Supplier Diversity in the Post-Pandemic World
While we often like to think we live in a fairer and more equitable society than many previous generations have enjoyed, the fact remains that people belonging to traditionally oppressed demographics still face many systemic challenges that others do not.
Inclusivity and diversity is no tokenistic box-ticking exercise either. Research has repeatedly shown that companies which employ a more diverse workforce and those which work with minority owned third-party businesses on average perform better than those that don’t
For example, a Harvard Business Review study found that when a member of a team shares traits with the end user, it increases overall understanding of that group and research from McKinsey took data from 366 public companies in Canada, Latin America, the UK, and the US and found those in the top quartile for inclusion and diversity were 35% more likely to have better financial returns than their less inclusive competitors.
Diverse Suppliers
Procurement has a role to play in diversity and inclusion as well, by seeking out and doing business with more diverse suppliers.
Definitions vary, but most advocate organizations in this space agree that a diverse supplier is one which is majority owned (51% or more) by people from a protected group such as race, gender and gender identity, disability, or sexual orientation. By working with these kinds of suppliers – ideally those in the communities your business operates in – you increase the profile of those businesses and improve the credentials of your organization at the same time.
"You don't have to be working in a procurement function to impact supplier diversity,” writes CIPD. "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 organization’s diversity and inclusion strategy applies no matter the size of your organization, or whether you are procuring multi-million contracts or spending a few hundred for some printing services.”
Economic Benefit
Working with a more diverse range of suppliers also benefits the economy and makes your organization a more attractive prospect for investors and more tantalizing to a young workforce of millennials and GenZers who have repeatedly stated they want to work for companies with an ethical perspective which closely aligns with their own.
At a time when recession is looming alongside an already present global talent crisis, the need to strengthen the economic power of your organization has never been higher. Attracting investment and the hottest young talent coming into the workforce are just two steps along the path to this goal and collaborating with diverse suppliers is a strong factor which increases your chances of success.
"Increasing the diversity of suppliers has become more urgent at a time when social issues strongly influence business growth,” writes McKinsey. "Sixty-four percent of millennials say they won’t work for companies that perform poorly on corporate social responsibility. Investors prioritize companies with a strong diversity, equity, and inclusion (DEI) strategy: 33 percent of assets under management from 2016 to 2018—totaling $30-plus trillion—were invested with environmental, social, and governance (ESG) considerations in mind.”
Post-Pandemic
One of the more depressing outcomes of the COVID-19 crisis was that is served to further highlight the inequality and social issues which persist to this day. Reports from the worst days of the pandemic showed that workers and business owners from BAME (Black and minority ethnic) populations were far more likely to suffer from the economic downturn that others.
This provided fertile ground for businesses to look at how they have collaborated with suppliers owned by BAME people in the past and seek ways to increase the extent to which they will in the post-pandemic world. With COVID-19 also exposing the fragility of global just in time supply chains, increasing our reliance on diverse suppliers located in the communities we serve will also help make our supply chains more resilient against disruptions from future global events.
"COVID-19 wasn't the great leveler many thought it would be,” writes CIPD. "Instead, it highlighted inequality and societal issues that still exist, with those from ethnic minority backgrounds being hit the hardest. Organizations 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.”
Final Thoughts
Everyone has the potential to benefit from supplier diversity. Purchasing organizations enjoy a better selection of suppliers, and become more attractive to investors and candidates, while the suppliers grow and become stronger businesses and better able to compete on the kind of level playing field we would all like to see.
Supplier diversity is sure to be a hot topic at ProcureCon Indirect West 2023, being held in February and March at the Hilton San Diego Bayfront, San Diego, CA.
Download the agenda today for more information and insights.