Here in Davos, Switzerland, at the World Economic Forum, much of the discussion is about economic growth. The International Monetary Fund’s Christine Lagarde inspired those attending to focus on the power of what she termed “inclusive growth”: “the evidence is clear, as is the message: when women do better, economies do better.” Today, visionary companies that initially embraced this notion through corporate philanthropy are now making investments in women a pillar of their business strategies.
In recent years, investing in women has become more than inspiring rhetoric or good PR for a company. It’s now becoming a core business strategy yielding quantifiable returns. As Secretary of State Hillary Clinton explained at an Asia-Pacific Economic Cooperation meeting in 2011, to “achieve the economic expansion we all seek, we need to unlock a vital source of growth that can power our economies in the decades to come.” By “increasing women’s participation in the economy and enhancing their efficiency and productivity,” the secretary said, “we can have a dramatic impact on the competitiveness and growth of our economies.”
These dividends come in part as a result of the growing economic influence wielded by women. In the United States, women control or influence more than 80 percent of purchasing decisions. Globally they are responsible for $20 trillion in spending, a figure expected to rise to $28 trillion by 2014. Goldman Sachs has found that it is women who are redefining markets and creating growth by focusing their spending power on purchases such as food, health care, education, clothing, consumer durables, and financial services. And, according to a Deloitte study, women’s earning power is growing faster than men’s in the developing world, where their earned incomes have increased by 8.1 percent compared with men’s 5.8 percent. As Muhtar Kent, the CEO of Coca-Cola, recently stated, “The truth is that women are already the most dynamic and fastest-growing economic force in the world today.”
More and more companies are doing the math and investing in what Booz & Co. has dubbed the Third Billion—women globally—a market segment large enough to rival China or India. The early corporate leaders focused on philanthropic and corporate social-responsibility (CSR) initiatives and have been in industries that market specifically to women: consumer packaged goods and retail and fashion-related companies. The Body Shop and Aveda created significant philanthropies for women and girls, and the Nike Foundation launched its Girl Effect movement, while Liz Claiborne focused on violence-prevention efforts. Many companies donated heavily to breast-cancer research and prevention.
Now, even industries traditionally considered men’s—automotive, oil, investment banking—are finding common cause with women and girls. Encouraged in part by the microfinance movement, their efforts often focus on women’s empowerment through entrepreneurship. For instance, Goldman Sachs’s 10,000 Women initiative has given more than 7,000 women across the globe economic opportunity through training and mentoring, resulting in growth for a significant number of women-owned businesses. ExxonMobil’s Women’s Economic Opportunity Initiative also supports female entrepreneurs by helping to facilitate the networks they need to grow their businesses.
The rewards are becoming demonstrable. Significant research from the World Bank to the public and private sectors has shown how investments in women yield a “double dividend”: women are more likely than men to invest their incomes in their families and communities, driving GDP up and illiteracy and mortality rates down. This double benefit, combined with pure market forces, now presents Wall Street and women with a unique and mutually beneficial opportunity.
So how can more of the world’s global economic leaders take advantage of this convergence of trends and harness the power of women for business growth and progress?
“Women are already the most dynamic and fastest-growing economic force in the world today.”
First, embrace a broader definition of corporate citizenship, one that goes beyond traditional notions of CSR. Instead of treating women solely as recipients of philanthropy, companies should see them as partners critical to every part of the value chain—marketing, sales, distribution, research and development, and management. For example, Coca-Cola recently launched a program to include 5 million women across its entire business structure, or corporate value chain, by 2020. Funded by the for-profit business, not the foundation, the program aims to include more women in every area of operations, including training them as business owners to market and sell products. Direct-selling companies such as Avon, Mary Kay, and Tupperware have long understood the value of women entrepreneurs as a distribution channel—and drivers of the bottom line. The direct-selling model gives women the training, credit, and support to start their own businesses by selling company products. It has been particularly successful in developing world markets with infrastructure challenges. Indeed, women have been known to paddle down the Amazon to sell products in remote communities.
Second, commit to greater diversity in management and corporate governance. There is no question that too many executive women today are still only tapping at that proverbial glass ceiling. As a result, corporations continue to deprive themselves of the very talents, energies, and insights that can propel growth and market opportunities. A recent Catalyst survey found a strong correlation between gender diversity in the leadership ranks of a business and that company’s performance. For instance, according to a Deloitte report, when women were given a significant role in product development at Campbell Soup, they came up with a new line that became a $200 million business almost overnight.
Third, aggressively integrate women-run small and medium-size businesses into the supply chain. By seeking out and working with women-owned firms, companies can not only diversify their supply chains and mitigate risk, but also support women entrepreneurs and expand small and medium-size enterprises (SMEs), which are known engines of GDP growth. Walmart is one example of a company using its enormous scale to drive business to women-owned sources. And organizations such as WEConnect that focus on the value of women in the supply chain are linking large companies like Pfizer, Microsoft, and Marriott with women vendors.
Fourth, eliminate the barriers women face in accessing finance and credit. Around the world, women face greater hurdles than their male counterparts in receiving financial services. As a result, women are less able to make the investments that can maximize profits and ensure their businesses reach their full potential. More financial institutions should recognize that women are a proven low-risk, high-yield investment and create products to better serve women as a market segment. Companies working to integrate women entrepreneurs into their supply chains could establish relationships with banks to encourage them to use purchase order agreements with their companies as collateral. Companies can also invest in women’s entrepreneurship funds or venture capital firms that specifically serve women-owned businesses.
Finally, take the lead in making the evidence-based case to governments that women are valuable—crucial—economic actors. In an era when governments around the world are trying to make do with less, it is essential that businesses and potential investors make national and local governments understand that investments in women’s education, health, and economic security and are important factors in big businesses’ decisions to expand into local markets are also investments that will create new jobs and lift economies.
Clearly, women are good for business, but is business good for women? Aligning the bottom line with women’s advancement is not a panacea for the plight of women worldwide. Critical human-rights issues must be addressed before women can truly advance. In many parts of the world, laws and customs still stand in the way of women’s empowerment—and we all must support efforts to reform these systems. At the same time, we must acknowledge that economic independence is critical to advancing those rights. The two are inseparable.
Ultimately, converting women’s fast-growing economic influence into real social, economic, and political power will take time and perseverance. But the momentum of the global marketplace, should we choose to sustain it, can provide us a way forward. As corporate leaders look for resilient dynamism and growth in 2013, there are no better partners poised to deliver profits and progress across geographies than the Third Billion.