How Supplier Diversity Fuels Business Growth

Diversity is becoming an increasingly critical aspect in today’s world. It's not just our societies that are now increasingly embracing diversity, the business and corporate landscape has grown to realize and is keen to tap into its power.

One facet where diversity is increasingly making its mark is in the realm of supply chains. Adopting a diverse supplier approach is not merely a philanthropic endeavor but an important strategic move for enterprises that are keen to get their noses ahead in the near future.

Decoding Supplier Diversity: The What and Why

Supplier diversity signifies an inclusive network of suppliers, incorporating businesses controlled and operated by individuals or communities that have historically been overlooked. This encompasses a broad spectrum – women, veterans, indigenous communities, LGBTQ+ individuals, people with disabilities, and various ethnic minorities.

The rising interest in supplier diversity is a ripple effect of a larger wave of environmental, social, and governance issues (ESG) taking center stage in boardroom discussions. But supplier diversity is no longer simply checking a box for compliance. Companies that have truly embraced this practice have reaped a rich harvest of benefits.

Also read: Why and How Businesses Should Focus On Supplier Diversity

The Ripple Effects of Supplier Diversity

Companies that have incorporated supplier diversity programs are helping drive economic impact and empowerment in marginalized and historically overlooked communities.

They've discovered that these programs don't just polish their reputation, but also turbocharge their brand's worth, spark innovation, and magnetize talent. Procurement teams that judiciously channel their investments into supplier diversity create realize benefits that extend far beyond the business walls – they foster prosperity and provide opportunities that enable the upliftment of entire communities, enhancing health, education, access and social outcomes.

Despite these advantages, the adoption of supplier diversity programs has been more of a slow crawl than a sprint.

According to the Minority Supplier Development UK (MSDUK), corporate spend on minority communities is not even 1%. However, it is not all a lost cause – a Hackett Group study revealed that about 69% of large companies globally, including those based in the U.S., have or plan to roll out a global supplier diversity program in 2023.

The Roadmap to Supplier Diversity: A Five-Point Plan

For companies that are yet to kickstart a supplier diversity program, GEP has charted a course for successfully weaving diverse suppliers into supply chains. This roadmap is laid out in five key steps:

Evaluating the Present:

Gauge your organization's current footing in supplier diversity. Recognize any diverse suppliers you already have and define what diversity implies for your organization.

Visualizing the Future:

Pinpoint the areas you will concentrate on and craft the necessary strategy, policies and guidelines. Set up parameters to monitor and gauge progress.

Strategizing:

Draw up a blueprint for your vision. Verify your supplier diversity program and single out the initial spend areas or categories for a trial run.

Execution:

Start incorporating diverse suppliers. Ensure a certain proportion of diverse suppliers have been prequalified to participate in your procurement processes.

Monitoring and Oversight:

Determine your metrics for success and manage key performance indicators (KPI). These could range from tracking spending and measuring impact to monitoring the number of diverse suppliers in your portfolio.

The Journey Towards Inclusive and Diverse Supply Chains

Embracing supplier diversity isn't just about leveling the playing field – it's a smart business strategy. It paves the way for fresh ideas, bolsters brand value and ushers in economic empowerment in disadvantaged communities. As this truth gains ground, supplier diversity is poised to transition from being an optional corporate responsibility to a standard business practice.

Learn more about this in our white paper 5 Steps to Building a Diverse Supplier Network