Racial Equality and Social Justice from Community Engagement

While many of the steps that companies should and can take relating to diversity and inclusion are largely internal, they can also take actions to address systematic racism in the external business and social contexts in which they operate.  Companies should commit to advocating for good, supporting employees in their interests in getting involved in community-based programming focusing on racial and economic justice, supporting full participation by workers and community members in democracy, rebuilding trust between businesses and communities of color and supporting minority-businesses through investments and preferences in procurement practices.

The following is an excerpt from the chapter on Racial Equality and Non-Discrimination just released on the website of the Sustainable Entrepreneurship Project.

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While many of the steps that companies should and can take relating to diversity and inclusion are largely internal, they can also take actions to address systematic racism in the external business and social contexts in which they operate.  Companies should commit to advocating for good by earmarking a significant amount of their lobbying and advocacy budget and related resources to supporting measures that would have a material impact on improving conditions for communities of color (e.g., increasing access to quality education and training, rebuilding infrastructure, ending racial oppression, reforming criminal justice systems and public and mental health systems and rebuilding the safety net).  In some cases, advocacy can be tied to creating more opportunities for companies to provide communities of color with access to needed products and services.  For example, Prudential worked with community-based coalitions to change state regulations that discouraged small businesses from offering savings plans to their employees, a situation that disproportionately impacted communities of color since a majority of those communities work for small businesses.  As a result, Prudential was able to offer its savings plans to small businesses, expanding its available pool of assets for management while strengthen the financial security in communities of color. 

Companies need to focus on rebuilding trust among communities of color given that many in those communities are skeptical that businesses really care about racial justice and equality.  While a particular company might have a good record and the best of intentions with respect to diversity, inclusion and racial justice, it nonetheless needs to be mindful that it is operating in a marketplace and social and cultural environment in which there has been a substantial and legitimate erosion of trust between businesses and communities of color due to past discriminatory practices including intentional failures to provide people of color with access to products and services on the same terms offered to white customers.  Until trust is restored, market opportunities of companies will be limited and customers in communities of color will be deprived of the benefits of the innovations that companies have applied to improve their products and services.  

Another way for companies to support changes in the communities in which they operate is by supporting employees in their interests in getting involved in community-based programming focusing on racial and economic justice.  Companies should allow employees to volunteer for these programs while being paid by the company and, in appropriate cases, also contribute cash and other resources to such programs.  While cash contributions from companies are always welcomed by nonprofits and other organizations working on racial justice initiatives, companies are often well position to provide unique resources such as equipment and technology.  Moreover, employees bring their own skills and experiences to the situation and can provide support in essential disciplines such as management and finance.  Volunteer programs are also a good opportunity for the representatives of the company to speak directly to community members and understand their concerns and their expectations regarding the company.

In addition to advocacy and volunteerism, companies should support communities of color by making investments in minority-owned businesses (or initiatives established for the primary purpose of supporting such businesses) and establishing preferences and requirements in their procurement practices to support minority-owned businesses and the professional development of people of color.  It has been estimated that 440,000 black business owners closed their doors in the wake of the Covid-19 pandemic, a 40% drop in the total number of black-owned businesses, and companies can provide black entrepreneurs with the financial support necessary overcome long-standing barriers to their survival including lack of access to credit and meager personal savings.  While companies can make direct investments, it may be more effective to commit to funding social impact funds and nonprofits led by people of color that specialize in addressing the unique issues that must be overcome by minority entrepreneurs and which are motivated by the expectations of their investors and donors to achieve significant social change within a specific timetable.   Companies should also localize purchasing commitments, develop and use lists of contractors led by people of color and require that professional services providers (e.g., lawyers, accountants and bankers) have at least one person of color in a meaningful role on the team working for the company. 

The National Credit Union Administration (“NCUA”) called on its members to develop and implement supplier diversity policies and practices to expand outreach for contracting opportunities to minority- and women-owned businesses and provide those businesses with opportunities to bid on certain contracts or procurement activities and otherwise inform them about how to do business with the credit union.[1]  The NCUA argued that integrating diversity into procurement practices promotes the development of a competitive advantage based on having a broad selection of available and diverse suppliers to choose from with respect to factors such as price, quality, attention to detail, and future relationship building.   The NCUA recommended that organizations should have a written supplier diversity policy that provides opportunities for minority and women-owned businesses to bid to deliver business goods and services, set aside some percentage of outside contracts as eligible for preferences for qualified minority- and women-owned businesses, establish metrics to track performance and demonstrate the impact of supplier diversity policies in terms of contract dollars and job creation and encourage prime contractors to use minority- and women-owned subcontractors by incorporating this objective into business contracts.  The NCUA also called for organizations to implement practices that promote a diverse supplier pool such as participating in conferences, workshops and other events that attract qualified suppliers in order to inform them of opportunities to work with the organization and developing an ongoing process to publicize contracting opportunities (including a list of qualified suppliers).  Finally, while a good deal of attention is placed on minority- and women-owned businesses, organizations should continuously consider expanding their supplier diversity outreach and practices to include businesses that are owned by persons who are members of other disadvantaged groups.

In addition to assisting minority-owned businesses in their communities, companies can provide philanthropic support to other projects and institutions that engage in activities that are essential to the wellbeing and advancement of people of color.  For example, companies can provide financial support to community programs relating to education, vocational training and healthcare.  In June 2020 Walmart announced that it would create a new center for racial equity underwritten with an initial $100 million commitment to support its philanthropic initiatives to address racial inequity and fund research, advocacy, innovation practices and tools and stakeholder convening in order to support the work of black philanthropic leaders and organizations that serve black communities.  Large technology companies such as Apple, Facebook and Google also announced plans to increase funding for support of entrepreneurs in communities of color.  While the additional funding is good news, companies need to carefully allocate and administer the resources and staff the initiatives with people who can apply a diversity lens to assessment of proposals and identify the appropriate metrics for measuring impact and success.  Getting the right team in place will take time since even experienced investors, such as those operating in the venture capital community, have been shockingly slow in engaging with entrepreneurial opportunities in black communities.  For example, according to data reported on in The Economist only one in 50 partners at venture capital firms was black as of 2020 and the ratio among venture capital-financed entrepreneurs was even worse at 1-to-100.[2]

Companies can also help effect changes in public policies that impact conditions relating to racial equity in communities by supporting full participation by their employees and community members in democracy by making Election Day a paid holiday, supporting registration of workers and community members for voting (e.g., setting up tables for voter registration at the workplace), providing assistance to ensure that workers and community members are actually able to vote and hosting forums for candidates to speak to workers and community members regarding their views on economic and social justice issues.  It is important for companies to avoid partisanship in these initiatives (i.e., appearing to be trying to influence employees, customers and community members to vote a certain way or otherwise support particular points of view on the political spectrum) and focus on encouraging and empower people to vote their conscience and have their voices heard.

Many companies have significant financial resources that can be contributed to support initiatives and projects to improve the lives of African Americans and other groups that have been disadvantaged in the economic system that has produced substantial wealth for a small sliver of society.  However, giving money is no longer enough.  As Darren Walker, the President of the Ford Foundation, wrote in The New York Times: “The old playbook—giving back through philanthropy as a way of ameliorating the effects of inequality—cannot heal what ails our nation.  It cannot address the root causes of this inequality—what the Rev. Dr. Martin Luther King Jr. called ‘the circumstances of economic injustice which make philanthropy necessary’”.[3]  For Walker and others, what needs to happen is that businesses, the beneficiaries of a system that perpetuates inequality, must be prepared to give up the special privileges and benefits of a system that favors them and needs to be reformed and recast in order for American capitalism to truly be a “beacon for upward mobility”.[4]

[1] National Credit Union Association Voluntary Credit Union Self-Assessment Checklist on Best Practices for Demonstrating a Commitment to Diversity & Inclusion, OMB No. 313340193 (Expired 3/31/2019).

[2] Beyond the pale, The Economist (June 20, 2020), 53.

[3] D. Walker, “Are you willing to give your privilege?”, The New York Times (July 5, 2020), SR4.

[4] See also E. Kaplan, “Everyone’s An Antiracist. Now What?”, The New York Times (July 7, 2020), A19 (“Being truly antiracist will require white people to be inconvenienced by new policies and practices, legal and social, that affect everything in everyone’s daily lives, from jobs to arts and publishing.”)..