It is easy to overlook small and medium-sized enterprises in engaging the private sector on LGBT+ issues. Yet, this is where the vast majority of LGBT people work. How can we enroll SMEs in the global LGBT+ equality movement? What is Out Leadership doing in this area?
Small and medium-sized enterprises (SMEs* – a specific definition of how SMEs are classified regionally is included at the bottom of this article) matter to the economy and disproportionately employ LGBT+ people compared to larger companies.
Most of Out Leadership’s 79 member companies are large, multinational companies that operate in multiple jurisdictions. These companies face the specific challenge of developing effective, consistent and legally compliant approaches to tackling discrimination against LGBT+ people that overcome significant differences in local laws and regulations.
Think of our member company and one of our biggest supporters HSBC, as an example, which operates in 65 countries and territories, covering Europe, Asia, North and Latin America, the Middle East and North Africa.
Yet, according to the World Bank, SMEs employ around 50 percent of workers in developing countries with the UK assessing that SMEs account for 60% of all employment. The World Bank identified that “small firms (<20 employees) have the smallest share of aggregate employment while the SME sector’s (<100 employees) contribution is comparable to that of large firms.”
There is evidence that LGBT+ people might be overrepresented among employees of SMEs and the informal economy. Barriers to education, loss of community support systems and discrimination in hiring are only a few of the multiple negative factors explaining this disparity.
In 2014, the economist Lee Badgett pointed out that in the developing world,
“LGBT+ people may be working in less productive positions than they are qualified for. (e.g. working in the informal economy) because employers refuse to hire them or because they do not have proper identification”.
In addition, the most marginalized LGBT+ people are less represented in large multinationals which tend to rely on the most educated and urban-based workforce. As a consequence, there is a real risk is that inclusion efforts would only benefit the most privileged, leaving the bulk of LGBT+ people behind.
Anecdotally, the early indication is that it appears the economic impact of the COVID-19 pandemic is affecting LGBT+ people disproportionately because of that same employment vulnerability (stay tuned for Out Leadership upcoming work in this area).
Generally speaking, policies and procedures tend to be less inclusive in SMEs. The three employment discrimination cases that the US Supreme Court is about to hand down a decision on, took place in small companies: including a funeral home and a parachuting agency.
Similarly, small businesses are more likely to refuse service to lesbian and gay people for so-called “religious freedom” reasons than big businesses.
It would, however, be incorrect to assume that large companies always or necessarily have superior anti-discrimination standards compared with smaller companies. In Milan a year ago, I met with VECTOR S.P.A. an independent and family-owned Italian freight forwarding company that has proudly implemented a thorough and thoughtful LGBT+ inclusion program.
But the high representation of LGBT+ people in SMEs means that it is imperative for the LGBT+ equality movement to continue to enroll these companies in its journey for equality.
Which arguments and mechanisms should we use to engage SMEs on LGBT+ equality?
As the UN Guiding Principles on Business and Human Rights make clear, all companies, irrespective of size, structure or location, share a common responsibility to respect human rights, including the human rights of LGBT+ people. This responsibility applies just as much to small and medium-sized enterprises (SMEs) as it does to large multinationals.
Beyond the human rights argument (which is losing speed everywhere – see my January 2020 post: Why I Left the U.N. LGBTI Team to Join Out Leadership), the reality is that the business case -which has been the engine for corporate engagement – is less impactful when speaking with SMEs.
SMEs are less affected by pressure from employees, consumers and investors than their larger counterparts. They are also less prone to the talent attraction and retention argument even though there is growing evidence that LGBT+ people tend to leave employers for more inclusive ones. This calls for different strategies in articulating the need for LGBT+ inclusion to trigger a social change in smaller companies.
Among these strategies, Out Leadership has been strengthening its cooperation with national and LGBT+ Chambers’ of Commerce and global-local networks which tend to have a broader reach.
Another strategy has been to encourage larger companies to enroll their suppliers in their diversity and inclusion efforts. The fourth standard of the United Nations Global LGBTI Standards for Business I co-authored in 2017 calls on companies to look at their supply chain and ensure that companies with which they work also respect the human rights of LGBT+ people.
Some of the early supporters of the Standards have held meetings with their suppliers to share best practice. This illustrates the concrete ways companies can live their commitment to the UN Standards by involving SMEs in their inclusion efforts.
Outside the walls of the companies – SMEs in the public sphere
SMEs and local companies have also clout and legitimacy when it comes to weighing in on public policy through collective action on issues affecting LGBT+ people such as decriminalization or other legal changes.
To date, large companies have tended to be more prominent than SMEs in speaking publicly about their LGBTI inclusion efforts. They are more high profile and attract more media attention, and they are particularly concerned about protecting and enhancing their reputations with the broader public as well as key stakeholders.
Even so, in some instances, SMEs may be better placed to stand up in support of local LGBT+ communities than larger, multinationals. In Singapore, for example, when foreign and multinational companies were barred by the authorities from supporting the country’s Pink Dot LGBT+ festival, 120 local companies, many of them family-owned enterprises, came forward to fill the gap with sponsorship and other forms of support.
In the coming months, Out Leadership will focus on encouraging its member companies to ask their suppliers to look at their own policies and practices. We will also discuss specific programs with our partners, the NGLCC and the US Chamber of Commerce Foundation to expand our inclusion efforts beyond large multinationals.
* The definition of SMEs varies from one region to another: the UK and Europe, SMEs are defined as independent businesses with fewer than 250 employees, the World Bank places the bar at 300 employees while that number is 500 for the US.