Before we Start with Supplier Diversity…
What do we mean by Diversity and Inclusion
According to Global Diversity Practice
Diversity is any dimension that can be used to differentiate groups and people from one another.
In a nutshell, it’s about empowering people by respecting and appreciating what makes them different, in terms of age, gender, ethnicity, religion, disability, sexual orientation, education, and national origin.
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You can choose an inclusive supply chain that reflects supplier diversity
A Supplier Diversity programme can be used by procurement professionals to help an organisation encourage doing business with underrepresented groups such as women-owned companies, LGBT, owners with disabilities and BAME.
Why Implement a Supplier Diversity Programme?
- Diversity promotes innovation because if we all think the same our product and services will also be similar.
- We want different options from different sources, we want to increase the markets ability to supply.
- We want to give companies new opportunities to grow where previously they may be marginalised
- As an organisation, we should be committed to doing business that reflects the diverse society in which we live.
- New entrants to the market drive competition in the marketplace.
Supplier diversity can help organisations mirror their HR agenda for employee diversity and inclusion initiatives. Extending the programme to the supply chain doesn’t have to tie up resources unnecessarily. To be a truly inclusive organisation companies should expand beyond lip service and beyond easy to measure metrics such as using a PQQ or RFI to measure the percentage of spend with different types of suppliers but take this a step further. Companies can actively implement supplier diversity programs by working with local suppliers on opportunities for collaboration and making it easier for them to bid for work that offers product or service innovation. Good companies will review options for supplier diversity in their supply chain as early adopters, campaigns do not require huge budgets, departments can work with social media to develop awareness. Stakeholders may not realise that this is relevant therefore the procurement team can run workshops and training to educate internal stakeholders about the value of supplier diversity.
Corporate companies are most likely to implement supplier diversity programmes, increasingly this has evolved from talking about diversity to implementing it.
Taking an efficient approach makes companies more competitive. How? Diversity increase supply chain flexibility, where one group dominates they build a monopoly and there are fewer opportunities to challenge costs. Society wants to feel aligned with the brands and companies that they associate with therefore being inclusive means you remain in sync with your customer’s views on how modern businesses should be proactive in serving the communities in which they operate.
Below are some companies incorporating supplier diversity such as SME inclusion in their supply chain
Source CIPD
COVID-19 wasn’t the great leveller many thought it would be. Instead it highlighted inequality and societal issues that still exist, with those from ethnic minority backgrounds being hit the hardest. Organisations responded by examining their workforce diversity, recruitment, talent pipelines and their ethnicity pay reporting. As part of its work to help people professionals tackle racism and racial discrimination in the workplace, the CIPD also published guidance on developing an anti-racism strategy.
Inclusion and diversity is good for business for many reasons; firstly it enables you reflect and understand your customer/client base better, a Harvard Business Review study found that when at least one member of a team has traits in common with an end user or client, the entire team better understands the them. Secondly, research from Deloitte and McKinsey have shown that it can significantly increase your bottom line and ability to innovate Deloitte’s research, which included the findings of seven major research studies, showed that I&D enhances innovation by about 20%. and McKinsey’s report, Diversity Matters, examined data for 366 public companies across a range of industries in Canada, Latin America, the UK, and the US. They found that companies in the top quartile for racial and ethnic diversity are 35% more likely to have better financial returns than their non-I&D industry competitors.
Lastly, but perhaps most importantly creating inclusive workspaces where all employees feel that they belong, that they can contribute to the business and thrive is the right and fair thing to do to.
This guide offers some practical advice on how to source diverse suppliers for your business, with examples of race and gender diversity that can be broadly applied to any protected characteristic, such as: age, sexual orientation, disability etc.
What do we mean by ‘diverse suppliers’?
When we talk about diversity in suppliers, two of the leading advocate organisations in this space in the UK, MSDUK and WEConnect International, agree that a diverse supplier is one that is majority owned (51% or more) by those from a protected characteristic such as gender, race, disability or sexual orientation.
You don’t have to be working in a procurement function to impact supplier diversity. If you spend your company’s money on lunch for a meeting or securing the guest speaker for your company awards ceremony, you affect the supplier diversity. The intention to work with a more diverse range of suppliers in line with your organisation’s diversity and inclusion strategy applies no matter the size of your organisation, or whether you are procuring multi-million pound contracts or spending a few hundred pounds for some printing services.
Source CIPD
Benefits of a diverse supply chain
As well as helping to meet your organisation’s diversity and inclusion strategy, working to ensure you have a diverse supply chain has additional benefits:
1. Innovation
With warnings of an imminent recession, there has arguably never been a more critical need for innovation in the UK. Recent research commissioned by the Federation of Small Businesses (FSB) suggests that businesses run by entrepreneurs from an ethnic minority are more innovative than their rivals – 30% have recently invested in new product or service innovation, compared to only 19% of their counterparts.
2. Culture add
Diverse suppliers can bring a new perspective and open doors to new audiences that you may not have been able to access otherwise. Instead of just thinking about whether a potential supplier matches your values and culture, you could instead consider what they bring to the table that will add to your culture and help you move it in the right direction. This shift in viewpoint paves the way for you to engage with a more diverse supply chain and think outside the box when considering your procurement options.
3. Potential savings
A downside of deciding only to work with large suppliers is that it can stifle competition, and the barriers to entry for the smaller suppliers (typically where diverse suppliers fall) become insurmountable. You may believe that this approach is the most economical option due to economies of scale, however, because many diverse suppliers are often small and medium sized businesses, their size makes them agile; they have fewer overheads, are more flexible and that can offer better value for money.
4. Local option
During COVID-19, many sectors saw a reduction in productivity, meaning businesses were forced to consider what is available more locally to them. The predicted trend is an increase in regionalisation and if your company is only relying on the global option it could cause delays, reputational risk and even loss of business. You can still keep your global supplier in conjunction with a diverse supplier closer to home.
Seven steps to increase the diversity of your supply chain
The steps below will enable you to diversify your suppliers in a meaningful and sustainable way, to benefit your company and wider society.
Step 1 – Examine the data
It’s important to understand your current level of supplier diversity. Do you know who you buy from? If you don’t already have the data, undertake a research exercise and send all current suppliers a questionnaire about the diversity of their ownership and make it clear to them your commitment to diversify your supply chain. You can also encourage them to complete the same process with their suppliers. If you are a large company with a team of procurement specialists, you might also look at that team’s level of diversity, and how that might be impacting your diverse supplier search.
Step 2 – Craft the business case
Once you know the diversity of your supply chain, you can consider where to focus effort. You may have a good percentage of business suppliers who are women-led but not many who are ethnic minority-led or vice versa. The aim is not to simply ‘tick a box’, but to create a strong articulated business case for supplier diversity, aligned with your diversity and inclusion strategy, and to gain senior level commitment and full support for the programme.
Maggie Berry OBE, Executive Director at WE Connect International, suggests that companies commit to at least one diverse supplier on every request for proposal (RFP). This is an accepted form of positive action to get the supplier on the list, and give them an equal chance to be considered. It does not guarantee the diverse supplier the contract, and they will still need to be evaluated as the best choice for the work in competition with other suppliers. “It’s important not to waste the diverse supplier’s time, you shouldn’t just include them to make up the numbers, they should have a real chance of winning the business” she says.
Step 3 – Set targets
The articulated business case must have targets, after all ‘what gets measured gets done.’ And by measuring your progress, you can understand what’s working and what’s not. Remember that you are aiming to create a long term and sustainable programme of supplier diversity. Do not expect instant results and then be able to move on to the next initiative; your targets should be short, medium and long term.
Step 4 – Find diverse suppliers
Diverse suppliers do exist, but you may need to look beyond your usual ‘go to’ suppliers to find them. Advocacy organisations like MSDUK for ethnic minority owned businesses and We Connect International for women owned businesses are a great start, but of course not all diverse businesses are registered or certified by them. You can look out for directories such as the BAME Executive Coach Directory, or look at businesses that are nominated for or win awards, such as the Black British Business Awards or Asian Business Awards. Your local Chamber of Commerce will know its members well, and the Federation of Small Businesses (FSB) and Institute of Directors (IoD) have leads for diverse groups who you could ask for recommendations. You could search your network; every person in your network has an extended network that could include the diverse supplier that you are looking for. As with any business undertaking, you will always need to do your own checks and due diligence to make sure that the diverse supplier is right for you.
Step 5 – Engage with diverse suppliers
To begin to develop relationships with potential future diverse suppliers you could provide information events on your business, how you work and how you procure contracts. This would help the diverse supplier be better equipped to submit proposals when the opportunities arise. If you are a smaller business, one to one meetings are a good way of getting to know potential diverse suppliers, perhaps a quarterly virtual coffee.
One of the key elements is to provide feedback to diverse suppliers if they are unsuccessful so that they can learn and grow from the experience. It’s also helpful to let them know that most organisations don’t win contracts the first time that they apply for them.
Step 6 – Monitor performance and remove obstacles
Depending on the size of your company, the number of diverse suppliers that you have, and the number of contracts running, you might review your success against your targets, monthly, half yearly or annually. When you do review progress, you should be looking to understand what’s working and what obstacles are getting in the way. Obstacles could include onerous paperwork, time consuming online portals or not enough turnaround time for the diverse supplier to respond. Once you know what’s working you can do more of it and when you know what the obstacles are, you can take steps to remove or help the supplier overcome them.
Step 7 – Celebrate and share success
Once you are making some progress on your target, however small, do let others in your company know. You can share case studies on an internal intranet or newsletter, include it in your annual report, or share it publicly on your website or in a newspaper article. This reinforces your commitment and galvanizes energy to make continued progress.
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