By Dr. Cristina Stanca-Mustea, Customer Operations Manager at Scoutbee
Supplier diversity. Everyone’s talking about it but there are still many questions as to what it means exactly, how best to execute it as a strategy, and why it’s good for your company to do so.
As part of our series of blog posts, Delving Deeper into Supplier Diversity, we’ll look at some of the different types of diverse businesses out there and why it’s in your company’s best interests to consider integrating them into your supply network. In this post, woman-owned enterprises take center stage.
Overview of the current situation
First of all, let’s get a quick overview of the facts and figures in the U.S. market. If we travel back in time to 1972, there were approximately 402,000 woman-owned enterprises. Jump forward to today and there are 12.3 million woman-owned businesses, which contribute a combined total of $1.8 trillion a year to the economy.
So, why are we telling you this? Well, the figures speak for themselves – woman-owned businesses are undeniably on the rise and there are a number of good reasons for this – higher profits, happier employees, and increased diversity in the workplace to name but a few. Economists all agree that unleashing the entrepreneurial power of women can have a tremendous impact on global GDP growth.
How does a company get certified as a woman-owned enterprise?
According to the U.S. Chamber of Commerce, in order to qualify as a woman-owned small business (WOSB), the business must be for profit and be at least 51% unconditionally and directly owned by women who are U.S. citizens.
The woman or women must be the ones who manage daily operations, make long-term decisions, and hold the highest officer positions. Other countries are yet to create such specific frameworks to encourage and support the visibility of woman-owned businesses.
However, taking into consideration the realities of fast growth, high-tech start-ups, another definition that’s growing in popularity is “women-led businesses”, which recognizes that it’s unrealistic for founders to keep 51% of their companies when raising significant outside capital. When you consider that less than 3% of venture capital funding goes to women-led businesses, expanding this definition is an important goal.
Below are just some of the reasons that working with woman-owned enterprises will have a positive impact on your business as a whole.
Benefits of working with a woman-owned enterprise
Increase your investors and customers
When you choose to work with a woman-owned business, it shows your stakeholders that different perspectives are important to your organization. Investors, particularly those in publicly traded companies, put more weight on investing in companies that are themselves diverse, but also that have diverse supply chains and partners. This shows up as a metric for investors within the “S” category of an ESG rating.
In addition, customers today, particularly younger customers, demand that the brands they buy from also do good in the world, including having diverse leadership and suppliers. It’s also likely that the unique perspectives brought to the table by these diverse suppliers will lead to innovative ideas that could, in turn, create more opportunities for growth and change.
This has the potential to help you expand into more diverse markets and enhance your competitive advantage. In addition, working with woman-owned enterprises covers a knowledge gap as women represent around half of the market – it’s simply smart business to know what their needs and requirements are.
Woman-led enterprises outperform those led by men
Perhaps one of the strongest reasons for working with woman-owned or founded companies is that they’ll make you more money than those founded by men. No matter the size of the company, women-led organizations tend to deliver higher returns. S&P’s “When Women Lead, Firms Win” report found that female CEOs and CFOs result in financial gains for companies. The report showed that “in the 24 months post-appointment, female CEOs saw a 20% increase in stock price momentum, while female CFOs saw a 6% increase in profitability and 8% larger stock returns.”
Furthermore, a 2018 study of more than 350 startups carried out by Mass Challenge and BCG showed that businesses founded by women yielded higher revenue – more than two times as much per dollar invested – than those founded by men. As well as producing higher returns, female founders have been proven to be more capital efficient and performance driven, generating consistent boosts to the bottom line over time.
Quality and reliability
Of course, there are always risks attached to starting new partnerships with suppliers. However, one way to mitigate that risk is to partner with a diverse supplier, such as a woman-owned enterprise. Research by The Hackett Group has shown that 99% of diverse suppliers met or exceeded their clients’ expectations.
Laura Gibbons, Research Director at The Hackett Group says: “Business leaders often worry that dedicating resources to supplier diversity will impact procurement savings or even quality. But our research clearly shows that this is not true. Top performers are not seeing losses in efficiency, and quality often improves. Overall, the risks in focusing on supplier diversity are quite low, and the potential upside is significant. In fact, up to 10% of sales come with supplier diversity requirements, suggesting that the lack of such a program can even result in lost revenue.”
Attract top talent
This one may come as a surprise but over two-thirds of all job seekers want to know about a company’s approach to diversity before considering working there. This is particularly true for Millennials and Gen Z professionals. They are not only interested in being part of a diverse workforce but are also keen to know who their employer partners with.
They make their decisions based on whether a company hires a diverse workforce, helps employees in underrepresented groups progress, and seeks out diverse suppliers. The message is growing ever clearer – diversity and social responsibility are becoming more and more of a concern and your company will be evaluated on these criteria.
It’s not all about the money of course, but who doesn’t enjoy a nice tax break every now and then? The United States government is keen to support diversity and is not just paying lip service to the initiative.
The federal government (and many state governments, such as California and Georgia) have special programs in place to help minority-owned businesses, including woman-owned businesses, and your company may be able to take advantage of reduced tax liabilities or special loan or grant programs by supporting them. These are programs designed to drive more business towards woman-owned businesses and could lead to new gains on your tax returns that you couldn’t claim previously. It’s a good idea to check with your accountant to see what’s available.
How to find woman-owned enterprises
SCOUTBEE Supplier Discovery allows you to specify complex supplier search criteria, such as woman-owned enterprises, and gain a comprehensive insight into your supplier market, at speed. Alternatively, if there’s a particular business you’re thinking of working with, go to the company website and take a look at the leadership team or “about” section.
If you don’t have a specific company in mind, you can visit online directories for your city or state that list woman-owned enterprises. Following communities, chambers of commerce, or awards that recognize female-owned businesses is also useful.
Does this mean you should simply stop working with businesses that are owned or run by men? Of course not. However, as we’ve shown here, there are plenty of compelling reasons to consider working with female-owned enterprises to drive greater diversity and achieve better results. Tapping into this network will open doors to new opportunities and will almost certainly have a positive impact on your company’s bottom line.
Scoutbee can help you find more woman-owned enterprises in the United States and is the only solution on the market that powers a seamless integration of all data, from internal and external sources, to give you a complete visualization of your supplier base and bring these benefits – and more – to your business.
In our next post in this series, we’ll delve into the advantages of working with minority-owned enterprises.