The 2020 triad of health, economic, and racial justice crises has accelerated corporate thinking about diversity, equity, and inclusion (DEI). Today, whether through internal hiring initiatives, philanthropy, or community engagement, most major companies are engaged in diversity in some capacity. But only a handful of businesses are looking at the supply chain as another opportunity to advance diversity.
Attention on social justice and diversity issues from consumers, employees, governments, and international regulators continues to increase. On top of that, many benefits come from doing business with diverse suppliers and supporting DEI initiatives with SMBs. For both of these reasons, companies need to look beyond their four walls and into the supply chain to truly advance DEI within their business.
In this blog, we’ll lay out some of the ways your company can advance its supply chain DEI initiatives.
As multinational corporations continue to advocate for social issues, some have started to funnel money into supplier diversity. By 2030, Kroger aims to spend US$10bn on diverse suppliers—businesses owned by people of color, women, veterans, and LGBTQ+ individuals; by 2025, Target intends to spend more than US$2bn with Black-owned businesses.
Why are these businesses investing in relationships with diverse suppliers? Beyond positive brand perception and the idea that it’s the right thing to do, diversity in the supply chain can bring many commercial benefits, including:
Despite the benefits, organizations of all sizes are still struggling to implement DEI in supply chains, due to global scale and regional factors such as less stringent labor standards.
If you recognize these problems, here are four steps you can take.
To get support and resources for any corporate initiative, you first need buy-in from your executive team. Unfortunately, while the C-suite might be engaged on DEI overall, they do not show strong support for supplier diversity – just 10% of COOs and 18% of CEOs and boards of directors show support for supplier diversity programs.
Leadership teams still need convincing that supplier diversity programs are an extension of corporate DEI commitments. In the previous section, we bulleted out some of the benefits organizations see when they prioritize supplier diversity. To put a finer point on the benefit of flexibility, Terrez Thompson, Coca-Cola’s VP of Global Supply Chain Inclusion and Diversity says, “Diverse suppliers can turn on a dime and are now considered for contracts that they would not have been otherwise due to the imperative for flexibility. They have proven themselves to be agile in terms of responsiveness.”
After leadership buy-in, it’s important to dedicate DEI-focused staff and resources to your procurement and supply chain teams. This ensures that your DEI initiatives can evolve from commitments to measurable KPIs for your business. Businesses with more resources may hire a dedicated supplier diversity professional. Smaller organizations may opt to bring on staff that can oversee multiple facets of DEI, including in the supply chain, and in some cases may choose to work with consultants that can help them get a program up and running.
Once you’ve achieved buy-in from your leadership team, you need to establish a baseline for improvement. How many diverse suppliers are you already doing business with? How are other suppliers looking at DEI within their business? What can you do to support your suppliers and help them improve? These are essential questions to answer, as they will help you identify your most significant opportunities and set KPIs for your supplier diversity program.
To create a baseline, you’ll need the right data. Reach out to your suppliers and begin to assess how they are performing on key DEI metrics:
There are many methods of requesting this type of data. SupplyShift offers one – our Supplier DEI Assessment provides a pre-built questionnaire and analytics to help you gain insight on your suppliers’ current DEI performance.
However you decide to engage suppliers DEI, establishing a baseline will help you understand the best path forward.
Once you have your baseline metrics for supplier DEI performance, it’s time to start driving improvement. Many companies are increasing diverse supplier spend simply by finding new diverse suppliers to do business with.
Tools like supplier.io and Tealbook provide databases of suppliers (including diverse suppliers) for businesses to build new relationships with. Companies can also attend diverse supplier events or join organizations like the National Minority Supplier Development Council for resources and peer learning opportunities.
Once you have onboarded new diverse suppliers, supporting them is just as important, especially for SMBs. Set suppliers up for success so they can become an integral partner for your business. Establish clear performance incentives and development opportunities, provide training and resources, offer opportunities for business expansion, hold networking events, and more.
The work is not over just because you’ve added a few diverse suppliers to your network. If your business is anything like most businesses, a majority of your suppliers are not owned by underrepresented groups. But you can still advance DEI by encouraging these suppliers to adopt DEI initiatives within their business and their own supply chains.
To create a truly equitable supply chain, organizations must put in the difficult collaborative work: meet suppliers where they are, understand their corporate values and the culture in which they operate, and build a foundation of mutual respect. Whether you’re helping them create a formal diversity policy or brainstorming ways they can improve diversity amongst their staff, a little empathy goes a long way.
If your company makes DEI integral to leadership and procurement, sets baselines and KPIs, and commits to finding diverse suppliers and supporting existing suppliers to develop DEI, you’re well on your way to a more resilient supply chain. And now is the time to act. As we head into the third quarter of 2021, workplace justice will continue to remain at the forefront of responsible sourcing and take center stage in corporate boardrooms.
Remember, however, that supplier DEI is not a one-size-fits-all approach. It is a dance in which you adjust to the styles and rhythms of your sourcing partners. At SupplyShift, we know that the first step is the hardest to take. That’s why we launched our Supplier Diversity, Equity, and Inclusion Assessment, which you can use to measure DEI performance in your supply chain, support minority-owned businesses, understand your suppliers’ internal programs, and work with our DEI consultancy partners at Taproot Ventures.
Talk to us to assess your strengths and weaknesses and identify opportunities to advance DEI within your own supply chain.