of the elements of community investment we track. These companies are most likely to direct their efforts toward supplier diversity spend disclosure. And while we’re seeing 51% of the companies we track addressing community investment, that means nearly half are not taking action.

Of those that do disclose, Accenture, Ford, and Cigna are showing how corporate America can lead on community investment by detailing supplier diversity spend and investing in local schools among other actions.

Companies are most likely to disclose supplier diversity spend

Looking at where companies are disclosing their community investments, diverse supplier spend is more commonly shared than any other data point disclosure. Companies were almost five times more likely to disclose their spend on supplier diversity overall than disclose a local/small supplier spend amount disaggregated from that overall supplier diversity spend (42% vs. 9%). Ford and Accenture disclose yearly expenditure for supplier diversity and local/small supplier spend not just as a total amount, but also disaggregated into separate categories such as minority, women, and veteran-owned business expenditure

Funding for public, U.S. K-12 schools in the form of money or tangible school supplies (computers, infrastructure, digital inclusion) is more rare (14%). Among companies disclosing these efforts, Wells Fargo partners directly with the Bethlehem Area School District while Cigna made a $3 million commitment to support mental health wellbeing in schools over three years.

While many companies do great work around mentoring, individual scholarships to students, or (volunteer-led) skills teaching, these initiatives fall outside of the scope of what we capture in our data, as the spirit of this data point focuses on infrastructural or material aid to the institution. In a perfect world, disclosure on school funding would be as clear as measuring supplier diversity expenditure rather than being housed in ad-hoc storytelling.

Nearly half of companies disclose no community investment data

Taking a look at the total amount of disclosures companies share related to community investment, about half of the companies we looked at do not disclose any of the three metrics considered. Only 10 companies disclose two and only two disclose all three metrics. These companies include CVS and Ford disclosing on all three, followed by Accenture, American Airlines, Verizon, Johnson & Johnson, Wells Fargo, Target, Marathon Petroleum, Cigna, Intel, and FedEx disclosing on at least two metrics.

This breakdown also means that nearly half of companies we assessed (49%) disclose no data points related to community investment. Action remains low and structural barriers hinder efforts on the supplier front in particular, making it more challenging for companies to put commitment into practice when considering local and diverse suppliers. Investing in communities is part of a comprehensive framework for action on racial equity, like that set forward in the Corporate Racial Equity Alliance’s CEO Blueprint for Racial Equity and forthcoming corporate performance standards.

Where we are seeing investments, many have decade-long timelines and are subject to questions or analyses around how companies are tracking the impact of their commitments. It’s difficult to ascertain where the money is going or what impact it has on the ground. Initiatives like the CEO Action for Racial Equity coalition and the Southern Communities Initiative are taking a more targeted approach to corporate community investments, shifting from external philanthropy to integrating community investments into business operations themselves.

More intentional initiatives that disclose clearly how and where money is spent are a roadmap to better tracking community investment. With increased itemized disclosure we will be able to better understand the impact of corporations’ commitments on communities – and raise the bar for corporate action on racial equity.

You can explore which of the 100 companies we assessed have disclosed diverse and local supplier spend and funding for local schools in the “Community Investments” drill-down section of the 2022 Corporate Racial Equity Tracker below. For more information on our Tracker and racial equity work, please contact Ashley Marchand Orme, JUST’s Director of Corporate Equity.