Supplier diversity: the missing piece in today’s DEI initiatives

Achieving a diverse supply chain is important to overall DEI today

The private sector has doubled down on workforce diversity efforts over the past few years. Roles dedicated to fostering internal diversity, equity and inclusion (DEI) have more than doubled since 2015.

Global progress on supplier diversity initiatives, however, has been slow. Research shows that most organisations have not started or are just beginning supplier diversity initiatives.

While boosting workplace diversity is incredibly valuable, focusing here alone leaves a critical piece of D&I out of the equation. In 2022, organisations that foster inclusive supplier relationships and provide equitable opportunities for diverse and minority-owned businesses will create both positive socio-economic impact and new business value.

Who is the diverse supplier?

A diverse supplier is a business that is at least 51% owned by one or more individuals that belong to a traditionally marginalised or underrepresented group.

These groups include small businesses, women-owned enterprises, and enterprises owned by minorities based on ethnicity, race, disability, LGBTQ+ orientation, military service and more. In the US, roughly 18.7% of all businesses are minority-owned and about 20.9% are owned by women. The UK reports that 5.1% of small and medium enterprises are led by ethnic minorities.

Diverse suppliers face unique barriers that can hinder their success, such as social and cultural stigmas, economic disadvantages and poor credit access. These challenges can be amplified in different countries depending on historical and cultural experiences, such as colonialism, and varying understandings of intersectionality.

Most small and minority-owned businesses took a hit during the pandemic and struggled more than other firms with accessing credit. Minority-owned businesses can also be at a competitive disadvantage due to lacking sophisticated marketing and sales infrastructure. Certifications through organisations such as MSDUK, National Minority Supplier Development Council (NMSDC) and other associations can greatly enhance visibility for diverse suppliers, but the application process is often costly and extensive.

Organisations can use their spending power to give opportunities to minority-owned businesses and still meet key procurement criteria. In fact, 76% of all diverse suppliers met buyers’ expectations and another 23% exceeded them, according to The Hackett Group.

Diverse suppliers are essential to our cultural, economic, and social structure. Data from NMSDC shows that certified minority-owned businesses generate $400 billion in output, which supports over two million jobs and $49 billion in annual revenue.

Benefits of supplier diversity

Firms that participate in supplier diversity programmes generate 133% greater ROI, according to The Hackett Group. JAGGAER and TealBook’s 2021 Supplier Diversity Survey found that an inclusive procurement strategy also creates positive reputational impacts (52%), improves internal culture (44%), and boosts organisational agility (38%).

Over half of people want to work for a company that has a supplier diversity and inclusion programme, which means boosting supplier diversity can help companies recruit and retain top talent too.

From a procurement perspective, a more inclusive strategy drives supplier innovation (46%), greater supply base competition (44%) and lower costs (26%). By nature, diverse procurement strategies widen the pool of potential suppliers, which boosts competition and leads to higher product and service quality while lowering costs.

Five steps to take today

Three-quarters of organisations plan to expand global supplier diversity programmes by 2023. Keep the following top of mind as you grow your programme.

  1. Start from within: If your internal company culture isn’t inclusive or diverse, it will be difficult to get meaningful initiatives off the ground. The right culture makes it easier to get stakeholders on board and solidify the processes that drive supplier diversity. There needs to be a real culture shift from the top down.
  2. Identify your champion: 46% of procurement and supply chain leaders globally say they have senior executive backing for their supplier diversity and CSR initiatives. Choose a leader within the organisation that will have an active voice on supplier diversity, attend events, network with key groups and ultimately be an advocate of the programme.
  3. Set your goals: Establish a set of KPIs and constantly evaluate your progress. Think hard about the value you want to get out of your programme and identify the metrics that will help you get there. From brand enhancement metrics and local community and economic impact to increases in customer satisfaction, savings, and more, there are a variety of ways to measure supplier diversity success.
  4. Find diverse suppliers: Get involved in industry groups, LinkedIn communities, Reddit threads. Attend supplier diversity events. Network with your peers and learn how they are approaching their own initiatives and found diverse suppliers. The actionable insight and ideas gained from knowledge sharing and collaboration is invaluable, as is technology. There are tools that can identify the right diverse partners for your business and provide powerful analytical insights to prove performance and ROI.
  5. Choose your programme leader: An effective supplier diversity programme requires proactivity and a considerable time investment. Beyond identifying and onboarding suppliers, you will also likely need to offer support through training, mentoring, and networking. You may eventually need a dedicated professional in charge of supplier diversity to get the most out of your efforts.

Influence change

Suppliers are an extension of your company. These partners should be considered within the organisation’s broader D&I strategy. Promote diverse suppliers’ perspectives, be their advocate, and invite them to the table. It’s the right thing to do, good for business, and will set higher standards for the corporate environment.

Jim Bureau is CEO of JAGGAER, a global procurement technology company that has helped hundreds of customers navigate through the pandemic and other supply chain disruptions.

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