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February 25, 2022

Good Business: How Companies Can Advance Racial Justice

In the wake of George Floyd's killing in May 2020, Americans poured into the streets and marched across the country to show their support for the Black community and call for change.

The movement helped to also shine a light on the impact that corporate support and actions will play in advancing equity in American life.

The focus on racial justice that emerged from 2020 should encourage businesses to revisit their diversity, equity and inclusion efforts. Because, more than ever, it's clear that the key to having a good business means being a good business.

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What Is the Meaning of Racial Equity?

For companies, racial equity should mean more than hiring people from different racial backgrounds. Instead, racial equity should be defined as the process of eliminating racial disparities and improving the conditions of historically marginalized groups.

Ultimately, racial equity works toward racial justice, a concept that describes the absence of systemic inequities that hold back certain groups of peoples. Working together, racial equity and justice create balance in a system that's been historically skewed in favor of select groups.

How to Address Racial Equity

Jennifer Nickerson, corporate citizenship manager for City National Bank, said authentic outreach is an important first step. There are also important questions everyone must ask themselves moving forward.

“How can I use my position, my expertise to effect change?" said Nickerson, who oversees corporate giving and volunteerism for the bank. “How do I personally and professionally take action that's intentional to make a difference? For example, if I'm an IT professional, can I volunteer with an organization that brings coding classes to girls or BIPOC clients? What's authentic to me and helps move the needle?"

Indeed, more change is needed in all facets of life—from the workplace to health care, small businesses to large corporations.

Systemic Racism in the Workplace

One of the most difficult aspects of addressing racism in the workplace is how embedded it can be in a culture. Some of these systemic problems were made more obvious by the strain of the COVID-19 pandemic.

One McKinsey Global Institute study found 39% of all jobs held by Black Americans—compared with 34% held by white Americans—are threatened by reductions in hours or pay, temporary furloughs or permanent layoffs due to the coronavirus pandemic.

In addition, the virus has disproportionately impacted minority groups.

According to the Centers for Disease Control (CDC), Black Americans are 2.5 times more likely than white Americans to be hospitalized due to COVID-19, and Hispanics are 2.4 times more likely to be hospitalized. Death rates are 1.7 and 1.9 times higher respectively for each group when compared to Caucasians.

Systemic problems don't stop when there isn't a pandemic. For example, when it comes to entrepreneurship, research also shows Black entrepreneurs are three times as likely as white entrepreneurs to identify “lack of access to capital" as a major detriment to business profitability.

Fighting Racial Injustice Means Investing in Communities

Research also shows, however, that targeted support efforts, which include mentorship, investing in minority community groups and developing supplier diversity programs, can benefit everyone.

In 2017, when City National Bank opened a branch in the Crenshaw neighborhood of Los Angeles, a historically Black community with a mix of affluent and low-to-moderate income households, its commitment was to serve everyone and not just Crenshaw's wealthier residents.

“As a business, you must be intentional with diversity efforts," said Karen A. Clark, multicultural strategy manager for City National Bank. “In Crenshaw, we had a plan, and we committed to all the people there. No matter who came into the bank, we wouldn't turn them away. If we couldn't serve someone immediately based on their financial circumstances, we'd give them a warm introduction to a home-buying program or a business development center that we partner with and that could help them immediately. We support those organizations philanthropically with time, talent and treasure, creating well-rounded partnerships."

Connecting local people to resources—such as mentorship, business literacy, lending and financial education programs—is just one part of the bank's strategy in the community. This is a strategy that can be replicated by other firms.

How to Promote Racial Equity With Your Business

One way for business leaders to take concrete action is by diversifying their supply chain through a supplier diversity program.

Some companies, for instance, mandate that a certain percentage of spend or a minimum number of suppliers they consider for goods and services must be from a diverse background. The final decision is based on merit, as always; but this method ensures intentionality in creating equity in the marketplace, by mandating the consideration of qualified diverse suppliers.

Ideally, the result is an increase in a company's supplier diversity and would serve as a powerful example for other suppliers as they're encouraged to look at their own inclusionary policies.

While many companies see the value in supplier diversity and would like to offer more opportunities to minority-owned suppliers, one challenge that many businesses face is that they have long-term relationships, that can be hard to break, with legacy suppliers who are not diverse.

“We've learned one way to overcome this challenge is to talk with those long-term suppliers and ask them about their own supplier diversity and inclusionary initiatives," said Sal Mendoza, manager of City National Bank's community reinvestment program.

“The key is to be intentional across the board and to bring together the different groups that can address what people really need," said Mendoza.

Racial Equity Requires Collaboration

“There are responsibilities on both sides of the equation to increase inclusion in the business world," said Clark. “People should also have strategies and insights to corporations, understanding their policies, priorities and passions to maximize the opportunity for bids."

One place to start is by reading corporate responsibility reports to determine which companies have active supplier diversity programs, explained Robin Billups, founder of The Billups Group consulting firm in Los Angeles.

“If you're a supplier who wants to work with a specific company, you can start by following their press releases and sending them a congratulatory note when you see they've acquired another company," suggested Billups. “This also provides an opportunity to ask for a 15-minute meeting to gain insight on working together."

Government agencies often have established relationships with diverse suppliers. Corporations that do business with the government typically need to meet established supplier diversity targets, so that can be a good place for entrepreneurs to start making connections.

“You can also get certified as a small and/or diverse business, which can help those companies with an active focus on diversity find you," Billups explained.

Getting certified as a minority-owned business is a vastly varied process that depends on a wide range of requirements that companies need to meet, Billups said.

While states and cities have their own certification organizations, you can accomplish the process through the Small Business Administration (SBA) and organizations, such as the National Minority Supplier Development Council (NMSDC) or the Women's Business Enterprise National Council (WBENC), Billups suggested.

Wanda Brackins, global head of diversity for RBC Wealth Management-U.S., agreed that certification and understanding the process of working with larger corporations can increase inclusion.

“We focus on training suppliers on how to work with organizations like ours because we understand how many small businesses don't know how to get through the red tape to be considered for an RFP from a larger business," said Brackins. “We're affiliated with many groups that work to educate business owners and make sure they get the third-party certification needed to qualify for some RFPs."

How to Promote Racial Equity With Your Business Practices

Any size business can combat inequity by taking small steps to be part of positive change.

Brackins and Clark suggested these go-to practices for anyone interested in making a more equitable business world, including:

  • Researching multiple minority-owned businesses to work with and support.

  • Expanding your network to include minority-owned business owners who can share ideas and best practices.

  • Implementing inclusive recruitment practices.

  • Mandating effective online diversity training for your employees to help strengthen interactions with minority business owners and your community.

  • Expanding your customer base to include minority consumers.

  • Joining a certifying agency as a member for access to diverse suppliers.

Whether you're a business owner with the goal of increasing racial equity, or part of a larger corporation that wants to expand its diversity efforts, training and intentional outreach can benefit both sides.

Corporate Racial Equity Is Possible With the Right Steps

For some larger companies and corporations, promoting racial equity isn't as simple as creating policies stating they'll do better. Reaching inclusion goals and meaningful change requires attacking problems at their root causes.

Robert Livingston, a lecturer in public policy at Harvard Kennedy School, points out that a company's best intentions and rules don't always translate to opportunity for everyone. For example, he cites a study that found Black candidates had callbacks increase from 10% to nearly 26% after they “whitified" their names and other aspects of their resume. Notably, these results were obtained from a company with a stated commitment to diversity.

While a company might make statements and establish policies to promote diversity, it isn't always enough to make a lasting difference. Looking to resolve this, Livingston produced a roadmap for racial equity that companies can use to attack unfair practices at the systemic level.

This roadmap involves the following steps:

  • Problem awareness: Does everyone within the organization understand that inequity is a problem?

  • Root-cause analysis: Does everyone in an organization understand the systemic causes of inequity?

  • Empathy: Once informed, do members of an organization care enough to make a change?

  • Strategy: Is there a solution for correcting the problem?

  • Sacrifice: Is everyone willing enough to do what it takes to reach diversity, equity and inclusion goals?

These steps are important for an organization with diversity, equity and inclusion goals to genuinely address systemic problems, helping to ensure that good intentions are backed by lasting results.

What Is the Goal of Racial Equity?

Ultimately, racial equity creates and improves conditions for all groups, diversifying business and opening opportunities on larger scale than ever. It creates a just world and opens limitless new possibilities for society – including those in business.

“Inclusion leads to profitability for everyone," said Clark, “and a safer, more just world in which we can all sleep a little more soundly at night." But remember the timing is important, too.

“Now is the time to strike and join a bigger conversation around inclusion and diversity," Clark commented. “There are countless ways to successfully design diversity programs that reflect your brand, your business strategy and the communities you aim to serve. The very act of reading this article and then taking one action and then another can lead to a more equitable business environment."

This article is for general information and education only. It is provided as a courtesy to the clients and friends of City National Bank (City National). City National does not warrant that it is accurate or complete. Opinions expressed and estimates or projections given are those of the authors or persons quoted as of the date of the article with no obligation to update or notify of inaccuracy or change. This article may not be reproduced, distributed or further published by any person without the written consent of City National. Please cite source when quoting.

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