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Extending Gender Parity ESG Principles to the Informal Economy

By March 2, 2022No Comments

Extending Gender Parity ESG Principles to the Informal Economy

Historically, in traditional African society, male-dominated businesses have been reluctant to actively recruit women, with traditionally conservative cultural and workplace beliefs informing this practice. The formal sector has however radically improved its hiring principles over the last two decades, aided by changing regulatory landscapes and the global acceptance of environmental, social and governance practices (ESG) which include the promotion of female representivity in the workplace. The informal sector has however been without these drivers.

According to a 2021 World Bank report, the informal sector accounts for 70% of employment in emerging markets[1]. Businesses in many informal sectors often find themselves operating in locations that are not particularly secure, they have limited bookkeeping records and no insurance, which can, amongst many other factors, limit their access to expansionary finance. In addition, rising levels of socio-political unrest in recent years and lack of access to ESG knowledge and training that improves stakeholder relationships significantly and reduces natural resource costs, can contribute to the sustainability of informal businesses being somewhat precarious.

The environment and culturally discriminatory beliefs regarding women in the workplace can give rise to situations in the informal economy where women are vulnerable and may be subject to harassment and other abuses[2]. When we combine the need to bestow upon women the ‘traditional’ roles typically ascribed to them (housewives or more menial-based work) with the level of vulnerability of women in informal trade, a view can be justified that women in the workplace are a burden.

However, multiple research papers have correlated improved business performance with increased levels of diversity in both the boardroom and the workforce. Some have come to the realisation that neglecting to have women in the workforce may be directly affecting the level of both productivity and turnover the business could potentially be achieving. Having improved levels of gender parity allows for creativity and greater connection with a diverse customer base, leading to a more productive working team.

Better dialogues and understanding of customers improves financial performance and leads to improved resilience of the business. In fact, it is the degree of engagement with one’s stakeholders that can allow businesses to become early identifiers of trends and adopters of innovations that are attractive to their customers. Stakeholder engagement is one of the key tenets of sustainability. This is readily applicable to the formal and informal sectors.

In advocating that the goal of gender parity is morally right, one also has to acknowledge the contribution that women make to their communities living standards. Women in developing countries re-invest approximately 90% of their earnings into their families and communities, in comparison to men who invest around 30% to 40%[3]. This means that when women have increased access to financial resources, a greater contribution towards the education and health of the community will be made[4]. Interestingly, women make up 58% of the continent’s self-employed population. However, a recent World Bank report, Profiting from Parity, shows that women entrepreneurs across sub-Saharan Africa continue to earn lower profits than men (34 % less on average)[5].

As informal businesses are typically smaller operations than formal business operations and do not usually have a formal staff base, HR department, or easily contactable management structures, it is difficult to advise that they should hire a certain percentage of women. So how do we formalise the informal sector? How do we encourage female employment in the informal sector?

In South Africa, the cultural acceptance of women working and starting businesses begins with education. A concerted effort by established agencies, such as the Small Enterprise Development Agency (SEDA) and the Department of Small Business Development, stokvels, community leaders, local authorities, and NGO’s to actively promote business practices that incorporate environmental, social and governance (ESG) considerations will hopefully lead to cultural change.  In addition, financial institutions are increasingly demanding and rewarding adherence to ESG principles when deciding on financing for business and the fees attached to those programmes. This specifically includes consideration of gender parity in employment practices.

Bearing in mind that there are informal businesses that are solely focused on survival with very little means to change, I believe sustained education can lead to the cultural acceptance of women in the workplace. In addition, following global trends, legislative changes will assist in the application and adoption of ESG principles to businesses which will have an impact on the viewpoints of society.  The informal sector can then perhaps begin to take advantage of female know-how, perspectives, and their understanding of the customer base. This may result in increased employment, promotions, and salary levels of women in the informal sector, inadvertently benefitting the communities, and contributing to the sustainability and performance of informal businesses.

[1]https://www.worldbank.org/en/news/podcast/2021/05/24/as-covid-19-wreaks-havoc-on-service-workers-is-the-informal-sector-increasing-global-inequality-the-development-podcast

[2] https://www.endvawnow.org/en/articles/1957-women-in-the-informal-economy.html

[3] 2X Challenge, 2022

[4]https://www.unwomen.org/sites/default/files/Headquarters/Attachments/Sections/Library/Publications/2018/SDG-report-Chapter-3-Why-gender-equality-matters-across-all-SDGs-2018-en.pdf

[5] https://ideas4development.org/en/ffemale-entrepreneurship-key-ingredient-africa-growth/