In the aftermath of George Floyd’s murder by a Minneapolis police officer, and in response to the rise of the social justice movement it spawned, hundreds of companies, including many in the technology sector, launched racial equity funds.
The funds make investments and philanthropic grants to nonprofits and businesses that serve communities of color. Fortune 1000 companies have committed an estimated $66 billion to racial equity initiatives, according to McKinsey. (ServiceNow, the publisher of Workflow, recently launched a racial equity fund to provide $100 million for investments in homeownership, entrepreneurship, and neighborhood revitalization programs in Black communities.)
The capital infusion into underserved communities is a welcome trend, says JP Julien, an associate partner at McKinsey’s new Institute for Black Economic Mobility. But capital commitments are just the beginning. Action must follow announcements, he says, to address deeply ingrained, structural problems that stand in the way of racial equity, such as access to mortgages and business loans.
In a recent interview, Julien discussed steps companies must take to make meaningful progress.
This isn’t just about philanthropy. Employees are looking to their employers not just to write checks but to stand up for what they believe in. In the past year, upwards of 70% of employees expected statements from employers about racial equity.
Businesses need to recognize that there are customers they aren’t serving, and think about how they can reach these customers and grow market share at a time when there’s a 30% gap in white vs. Black home ownership rates.
The U.S. is coming out of one of the largest recessions since World War II. As companies think about recovery and growth, there’s a huge opportunity to think about these valued customers and why you’re not reaching them. Our own research shows that closing the racial wealth gap could be worth as much as $1.5 trillion in GDP.
From our research, the process starts with knowing what problem to solve. For problems that are systemic, it doesn’t work to have a bunch of companies all doing individual things, which is why the next step needs to be coordination so the work is more effective. While giving money is helpful, the thinking needs to go toward solving a problem that goes across many businesses, such as providing down payment assistance to Black home buyers, or improving the shopping experience so Black buyers get to see more homes.
The next step is funding that goes beyond a one-time grant or donation. It needs to be long term, so you can move the needle on outcomes. Then there’s accountability: How do businesses measure what’s working, and how do they double down on that?
Finally, there’s building coalitions of support beyond just coordinating with other businesses. For example, you may need to call on philanthropic organizations to change outcomes, which means reaching beyond your industry.
Technology alone won’t solve the coordination challenges between organizations and sectors, or replace the deep commitment and dedicated resources that will ultimately be needed to move the needle on racial justice issues. But when used well, it could be an enabling tool to improve communication, share data, and better understand and track the impacts of various efforts.
There’s the Business Roundtable special committee on racial equity and justice, which is looking at issues like employment and housing. There’s a coalition of 18 financial institutions, working with the Ford Foundation, that is committing to release diversity data about their workforces and to diversify their suppliers and business partners. So we’re starting to see movement.