How Can More Women Business Owners Be Incorporated In Value Chains?
When a Latin American company contracts providers, it does not always take into consideration companies that are led by women. Even when a company offers everything the client needs, contrary to evidence, there are limitations on recognizing diversity as critical in the decision-making process of companies there are limitations contradicting the evidence of recognizing diversity as decisive for the success of companies.
Thus, a Mercer consulting study asserts that although 64% of organizations in Latin America understand the commercial and business imperative of having diversity in the value chain, they are still not taking concrete actions to achieve gender diversity among their providers.
This is true despite the fact that women are currently present at each point along the entire value chain. Whether as entrepreneurs, supervisors, producers, providers, consumers, or buyers, women’s work and talent contribute resilience, capacity for innovation, knowledge of the environment, and understanding of clients’ needs. A diverse contribution is vital tothe success of companies.
A 2017 UN Women study indicates that companies that adopt a higher rate of diversity of providers and inclusion programs generate a one-third higher than average return on the cost of procurement operations. This also has a potential positive impact on the generation of benefits for the communities where they operate.
Limitations for women-owned businesses
Breaking down this asymmetry is one of the objectives of multilateral development banks. Thus, in the case of IDB Invest, a comprehensive inclusive strategy is being developed in favor of equality in the value chain, both for women and for other less-represented groups such as indigenous peoples and afro-descendants, the disabled, or those identifying as LGTBIQ+.
The main objective is for companies in the region to consider businesses owned or led by women when contracting providers of goods and services.
This is not an easy objective. On the one hand, contracting companies lack experience and knowledge regarding what the characteristics and best practices are for incorporating this link in the value chain. On the other hand, women-led businesses encounter specific problems in gaining access to the market, because their activities tend to develop within a very restrictive financial and social ecosystem, particularly with regard to the following aspects:
- Limitations on accessing markets. Women-owned businesses are usually SMEs and microenterprises and thus have fewer commercial contacts and relationships and have greater difficulty achieving the production volumes required by large companies. This impedes their access to sales networks at the national or international level.
- Limitations on accessing financing. Women-owned businesses have less access to credit and more problems obtaining loans that would allow them to consolidate or increase their activities and sales, whether due to the financial sector’s ignorance of the specific needs of women-owned SMEs or an explicit or implicit bias in credit approval processes.
- Limitations on entrepreneurship. Many women-owned businesses operate informally due to regulatory complexity or the size of sales, among other factors. This dynamic affects the development of these businesses, impeding women’s access to training tools and mentoring and limiting their business experience.
Inclusive value chains
Besides providing access to capital, IDB Invest incorporates in its loans the objective that companies will increase their benefits by becoming integrated in the communities where they operate, i.e., by obtaining a social license to operate.
As a first step, when a company asks for our financial and nonfinancial support, a diagnosis is performed on the status of gender and diversity in its value chain. With this information and adapting the proposed measures to the concrete context of each client, an action plan is designed.
This plan may include recommendations for procurement policy, advisory services on inclusive policies, training and awareness plans for procurement teams (who are not usually familiar with promoting gender equality), identification of new providers and training on productive or commercial topics.
The measures may be applied to companies operating in a wide variety of sectors such as retail, manufacturing, agribusiness, tourism, or telecommunication. IDB Invest works with clients to help them include women-owned businesses among their providers.
In one case in Argentina, where the goal is to incorporate women within the group of local providers supplying corporate dining rooms, the work is being done through specific training for women. It was determined that the lack of technical training was one of the major barriers to their inclusion and, once this action is implemented, it is expected that the client will strengthen the employability of women in the agribusiness sector, achieve greater integration and improved relations with the local community, and contribute to social sustainability.
Some projects with clients also include an action plan connecting the client with international provider networks, through partners like WEConnect, a global network that connects women-owned businesses with corporate buyers throughout the world.
The result of gender inclusion policies in the value chain is a win for both parties. The companies win because they obtain higher quality and more innovative products and services, because they reduce costs through increased competition, and because they improve their relations with local communities.
And the women’s businesses win because they access new markets, improve the quality of what they supply through training and advisory services and because they are able to make their businesses grow.
This is further evidence that ensuring equality means winning.■