The business case for diversity, equity, inclusion and belonging (DEIB) is clear. According to the World Economic Forum, companies that lead on DEIB are up to 36 percent more profitable and have up to 20 percent higher rates of innovation. Supplier diversity is a critical component of DEIB leadership, and that is why it should be more than a dedicated program within procurement, it should also be a companywide priority.
Cultivating DEIB requires more than strong policies and procedures: it requires all employees in an organization to approach their work with an inclusive mindset. When it comes to talent acquisition, for example, an inclusive mindset encourages employees to recruit from more diverse candidate pools and mitigate their unconscious bias in interviewing. Similarly, inclusive procurement might entail expanding recruitment for formal RFP processes and training employees to look for new sources for everyday purchases.
For the most authentic and effective results, these mindset shifts need to start at the top of the organization with the executive leadership team. To do this requires DEIB leaders create a holistic DEIB strategy that secures executive buy-in. Ideally this strategy positions supplier diversity as a key metric of DEIB leadership, a source of innovation, a tactic for combating supply chain disruption, and a tool for strengthening both employee engagement and relationships with local communities.
A key metric of DEIB leadership
Diverse supplier programs give companies a clear key performance indicator — spending with women- and minority-owned businesses — to track the effectiveness of their DEIB strategies. And this KPI can often be easier to measure and improve than other DEIB metrics like employees’ sense of belonging and engagement. Setting a public goal around supplier diversity, such as increasing spend by 50 percent by 2030, can be an effective way to drive change even faster. This accountability can ensure supplier diversity remains a priority for executives, and the company invests in the resources needed to staff and support the program.
A source of innovation
Workforce diversity and supplier diversity are complementary components of an effective DEIB strategy, and both drive overall innovation. Diverse teams bring new perspectives and are more effective at solving problems. Many diverse suppliers are small businesses, which means they offer more nimble, creative solutions than larger organizations. And businesses owned by women, veterans, people with disabilities, LGBTQ+ individuals and Black, Indigenous and people of color have valuable knowledge of and access to increasingly diverse customer bases.
A tactic for combating supply chain disruption
Diverse suppliers’ nimbleness can also help companies fulfill their needs in the face of ongoing pandemic-related supply chain disruptions. Although constraints have caused many companies to lock in big orders with existing direct suppliers to ensure consistency, there is a huge opportunity to diversify indirect supplier spend. The competition is also fierce for operational supplies like machinery and building materials, as well as for services such as business consulting and maintenance. Casting a wider net to find new indirect suppliers can ensure a company’s needs are not only met but met with flexibility and a fresh perspective.
A tool for strengthening employee engagement
One overlooked aspect of supplier diversity programs is employee engagement in sourcing new suppliers. Many employees have relationships with local business owners in their communities and leveraging these connections can exponentially increase potential supplier base.
This is especially true of employees who belong to your companies’ employee resource groups (ERGs) or inclusion resource groups (IRGs) for women, veterans, people with disabilities or members of the LGBTQ+ or BIPOC communities. Procurement can partner with ERGs to encourage informal networking with diverse business owners or more formal involvement through local chambers of commerce or interest groups. This is a win-win for both supplier diversity and employee engagement and retention, as a recent CNBC study shows 80 of employees want to work for companies that value DEIB.
Educating employees about the company’s DEIB goals and strategies, and their role in achieving them, is an essential part of building supplier diversity infrastructure.
A bridge to stronger community relationships
Lastly, creating a supplier diversity program that is integrated with the company’s overall DEIB strategy pays lasting dividends in local communities. Developing strong relationships with diverse suppliers can help them grow their capabilities, land contracts with other organizations and scale their operations. Employing people from underrepresented communities, investing in nonprofit initiatives, and contracting with diverse businesses can create a ripple effect that may eventually reduce gender and racial wealth gaps.
Conversely, this builds a company’s reputation as a good corporate citizen and an organization that genuinely cares about leveling the playing field for people from all backgrounds.
That all strengthens a company’s position of DEIB leadership — a position that can boost profitability and innovation for decades to come.