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November 01, 2022

Outcome to impact minority business funding

By Michael Verchot, director, Consulting and Business Development Center, University of Washington Foster School of Business

In all the political turmoil of recent years, at least one takeaway is increasingly clear: Elections do have consequences.

For entrepreneurs of color, this November’s election has special — though often overlooked — importance.

Corporations are increasingly aligning their supplier diversity goals and strategies under their corporate environmental, social and governance or ESG strategies and reporting.

We need look no further than the 2022 Billion Dollar Roundtable Inc. Summit’s focus on corporate ESG and supplier diversity to understand how important this issue is. Certainly, if corporations that are setting the pace on supplier diversity are aligning their work within the social component of the ESG framework, others will follow.

As I write this column, the U.S. Securities and Exchange Commission is reviewing comments to its proposed ESG rules and will publish its final rules this fall or winter.

Over the next two years, we can expect additional amendments and adjustments to these rules — that will have direct bearing on companies’ devotion to the social or diversity component of ESG.

Without the amendments under consideration now, corporations most likely will focus on environmental factors, especially climate change. That issue will undoubtedly compel companies’ attention because of its dramatic potential to impact the planet, draw public and media attention and consequently affect corporate actions.

With the amendments and their required specificity, the social or diversity factor will also receive the attention it deserves. Corporations that otherwise might concentrate only on climate change will build stronger diversity initiatives, with more visible performance initiatives and results metrics.

Two of the five SEC commissioners are up for appointment by President Joe Biden and confirmation by the Senate in the next two years. Ensuring that elected officials who have a commitment to growing people of color- owned businesses will be key to ensuring that supplier-diversity reporting is included in SEC regulations.

A second key federal government initiative that the 2022 election will impact is the State Small Business Credit Initiative or SSBCI program. Part of the American Rescue Plan Act of 2021, it reauthorized and expanded the SSBCI program originally established in 2010 with funding for one year.

Its $10 billion is intended to expand access to capital for small businesses, increase entrepreneurship opportunities and create new jobs. The money is distributed from the U.S. Treasury Department and is administered by states, the District of Columbia, territories and tribes.

SSBCI’s funding includes $1.5 billion for businesses owned and controlled by people of color. These funds aim to support small-business owners who have faced discrimination, hampering access to capital, markets and networks to grow their companies. They also aim to aid small businesses — including minority-owned — in designated low-income, high-poverty areas.

While culture wars incite most of the media coverage, tangible programs such as SSBCI and the ESG amendments deliver real economic benefits. They also demonstrate that there is a difference when elected officials who value entrepreneurs and business owners of color are in place.

Voters of color who value their communities’ and businesses’ economic well-being should take note. Then, they should turn out and vote accordingly.

To learn more about the Foster School of Business, visit foster.uw.edu.

Michael Verchot, University of Washington Foster School of Business