The Next Sustainability Frontier: Gender Equity as a Business Imperative

A graduate from Gap Inc.'s personal advancement and career enhancement (PACE) program for women. (Photo courtesy of the Gap Inc. PACE program)

Over the past decade, the private sector has increased its engagement with women’s empowerment and gender equity. More companies have begun to invest in gender-related policies and initiatives, and the quality of that engagement has improved for those in the vanguard of this work. Corporations are getting better at identifying where the status of women is material to their business—as board members, employees, suppliers, customers, and distributors, and as members of the communities in which they operate. This recognition is resulting in greater investments to establish gender pay equity, remove barriers for women to advance to senior leadership positions, source from women-owned businesses, improve the skills and capabilities of women workers, develop unique products for women consumers, implement community initiatives to address gender-based violence, and more. For many companies, uprooting gender inequities across the value chain is now considered both good for society and good for business.

Yet, still, only a fraction of Fortune 500 companies are addressing gender-based issues and opportunities. What’s keeping most companies on the sidelines?

Thirty years ago, environmentalists asked the same question. Today the case for building environmentally sustainable businesses is undeniable, and there is a strong global movement of corporations that have made public commitments to environmental stewardship. Indeed, almost half of Fortune 500 companies (48 percent) have at least one climate change or clean-energy target.

This work is ongoing, but it is not too early to explore what we can learn from the successful integration of environmental sustainability across corporate value chains. How can we adapt the approaches used in that effort to build a similar movement to eliminate gender disparities?

Critically, many companies and investors recognize that environmental issues are material to business and that environmental sustainability represents a competitive advantage central to long-term success. Indeed, over the past decade, companies have sought to analyze the business implications of adverse environmental impacts from their activities, as well as dependencies on fragile ecosystems. With support and guidance from NGOs, governments, and other partners, a handful of companies have been developing and implementing sophisticated data collection, management, and analytics for tracking and quantifying impacts related to a wide range of climate-smart business practices. (See, for example, Kering’s Environmental Profit & Loss tool, which allows companies to calculate the monetary value of their environmental footprint).

We argue that eliminating gender inequities and advancing women’s opportunity and empowerment is equally material to companies’ competitiveness and sustainability. Unfortunately, companies aren’t collecting data—nor does enough research exist—to adequately back materiality arguments for gender equity across industries and the value chain. As with the environment, gathering more evidence would likely drive future private sector investment; it could encourage companies already investing in women to do more, heighten demand from investors, and encourage companies sitting on the sidelines to get involved.

The Sustainability Accounting Standards Board (SASB) has made some headway by highlighting that diversity and inclusion in certain industries is material for investors and should therefore be disclosed in 10-K filings. While this is a good start, it limits the materiality conversation to women as employees in certain industries, not fully accounting for the true potential business value of addressing gender issues and opportunities throughout the value chain.

Until companies and investors recognize gender equity and women’s empowerment as important competitive and sustainability issues, and evaluate where and how they have a material impact in their value chains, they will not embed progress markers into their business models and will limit resources to address these issues to corporate foundation and corporate social responsibility (CSR) department budgets. At the same time, the companies that drive innovation in building this business case will likely become the leaders of the most sustainable businesses in the 21st century.

So, how can we better understand the business impacts of gender equity and women’s empowerment across the value chain?

Taking a page from the corporate environmental sustainability playbook, we should look at how gender issues impact risk, productivity, and growth. Gender impacts these factors in different ways and to different extents depending on the industry, company, and value chain segment.

Risk: Risk is particularly important to consider for women as employees, women in the supply chain, and women as community members. The price tag for workplace discrimination of all types may be as high as $64 billion in the United States alone. Companies that foster and reinforce cultures that exclude, demean, or harm women, as well as more subtly inhibit their career growth take on legal and reputational risk. Women employees can pursue legal action based on discrimination in pay or promotion, consumers can abandon a brand, and shareholders can revolt. Within certain supply chains (such as garment), women constitute the majority of workers. Companies that source from factories or suppliers that do not protect workers’ rights, or understand and address gender-specific issues can also face additional risks—operational, health, and safety risks among them.

Productivity: Addressing gender issues and supporting women’s empowerment can enhance productivity in the workforce and supply chain. Investing in women’s skills and facilitating access to resources can improve production quality and stabilize or increase output. Furthermore, human resources (HR) policies that address gender-specific needs (such as family-friendly policies, and non-transferable maternal and paternal paid leave) play a critical role in talent management, and can improve retention and reduce absenteeism. Addressing issues of gender-based violence (whether occurring at home, in the workplace, or en route) can also help reduce absenteeism, presenteeism (loss of productivity resulting from health problems and/or personal issues), and turnover.

Growth: Companies can experience growth by supporting women throughout the value chain. Various research studies have demonstrated that gender diversity has a strong impact on innovation in the workplace. Increasing gender diversity in the supply chain can also lead to greater innovation as well as new or improved market access. Furthermore, given that women control an estimated 64 percent of household spending and $29 trillion of consumer spending worldwide, they are a critical consumer segment that companies need to better understand, design for, and market to if they want to experience market growth.

Finally, gender inequality in a company’s operating environment can affect growth. According to the World Bank, more than 150 economies have at least one law impeding women’s economic participation (such as laws limiting mobility or restricting financial access). Even with positive legal frameworks, social norms such as the expectation that women attend to unpaid care work, can reduce women’s participation in the workforce. McKinsey estimates that if every country matched the progress toward gender parity in the labor markets of its fastest-moving neighbor, global gross domestic product could increase by $12 trillion in 2025.

Outside these three value drivers, and also intertwined with them, are the positive impacts that gender equity and women’s empowerment initiatives can have on more intangible value factors, such as brand and goodwill, particularly among the increasingly important demographic of millennial and post-millennial employees and customers.

Ultimately, the potential social and business impact of addressing gender inequities and advancing women’s empowerment is immense. Indeed, we are already seeing forward-thinking business leaders, such as Paul Polman at Unilever and Art Peck at Gap Inc., who are integrating gender into core business operations throughout the value chain.

There are several things companies interested in expanding their work in this area can do:

1. Conduct analysis to understand where and to what extent gender is material to the business through value drivers of risk reduction, productivity, and growth.
2. Get out of siloes. Learn from colleagues who have worked on integrating environmental sustainability, and collaborate with colleagues working on gender across the business—in HR, CSR, and procurement departments—to understand how gender impacts the whole business.
3. Implement gender friendly policies, programs, and initiatives in core business operations, and ensure that gender initiatives are not restricted to HR or CSR departments or foundations.
4. Collect and use data to model and quantify the concrete business benefits of interventions to promote gender equality.
5. Be bold, take action, and share results. Step up, innovate, push forward, and share the social and business impacts of work to empower women. This can help build the case that advancing women across the value chain is important to a long-term sustainable business—not to mention the right thing to do for women and society. 

Read more stories by Katherine Fritz, Genevieve Smith & Marissa Wesely.