Buying local isn’t solely reserved for the final consumer or for big businesses. Although big business is an essential factor for social accountability, as per the Economist, small businesses are key in leading by example and practising what they preach too. While outsourcing globally may be convenient in terms of supply and economic reserve, spending locally can create a ripple effect in support of the primary community with an increased ROI as well.
Whether your business is new to the market or if you’re still finding your ground, even the smallest organization can make a large difference in the community and in turn, the economy. As an entrepreneur, you have the power to reinvest in your community through job creation. The importance of small business lies in the fact that these independent suppliers keep money within the local sphere. Boosting your local influence will then have a major impact on your sustainable business development goals and as a result, environmental, social, and governance (ESG) factors.
With this in mind, the importance of small business goes beyond the alleviation of ESGs and sustainability. In fact, it largely impacts your investors and final consumers too.
From an investor standpoint, portfolio managers are looking to diversify, reduce risk and do good in the world, the people’s whose hard earned money they are managing are demanding it. Even more so, in today’s economy having a transparent risk management strategy is essential. Investors want to know where their money is going, how it’s being spent and who it’s benefitting, throughout the supply chain.
Diverse workforces and close supplier relations allow companies to be transparent in their risk reporting and to ultimately enhance the business’ relevance. The better you are in proving your business’ commitment to sustainability and diversity, the better your ROI will be. This goes for your final consumer also. Responsible consumerism is growing in popularity with more people opting to support small businesses who strive for sustainable practices.
Supporting the local community and generating a diverse supply chain is important for your small business growth. It’s what many stakeholders are on the lookout for and it can significantly impact your business’s success.
The Importance of Small Business and Supporting Local Suppliers
With ESG factors at the fore for sustainable business development and portfolio construction, the importance of small businesses has never been greater. We are seeing more organizations harness sustainability goals in order to attract capital and ultimately drive growth. Part of these goals is to drive economic inclusion by embracing diversity and supporting small businesses.
The truth is, achieving a sustainable business practice means that you have to cover the triple bottom line. Investors are on the hunt to diversify their portfolios and embrace the benefits that come from an inclusive work environment. A company with a poor environmental and social impact record may not be top on their list of bids.
Beyond the economic effect, supporting local suppliers allows you to stand out from the crowd. According to Business.com, 63% of consumers want to support local businesses with an additional 54% of consumers appreciate the unique qualities that come from smaller enterprises. Opting for external suppliers means that you risk losing these unique qualities and therefore an active consumer base.
If your ESG goals are to be met, it’s likely that your list of suppliers and diversity of the workforce plays a major role. For those reasons, we will unpack the importance of small businesses and how your investors can benefit in the process.
Why Diversity Matters to Investors
It’s growing in prevalence that investors are no longer focusing solely on the ROI but rather the rate of diversity, sustainability and inclusion too. These days, “diversity and inclusion” are often spoken about but little is done in improving its relevance for the importance of small business. Buying local and employing a diversified workspace comes down to your company’s complexities and values. Considering a strategy around diversity and inclusion can lead to strong and sustainable business and higher investment rates.
Different Experiences Improve Overall Outputs
With different perspectives come better and more insightful decision-making tactics. If you had to employ a workforce with all of the same experiences and preferences, it’s highly likely that you’d be excluding an essential part of your target market as well as limiting your end product. In other words, you won’t be seeing as much consumer buy-in as you would with a diversified force. In addition, studies have shown that teams that are less diverse are less innovative.
Best-practice companies infuse diversity across all tiers of their business units. It’s imperative that businesses use diversity and inclusion to strengthen their competitive advantage and be a catalyst for a higher ROI in human capital too.
As an investor, analyzing the rate of risk in a non-negotiable. Companies who are under scrutiny for their lack of inclusivity or societal footprint may lead to a greater impact on a loss of ROI. Take the gender gap, for example. Companies such as Disney and Mastercard are becoming benchmarks in the market for strong diversity and a solid gender-equality policy. And these policies go hand in hand with their stock prices. On the other hand, companies such as Apple and Facebook are seen to be failing in this regard. As a result, there is often less support from consumers and investors and in turn higher levels of scrutiny on the whole. Failing to diversify a company’s personnel can lead to court cases, bad press, and a decline in sales - all of which is a black mark for interested investors.
Diversity is Good for Business
It’s no secret that good business isn’t just about the final dollar. In fact, in the past few years, we’ve seen an awakening of social justice coming forward with pressure being put on all businesses, regardless of size. Catalyzing social change through sustainable development goals is what many investors are on the hunt for and so is the consumer.
As a small business, taking a diverse and inclusive approach to your decision-making strategies can lead to a positive brand image and higher sales. Increasing your portfolio’s bottom line can be done by employing different races, genders, and local suppliers to accurately represent the local community. As a result, your business and investors will benefit from higher returns.
The Bottom Line
For Fortune 500 companies or small businesses, diversity and inclusion, as well as driving ESG related objectives, is a process. A process which brings high ROI and increases your business’s bottom line. By buying local and employing a diverse workforce, you are actively creating an environment for maximum productivity. Inclusion management and connecting with local suppliers directly influence better decision-making and customer alignment while building a positive brand image. With the growing number of investors caring about diversity and inclusivity, as well as hitting ESG goals, the importance of small business lies in practising what they preach by supporting local suppliers.