This sector profile focuses on gender-based opportunities and gender-smart investing as an investment strategy for the manufacturing sector. It aims to support investors and fund managers to identify existing and future opportunities for gender-smart investing in the manufacturing sector, both light and heavy manufacturing. See BII’s full Gender Sector Brief for the evaluation of manufacturing investments, including screening and due diligence questionnaires and quick facts.
Industrialisation is a driver of economic growth, which can create economic opportunities for women and men alike, yet women have traditionally been under-represented across the manufacturing value chain. We know the industry could create value by increasing women’s representation in high-pay, high-value, leadership and technical roles. We also know that by integrating women’s needs into the design of manufactured goods and products, businesses can widen their customer base and expand their market share. This presents a significant business and impact opportunity.
Adopting gender as an investment strategy can help investors align their impact with the United Nations Sustainable Development Goals (SDGs). There is significant potential for investors to shape gender outcomes in line with SDG 5 on gender equality and SDGs 8, 9, 10, 12, linked to inclusive and sustainable industrialisation and production pathways for the manufacturing sector.
Guidance on ESG issues and opportunities linked to the manufacturing sector, including gender-based environmental and social risks, is provided in the BII ESG Toolkit for Fund Managers.
Why take a gender lens to manufacturing investments?
- Business case
- Expanding the talent pool: The global manufacturing industry is predicted to experience a deficit of more than two million workers by 2020. By 2030, the shortage could reach more than 7.9 million people. The resulting loss in revenue may be as high as $607.1 billion. Increased education levels across the world mean women represent a vast untapped talent pool and offer a credible solution to this shortfall. Where women are not already equipped with the requisite skills, companies could focus on upskilling young female employees through apprenticeships and workforce training programmes, recognising that women often have lower average attrition rates. The outsourcing of manufacturing from developed countries to the Global South has created important employment opportunities for women, with over 60 million women engaged globally in the sector, representing more than one-third of the total manufacturing workforce. In South Africa, more than 1.6 million people are employed in manufacturing, but fewer than 35% are women. In many export-processing zones of industrialising countries – where most of the work is labour-intensive, low-cost manufacturing – the female percentage of the workforce rises further, to 80%.
- Capturing new customer segments: As the manufacturing sector increasingly serves the local market, women will become an important consumer class. By 2028, women are expected to control close to 75% of discretionary spending worldwide. Women are expected to control $43 trillion of global consumer spending through voluntary private consumption or an exchange of money for goods and services by the end of 2020. Women are also involved in 80% of purchasing decisions worldwide. Strategies that help manufacturing companies reach the women’s market can help increase their resilience to lower overall demand and shifting business models. Ensuring product design, marketing, distribution, financing and after-sales efforts are adapted to women’s preferences is therefore critical for manufacturing companies to effectively target women as primary customer segments within local markets.
- Enhancing productivity, attractiveness and team performance: Attracting and retaining women allows manufacturing companies to capitalise on the ‘diversity dividend’ in their management and employee teams. Creating a supportive environment for female workers can positively impact their attendance and retention, resulting in significant cost savings. Within garment production specifically, factories often hire young women before they are married and/or pregnant and often let them go once they are. Nalt Enterprise, a large garment manufacturer in Vietnam, estimated that it takes up to three months for a new textile worker to reach productivity. They calculated that a 10% reduction in staff turnover saves the company 8.5% of the total annual wage bill. This constitutes a clear business rationale for efforts to retain – rather than dismiss – female staff, and to step up efforts to increase the maternity return rate.
- Boosting innovation and performance in supply chain: As entrepreneurs, women are key contributors to manufacturing supply chains and can help drive innovation and supply chain performance. By the end of 2020, women-owned companies will represent over 40% of registered businesses worldwide. Increasing the representation of women-owned small- and medium-sized enterprises (SMEs) in manufacturing supply chains can help anticipate customer needs, drive innovation and competition, and enhance brands and corporate reputations.
- Impact case
- Addressing skills shortages: The manufacturing industry is experiencing a profound transformation as a result of automation and shifts to green and sustainable modes of production and consumption. The greater involvement of women is seen as a way to address the industry’s skills gaps. As the secondary education of young women surpasses that of men in many of our markets, increasing the share of women in employment through hiring efforts can also boost shareholder value, improve financial performance, fuel innovation, optimise team performance and collective intelligence, and improve levels of engagement. In addition to emerging tech-enabled sectors, promoting women’s quality employment and leadership in ‘traditional’ manufacturing sectors (e.g. garment, textile, food) can help tackle obstacles to increased business performance and productivity.
- Enhancing job quality: Better work standards for women in the industry, and increased women’s leadership, are essential to shift gender gaps in the workforce and improve job quality in the industry. The garment manufacturing sector is characterised by poor working conditions, excessive hours, and low wages. Women also often face discrimination and are rarely able to rely on an organisation to protect their rights. The international media spotlight on standards within the apparel sector, including the 2013 Savar building collapse, mean that consumers in Western markets are increasingly concerned with how and by whom their products has been manufactured. Demonstrating gender-equitable practices, and providing good employment and skills development for women, can also serve to enhance the social impact narrative and reputation of manufacturing companies among end consumers, sourcing companies, and broader investors.
- Addressing gender-based violence and harassment: Evidence shows that creating respectful manufacturing workplaces helps manage reputational damage, drives productivity, promotes business growth, and helps to attract and retain talent. In Myanmar, bullying and sexual harassment are responsible for a 14% of annual loss of labour productivity. Evidence shows that disrespectful behaviours in the workplace also incur high costs to businesses related to turnover, recruitment, retention and business reputation. Sexual harassment is a concern across the manufacturing sector, with 30% of women in industrialised countries saying they have been subjected to frequent, serious sexual harassment (unwanted touching, pinching, offensive remarks and unwelcome requests for sexual favours). These offensive and demeaning experiences often result in emotional and physical stress and related illnesses, reducing morale and productivity.
Gender-smart investment process
- 2X Screeningelow explore gender-based opportunities and focus on the company’s smart inclusion of women across its workforce and supply chain, and its efforts to serve female customers. Screening questions will help determine: (1) If the deal meets thresholds and/or qualifies under the 2X Challenge; (2) if there are potential gender-based opportunities to be explored further in due diligence.
See the Gender 2X Screening Questionnaire for this sector.
- Due diligenceGender due diligence is the process of gathering gender-related data and information from the potential investee company for analysis to determine whether gender gaps present opportunities that may impact performance and affect an investee company’s operations and financials. Deal teams can integrate these questions into existing due diligence workstreams (e.g. E&S, impact, commercial). The investor will collect the due diligence information and proceed to confirm 2X qualification; (2) confirm gender-based opportunities to determine whether to take forward compared to other impact investing themes. Selected sector-specific documents can also be requested to guide due diligence further.
For gender-smart investors, due diligence on gender-based risks and negative impacts is an important aspect of ESG due diligence. Improper screening and poor management of gender-based risks can prevent effective gender-smart investing and have a detrimental impact on a company’s performance in terms of operational costs, reputational damage, stakeholder engagement, employee productivity and loss of confidence.
- Net-zero economy transitionShifts in business models to green manufacturing involve changing business and manufacturing practices as well as the mindset of stakeholders. The overarching aim should be to mitigate the industry’s impact on climate change and other environmental concerns. The green economy transition involves the adoption of sustainable practices within facilities, across the supply chain, and through the customer base. Where this involves new job opportunities, a gender lens can enable the upskilling of women to take advantage of those jobs and contribute to improved business outcomes. There is a risk that green manufacturing would exacerbate existing gender gaps in the sector, as women tend to be less represented in STEM-related professions. This is particularly the case for more skilled roles—which have greater employability and livelihood benefits—highlighting the need to upskill women for those roles.
- Intelligence of everythingThere is a risk that artificial intelligence (AI) exacerbates the employment gender gap for two reasons. First, AI is likely to increase automation, thereby eliminating jobs across a variety of manufacturing sectors, including female-dominated industries such as textiles. Second, AI relies on ‘real world’ data and so can inadvertently reinforce existing social biases. Gartner (2016) predicts that by 2022, 85% of AI projects will deliver erroneous outcomes due to bias in data or algorithms. However, AI also has the potential to reduce the burden of domestic housework on women, allowing them to take on paid work during the day. Also, the gig economy and remote work may offer better opportunities for women to enter the workforce while balancing work and family responsibilities.
- Ethical EcosystemsWestern consumers are increasingly concerned about how manufactured goods and products are sourced, procured and assembled. As a result, manufacturing companies (particularly exporters) across Africa and South Asia may be subject to additional reporting requirements around gender diversity and sustainability.
- Advanced materialsThe manufacture of advanced materials could open up opportunities for women’s job creation and upskilling. For example, new manufacturing capabilities will be required for each of the materials outlined in this megatrend (e.g. self-healing solar panels, advanced pesticides, arsenic removing chemicals, bricks made from urine and sealant earth floors).
The following resources should help investors and fund managers further develop their gender-smart investing approach in the sector.
- Deloitte: Women in Manufacturing: Stepping Up to Make an Impact that Matters (2017)
- International Centre for Research on Women: Women in Manufacturing: Mainstreaming Gender and Inclusion in Kenya (2020)
- Close the Gap: Making Manufacturing Work for Women (2015)
- KPMG, UN Global Compact: SDG Industry Matrix: Industrial Manufacturing (2016)