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Diversifying Global Supply Chains

December 9th 2012

Working Women

Women-owned businesses represent 32 to 39 percent of all private businesses worldwide, but reportedly receive less than one percent of procurement from both corporations and governments. (I say reportedly, because these numbers are very hard to verify. Still, even if the statistic is off by a factor of ten, women-owned businesses are still hugely underrepresented.)

As societies around the world struggle with ways to expand women’s economic opportunities, better integrating women-owned businesses into global supply chains clearly holds enormous potential. This is a topic I’ve explored previously, and was able to delve into it more deeply at a meeting yesterday of CFR’s ExxonMobil Women and Development Roundtable Series.

Corporations are working in concert with governments and nonprofits to address issues of women’s empowerment for a variety of reasons: some are in search of improving their image or motivated by a sense of corporate social responsibility; increasingly, others recognize a business argument for embracing women’s economic empowerment. They understand that reaching out to women can make their labor forces more productive, improve the quality of their global supply chains, and expand their customer bases. As Astrid Pregel, an adviser to the Canadian government, argues, women owned-businesses should be supported and grown because they are the “greatest underutilized resource” when it comes to growing the global economy.

While better incorporating women into global supply chains can be a major lever for change, it’s difficult to do. Women business owners in many markets face strong cultural and structural barriers. Also, a higher percentage of women-owned businesses are in the informal economy; before they can supply corporations, they have to become legitimate businesses, paying taxes, meeting regulations, and following accepted accounting procedures. Moreover, we have little evidence about effective, scalable strategies.

However, a few successful initiatives are gaining traction. WeConnect International is a nonprofit created three years ago by its corporate members to assist them with supplier diversity. Working now in India, China, Peru, Chile, Colombia, and soon, Costa Rica, WeConnect identifies and certifies businesses that are at least 51 percent owned, managed, and controlled by one or more women, and helps connect those businesses with support networks, technical assistance, and buyers.

Retailing giant Walmart is a WeConnect partner. In 2011, it pledged to source $20 billion over the next five years from U.S. female-owned businesses, and double the amount it buys from women-owned suppliers internationally. (The fact that the company faces a major class-action lawsuit from female employees in the US might have played into its decision to focus on women business owners, but regardless, this is a significant commitment and given Walmart’s more than $400 billion in revenue, one that promises to pull global supply chains along with it.)

One initiative it has launched is called A Hand to Grow. This program operates in Central America and works with over 600 small and medium manufacturers, 200 of which are women-owned, to assist them in the process of becoming Walmart suppliers. For those SMEs that win contracts, Walmart provides three years of technical assistance to help them meet sustainability requirements, as well as training sessions on business and management skills. Anabella Ruiz de Freeman, the director of the program, insists this “is not philanthropy, but real business.” Walmart stands to benefit from greater innovation, more locally tailored products, and more competitive pricing.

Women, and societies, stand to benefit too. There is significant data about the positive effects of women’s economic empowerment on families, communities, and countries at a macroeconomic level. Hopefully, programs like those of WeConnect and A Hand to Grow will help us figure out how to accelerate the process of bringing more women-owned businesses into global supply chains.

Isobel Coleman writes for the Council on Foreign Relations, from where this article is adapted.

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