Investments in diverse suppliers will not only enhance a company’s social responsibility footprint but will also have the potential to impact its bottom line.
There is no force greater than the purchasing power of U.S. corporations to permanently address economic inequality.
This statement holds even more weight when you consider that the top five U.S. tech companies alone have a combined value of $7.5 trillion, which is larger than the GDP of Japan, the world’s third-largest economy.
Still, for 70 years, big business has stacked the deck, albeit unintendedly, against Minority- and/or Women-owned Business Enterprises (MWBEs) through their sourcing process. This has happened largely because MWBEs don’t have comparable scale, experience, references, capacity or track records of more established suppliers.
C-suite leaders and their respective business strategies were shaken when they examined their companies’ records, which generally speaking, were found entirely insufficient in providing equal economic opportunities to diverse suppliers. However, companies do want to change this narrative. In the last 18-plus months, more C-suite leaders than ever before have made commitments and staked their reputations on increasing the amount of money their companies spend with MWBEs.
While much of this commitment was in response to the outrage around systemic inequalities, highlighted by the global Black Lives Matter movement, large corporations with influence and purchasing power have a tremendous opportunity to use their authority and energy to elevate and grow diverse businesses.
In turn, investments in diverse suppliers will not only enhance a company’s social responsibility footprint, but will also have the potential to impact its bottom line. Companies that invest in supplier diversity help grow the impact of potential suppliers while promoting healthy competition. This often leads to better quality, lower costs and new ideas and experiences—all of which makes supply chains more resilient and more profitable.
As we look ahead to 2022, in order to be successful, multinational corporations who have complex supply chains should consider the following:
- Embrace Innovation Opportunities: The recent momentum for social justice has caught the attention of a younger, global generation, some of whom are just getting educated on inequalities and disenfranchised communities. Because of this, and coupled with the fact that this younger generation speaks and votes with its wallet and its conscience, companies can’t sit still on this issue and need to embrace innovation that includes time, energy and resources. One strong example is Bristol Myers Squibb (BMS), who has committed a billion dollars to supplier diversity. They encourage diverse suppliers to join their BMS Supplier Diversity Program, while also educating suppliers on the variety of goods and services they develop and deliver to patients everywhere.
- Develop Metrics With Accountability: BMS has been vocal about holding itself accountable to supplier diversity and tracking progress. Other companies, regardless of what stage they are in, should follow suit and be proactive with defining success and measurement against supplier diversity. What level of spend is being committed by an organization to this effort, and how are they tracking diverse suppliers through the system? Answering these questions enables all companies to have a goal, a starting point and an ability to understand their progress against a particular category (i.e., IT). CBRE Group, the world’s largest commercial real estate services firm, has set ambitious goals for itself and its roster of diverse suppliers. Recognizing that diverse suppliers currently represent less than 4 percent of its more than 100,000 global suppliers, CBRE pledged to spend $1 billion with diverse suppliers in 2021 and grow this to $3 billion in five years. While the company is committed to increasing its overall number of suppliers, it believes the overall dollar value will be more meaningful, as this will help create a larger and more valuable economic impact across CBRE’s supply chain and communities.
- Enable C-Suite to Drive Supplier Diversity: This includes diversity, equity and inclusion (DEI) leaders, but also C-suite leaders throughout the organization. The C-suite needs to prioritize diverse businesses in their supplier evaluation scorecard, ensuring this business goal and message filters from the top down. DEI leaders can be a valuable asset at the procurement table and will be more effective if they understand the process. In addition, giving DEI leaders a broader voice, and tying their personal KPIs with the organization’s diversity supplier goals, could lead to greater insights, better communications and likely more impactful results.
- Mentor Diverse Suppliers: Many diverse suppliers don’t have the scale or the depth of experience to fulfill the needs of a multibillion-dollar organization and might not understand what “good” really looks like to Fortune 100 or 500 companies. Organizations should take the time and mentor suppliers, providing much needed guidance and nurturing them so they have the right exposure to one day be competitive on all levels with the majority of suppliers. Too many companies make decisions based solely on cost. Helping diverse suppliers evolve as an organization benefits everyone in the ecosystem. Two great examples here include Target and The Clorox Company. Target hosts a supplier diversity summit, where indirect vendors learn about the organization’s processes and business initiatives, while getting direct access to Target leaders. Meanwhile, The Clorox Company has positioned itself as advocates for diverse suppliers. In addition to tracking its spending with suppliers, Clorox is an active member of the National Minority Supplier Development Council and the Women’s Business Enterprise National Council, which enables them to educate and advocate for more supplier diversity in their organization.
While these are a few of the tangible ways that companies can actively kick-start supplier diversity programs, companies should start this process by having a simple conversation about where they are and where they want to be. Every company must address social inequality and determine how they can best commit more resources for diverse suppliers. Organizations that don’t prioritize supplier diversity will inevitably get left behind or be lapped by competitors.
This change may be hard for some companies. However, having more diverse suppliers and businesses become partners will bring tremendous value to every member of the supply chain in the long run.
Daryl Watkins is the senior director of GEP Consulting.
Article courtesy of WORTH Magazine: https://www.worth.com/business-procurement-urgent-opportunity-increase-diverse-suppliers/
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