Last year, lean supply chains were the prevailing wisdom across industries. When supply chains ran into coronavirus-induced lockdowns, that wisdom came into question. As early as February, 70% of US companies were assessing inventory. In the following months, supply chain disruptions received national attention when there were shortages of basic necessities like toilet paper and PPE. Even now, businesses are still experiencing the impact of COVID-19 on their operations. Diversity and inclusion in the supply chain is now critically important.
Almost no business has been left untouched by the pandemic – 97% of firms worldwide confirmed they have been impacted by supply chain disruptions. Among the three quarters of companies reporting drops in revenue, the average decline was 23%. For some companies, that’s enough to close doors. After a sustained pattern of decreased inventory, demand, and revenue, 60% of business closures during the pandemic are now permanent. Small businesses, which possess less bargaining power than their retail buyers and suppliers, have been the hardest hit with business closures.
Small Business Impact in Diversity and Inclusion
But even among small businesses, the impact was unequal. 65% of businesses in high rent zip codes laid off staff compared to only 30% in lower rent areas. From February to April, minority business ownership declined twice as fast as it did for whites. The worst decline came from the Black community, who witnessed a 41% drop. Months before the nation took to the streets to demand racial equality, black businesses were denied the opportunity to operate during the movement.
Not only is this a personal loss for the individual owners, it’s a setback for racial equality itself. According to Robert Fairlie, an economics professor at University of California, Santa Cruz, “the negative early stage impacts… on minority- and immigrant owned businesses, if prolonged, may be problematic for broader racial [equality] because of the importance of minority businesses for local job creation [and] economic advancement.”
These troubling setbacks come at a time when public outcry for diversity and equality has exploded. 70% of Millennials chose to shop with brands that demonstrate diversity and inclusion, 60% of people said brands’ reaction to protests would influence their buying decisions in the future, and 53% of adults aged 18-34 expressed distaste for working at a firm that failed to speak out during the protests in the future. Companies lose out on both customers and employees by failing to respond to these issues.
More than a Trend: Diversity Is Here to Stay
While many companies have promised to increase diversity going forward, they still need to follow through on their claims. Diversity isn’t a trend – it’s good for business. Diverse workforces lead to product innovation. When businesses rely on local suppliers, including the minority-owned businesses that remain, whole communities flourish. Diversity compliance is not enough. Diversity needs to be a business strategy to procure a successful future.