- Businesses and governments are increasingly recognizing the need for supplier diversity.
- We spoke with four experts about how to overcome barriers and realize the benefits of supplier diversity.
In a world where the COVID-19 pandemic has contributed to an increase in the global gender gap by a generation and where we see growing socio-economic inequality, encouraging signs for social reform and equality are emerging in supplier diversity.
Supplier diversity is becoming a top priority for the private sector, highlighting a shift of corporate objectives from compliance towards social and economic inclusion. A 2021 study by Hackett of 100 large global and US-based companies found that almost three quarters of organizations either already run or plan to expand their global supplier diversity programs by 2023, and that the average 2025 target is to spend 13% with suppliers that are more than 51% owned or controlled by an individual or group that is traditionally underrepresented or marginalized.
To understand how organizations can achieve supplier diversity, we reached out to four experts. Here are their views on overcoming obstacles and realizing the benefits of supplier diversity.
'Positive steps need to be backed by real commitment and outcomes'
Mayank Shah, Founder and CEO of Minority Supplier Diversity UK (MSDUK)
Supplier diversity enables companies to encourage entrepreneurship in underserved, underrepresented communities, which in-turn creates jobs, wealth, better health and education in those disadvantaged communities. And a more diverse supply chain impacts the bottom line through innovation, competitiveness and sustainability.
In the UK, a recent government policy statement on public procurement has made supplier diversity a priority area for local governments. These are positive steps in the right direction, but they also need to be backed by real commitment and outcomes. Here are some recommendations to make it happen.
- Pursue public-private partnerships: Make major private sector contractors to the government commit to supplier diversity. Set targets and include reporting mechanism to monitor outcomes.
- Provide incentives: Like the US, governments should offer incentives to the private sector to do more on supplier diversity.
- Build capacity: Invest in building capacity within diverse, under-represented business communities.
- Collect business data: Government in the UK doesn’t record ownership and size of all businesses - that makes it hard to identify ethnic minority or women-owned businesses and support them. Companies should record business-owner information to support supplier diversity efforts.
- Support advocacy networks: There needs to be more support from the government to advocacy networks as that will help build capacity within the business communities.
- Overcome barriers: Common barriers faced by small businesses in accessing large corporate contracts are access to finance, opportunities and procurement processes that are made for large contractors. Break large contracts to small contracts, offer technical and business intelligence to diverse businesses, offer supply chain finance and commit to 30-day prompt payments.
Let supplier diversity take centre stage in driving economic inclusion and build future generation of entrepreneurs that represent the multi-cultural, multi-dimensional society we all live in.
'Be conscious and be proactive'
Pavel Subrt, Board Member and Head of Supplier Diversity Programme at the European LGBTI Chamber of Commerce
We at the European LGBTIQ Chamber of Commerce (EGLCC) believe in role models. They are very important for every society and community. We believe if we support people, they will grow not only as persons, but also as business professionals. As an outcome, the community will see them as a living example that “being out as LGBTIQ” in business is possible, and this does not mean losing customers or business partners.
The next outcome is that also society will see the whole community differently than many times in media at present, as successful business professionals. Regardless if representing a business, a corporation or government organization, every person can make a difference and contribute to creating role models (or even becoming one).
The way to start in procurement and sourcing is to be conscious and to be proactive. Conscious means to keep asking “from whom do we procure?” and “is our supply chain as diverse as our customer base is?”. Proactive means being curious, showing an interest and offering a helping hand. Diverse businesses are experts in their work but have many times no experience how apply for an RFPs (request for proposals), how to prepare a pitch or how to run their business in a long-term sustainable way.
Every person can make a difference. Why don’t you try it tomorrow – when it comes to businesses currently underrepresented in supply chains, make one proactive business action, or start a conversation.
'Both mindset and policy changes are needed'
Alexandra Tarmo, Head of Partnerships and Social Procurement at Unilever
A successful supplier diversity program presents a real opportunity to answer the resilience, savings and innovation needs of businesses, while also delivering sustainable, positive social impact. At present, the COVID-19 pandemic has shown that there is a strong need for equitable, inclusive economic recovery to address the growing inequality experienced by diverse and underrepresented groups.
For corporate procurement organizations, this presents a major divergence from the consolidation and simplification strategies of old, where many suppliers gave way to the few, leading to over-dependence and economic exclusion. To practically address these challenges and create an inclusive business environment, both mindset and policy changes are needed to work in parallel: unconscious bias must be met with education; supplier development programs should be implemented to bridge any capability gaps. A UK first, Unilever has backed the launch of the MSDUK Accelerator, with partners Dow, Google and WPP, to support UK minority businesses catalyse their corporate partnership potential through mentorship and networking opportunities.
While we’re looking to scale our supplier diversity efforts globally, we are committed to discovering and developing local solutions to address the unique challenges faced in each country. Government advocacy and collaboration will be critical to paving the way in markets without established supplier diversity infrastructure. In June this year, Unilever Thailand partnered with the Office of SMEs Promotion (OSMEP) to launch a nationwide search for local and diverse small-medium enterprises to join our supplier development program.
While it may be tempting to only set spend targets to drive and ascertain progress, a successful supplier diversity programme is however one which targets innovation, growth and positive social impact as key outcomes - diverse spend growth will be an organic outcome of what is essentially just good business.
'Bring down barriers for diverse-owned businesses'
Peter Zerp, Supplier Inclusion and Diversity Program Lead at Accenture
At Accenture, one of our key objectives as a responsible business is to help build supply chains that are more sustainable and inclusive. By encouraging a mindset of responsible buying both inside and outside our company, we are helping to generate long-term value for our clients, supplier partners and communities. Supplier inclusion, diversity and sustainability are at the core of this mindset and our procurement strategy.
Developing a strategy for launching a supplier diversity program requires proper research and engaging the right people. Some of the considerations for doing this successfully include:
- Champions: Securing local leadership and champions support will help understand potential legislation, local language and culture and supply chain opportunities.
- Data: Data is key. Analyze your supplier base and identify current diverse owned suppliers helps to set a baseline and KPI’s.
- Local representation: Partnerships with local organizations that represent diverse businesses is critical. These partners can help identify and connect diverse-owned suppliers with new, relevant opportunities.
- Market research: Performing market research, with organizations such as WEConnect International, MSDUK and EGLCC, is crucial. It provides necessary insights into the local landscape to understand the needs and barriers diverse-owned businesses encounter as they grow their business.
The information you gain from above checkpoints can help to decide which of your markets make most sense to start your supplier diversity journey. Based on best practices and learnings from this you can further develop a program that brings down barriers for diverse owned businesses to connect with opportunities to scale.