A Win-Win for Women and Business: Partnering for Growth in Worlds 2 and 3

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Over the past two decades, aid organizations such as the World Bank, microcredit institutions, and NGOs have recognized women’s distinctive role in international development. When aid and credit are funneled directly to women, rather than through traditional channels, improvements are seen in economic and social indicators ranging from economic growth to agricultural productivity to more sustainable population growth rates. “The empowerment of women is smart economics,” Robert Zoellick, president of the World Bank, has often stated.

Now, as more companies seek to do business in Worlds 2 and 3, the recognition of women as economic and social catalysts is broadening to the corporate community. Businesses are starting to see women in emerging and developing nations as a potential force for revitalizing the global economy, and for building new markets for their wares.

As Goldman Sachs has put it, investment in women “can have a significant multiplier effect that leads not only to increased revenues and more employees for businesses, but also [to] healthier, better- educated families, and ultimately more prosperous communities.”

A growing number of global companies are experimenting with new ways of partnering with women in Worlds 2 and 3—as customers, employees, suppliers, salespeople, distributors, and innovators.

The majority of these companies are already seeing benefits to their bottom lines: in a 2009 McKinsey & Co. survey of about 2,300 corporate executives, nearly three-fourths of the executives whose companies had initiatives aimed at economically empowering women in Worlds 2 and 3 reported either increased profits or an expectation of increased profits as a result.

Thanks to this promise of real added value, more corporations are taking note of and exploring this path to market development.

DRIVERS OF CORPORATE INVESTMENT IN WOMEN

The interest in building women’s economic and educational capacities in Worlds 2 and 3 is being driven by a number of developments, including:

  • Growing evidence that empowering women boosts economic growth: Gender disparities in education and employment can significantly hinder economic growth, while rectifying them may measurably boost it. A recent study found that gender gaps in the Middle East and North Africa cost those regions 0.9 to 1.7 percentage points in annual GDP growth compared to East Asia.6 A separate analysis by Goldman Sachs concluded that closing employment gender gaps in the BRICs and the so-called Next-11 countries could boost per capita incomes in those nations 14% higher than current projections by 2020, and 20% higher by 2030.
  • Women’s capacity to boost profits: The2009 McKinsey survey found that among executives whose companies already had initiatives focused on empowering women in Worlds 2 and 3, 34% reported increased profits and another 38% expected profits to increase—a total of nearly three-fourths who saw or expected near-term benefit to their bottom lines as a direct result of these efforts.
  • Companies’ drive to build new markets: Companies operating in Worlds 2 and 3 often find that hiring women as employees, managers, and in distribution and sales helps “their labor forces become more productive, the quality of their global supply chains improve, and their customer bases expand,” motivating them to hire more.

THE BUSINESS CASE

Companies that have invested in women’s economic empowerment frequently cite a desire to contribute to the societies in which they operate. But many others say they need a clear business case. In the McKinsey survey, 25% of the companies not currently partnering with women in developing countries said they would need to know they could generate additional value by doing so.

Research and experience have begun to clarify the specific ways that economically empowering women can generate new value:

  • Economically empowered women are new customers: Generally, when women gain economic power, household spending rises. Categories that benefit most include food, healthcare, education, clothing, consumer durables such as appliances, and financial services. Savings rates may also rise.15 This new or expanded spending can enlarge existing markets, or create new ones where none existed before.
  • Human resources and value chains are strengthened: Companies that invest in women’s education and training in developing and emerging markets say that newly skilled women are a diverse and motivated talent pool, and that employee productivity and retention also improve across the board. In addition, some of these women become entrepreneurs who participate in the value or supply chain. Finally, some become managers—and research has shown that gender-diverse leadership correlates with stronger financial and operational performance.
  • Remote markets can be accessed: Hindustan Lever, South Asia’s largest consumer-products company, provides microcredit grants to rural women who market and distribute its household products door-to- door in remote villages where roads are scarce and distribution networks are nonexistent. In India, this sales network totaled nearly 50,000 women by 2010, selling to more than 3 million homes.18 Avon has used a direct sales model to access rural customers deep in the Amazon region for decades.

3 BUSINESS IMPLICATIONS

  • While the special role of women in economic development has been grasped by aid organizations over the past two decades, expansion of this understanding to the corporate sector is new. Global companies operating in Worlds 2 and 3 can both gain a near-term competitive edge and build future markets by strategically investing in women’s employment and education in target regions.
  • Companies that have found success through investing in women in Worlds 2 and 3 have treated the decision as a strategic one—clearly identifying the desired impacts for both the women and the company, and designing tactics to achieve these objectives in tandem. In addition, many of the respondents to the 2009 McKinsey survey felt, the CEO needs to be involved to truly ensure success of these programs.
  • Companies will need to measure the progress of their initiatives with metrics tailored to local markets. For instance, are female employees or trainees able to control their own bank accounts? Highly localized market studies can help identify relevant measures of economic empowerment.