Hundreds of companies across the US depend on their contracts with JPMorgan. From tech and law firms that consult with the bank to manufacturers that make its custom pens and notebooks, these suppliers can earn million-dollar profits from a contract with JPMorgan.
In an announcement shared exclusively with Insider, JPMorgan is urging its 100 largest business partners to accelerate spending with Black- and Hispanic-owned businesses. Failure to do so means JPMorgan may terminate its contract with the supplier, said Brian Lamb, the firm’s global head of diversity and inclusion. If a supplier doesn’t increase its spending with Black- or Hispanic-owned businesses, JPMorgan would first downgrade its contract from preferred or “Gold Status” to “regular,” according to a company spokesperson.
“We fully expect our suppliers to perform on this,” Lamb told Insider. “And when they don’t, we obviously have made it very clear that we’ll hold them accountable for that.”
Forty percent of JPMorgan’s largest 100 suppliers have formally agreed to increase their spending with Black- or Hispanic-owned businesses, and some $6.2 billion will be directed to minority-owned businesses over the next three years, Lamb said.
A representative from the bank said the firm expected suppliers to spend a “significant” amount on minority-owned businesses or risk their status with the firm, though they did not specify how much.
It’s worth noting that JPMorgan is pressuring other companies to increase spending with Black- and Hispanic-owned businesses. Lamb described the result as a “multiplier effect” in the economy.
“This isn’t philanthropy,” Lamb said. “At the end of the day, it’s revenue to small businesses that can ultimately create jobs, reinvest in their own communities, and drive prosperity in these communities that have been left behind.”
Lamb said JPMorgan’s supplier push was the result of conversations with CEO Jamie Dimon and other team members and the next step in the company’s plan to advance racial equity in the US economy.
After George Floyd’s murder, JPMorgan made a $30 billion investment in reducing the racial wealth gap. Citi committed $1 billion to address the gap, and Mastercard committed $500 million. Goldman Sachs said it was committing $10 billion to improve the economic status of 1 million Black women.
John Robinson, the president and CEO of the National Minority Business Council, agreed that JPMorgan’s supplier initiative would have a multiplier effect on the economy but expressed concern that only 40% of suppliers had agreed so far.
“Why can’t Chase get 50% to 60% of suppliers to agree to do subcontracting with minority/women- and veteran-owned businesses?” he said.
The $6.2 billion that JPMorgan’s suppliers are set to spend on minority businesses is expected to increase as more suppliers sign on over the next weeks and months, Lamb said.
Ming Leung, an associate professor of business at the University of California, Irvine, said JPMorgan could inspire other companies to pressure their own suppliers to do more business with Black- and Hispanic-owned companies.
“The impact is going to be huge,” Leung said. “It’s not just the dollars but the high-profile nature and attention that’s going into this. JPMorgan Chase is a big company.”
Minority-owned small and medium businesses that were underfunded or underutilized may see a big boom in interest and demand, he said. And the spotlight on them could help generate wealth in these communities. Less funding for Black- and Hispanic-owned businesses compared with white-owned businesses is one of the reasons a stark racial wealth gap persists. Research from the Federal Reserve in 2017 found that for every $100 in wealth held by a white family, a Black family had $10.
“We hope we can inspire other companies that may not be in our supply chain to realize their power in the economy,” Lamb said. “There’s just a lot of enthusiasm around this opportunity. There’s real dollars that we can redirect to help address the racial wealth gap.”