Supplier Diversity Is the Key to Better Business Outcomes
Supplier diversity, often a function tucked away in an organization’s procurement department, rarely has the visibility that other diversity, equity and inclusion (DEI) efforts have at an organization. Yet, supplier diversity can offer a competitive advantage. Not only does it have tangible business outcomes, but efforts also elevate the communities organizations hope to serve.
Supplier diversity refers to the intentional inclusion and utilization of businesses owned by individuals from diverse backgrounds, including those whose identities have been traditionally marginalized in the business world. This concept focuses on promoting and supporting businesses owned by minorities, women, veterans, LGBTQ+ individuals, people with disabilities and more.
Often, the goal of supplier-diversity programs is to create a more inclusive and equitable business environment by providing opportunities for historically marginalized groups to participate in the supply chain of goods and services. Companies and organizations that embrace supplier diversity actively seek to engage a variety of suppliers to enhance innovation, competitiveness and economic empowerment within diverse communities.
The Current State of Supplier Diversity
According to industry leader Supplier.io’s 2023 Economic Impact Report supplier diversity has a tremendous impact, not just to organizations and their suppliers, but also to the communities they serve. They found:
- 326 companies were supported, contributing to creation of 1.3 million jobs.
- $1.28 million was spent on small-sized and diverse-owned businesses.
- For every $1 spent, there was a $1.80 benefit to the community.
It's important that the impact of supplier-diversity efforts is measured. With increased transparency, organizations can see how communities are directly impacted by their efforts to diversify their supply chains. By impacting the community they hope to serve, there's often a reciprocal effect with consumer spending and employee support. People want to feel good about the organizations they choose to do business with.
According to Monette Knapik, head of supplier diversity for CVS Health, there are some headwinds in supplier diversity now. “Diverse suppliers are being acquired as they scale and budgets are set based on the best price, and diverse suppliers sometimes are not the lowest-cost supplier.”
She believes there is opportunity for supplier-diversity professionals to work more with growing small and medium businesses as they scale, being a collaborative partner and helping them deal with growing pains.
As for tailwinds that are helping elevate supplier-diversity work right now, Knapik notes how “diverse suppliers are more nimble and often are easier to work with and bring innovative products and solutions. It is critical that supplier-diversity leaders gain more visibility at their organizations so that they can show the value and ensure leadership is bought in the long-term.”
Industry Leader Case Studies
As with DEI, there's no one-size-fits-all approach to supplier diversity. It's all about being intentional and consistent with priorities over time. For example, at CVS, where Knapik leads supplier diversity, there are four key priorities for success:
- Performance and process management. Organizations need to measure their spending with diverse suppliers and also their suppliers’ suppliers. The full supply chain needs to represent the communities they serve. That also means measuring request for proposals (RFP) responses.
- Communication and program branding. It is important to explain broadly to the organization why they are engaging in supplier-diversity efforts. It is about economic impact, having a competitive differentiator and better connecting with employee needs, especially employee resource groups (ERGs). Media exposure in editorials and advertisements are important for visibility and accountability.
- Relationship building. Organizations are more sustainable when they have strong partnerships with other peer and industry organizations, are active in industry and diversity conferences, have portals to find diverse suppliers and share best practices.
- Education and development. Partnering with universities to provide executive learning for suppliers and historically Black colleges and universities (HBCUs), and providing merchandising education to help reach retail buyers.
Etsy offers another example of being intentional with supplier diversity. Their commitment to DEI is based on their mission to "Keep Commerce Human." The company recognizes that embracing diverse perspectives strengthens its business, and it is committed to transparency and accountability in achieving its goals. Their goals center on workforce diversity, with women and non-binary individuals comprising half of the executive team, board and nearly half of the overall workforce. Black, Latinx and Native American employees now make up 12.2% of the workforce, with a notable increase in leadership roles to 8.7%.
Etsy's diversity initiatives extend beyond recruitment, with a focus on the entire employee lifecycle via mentorship and employee resource groups (ERGs). Etsy is committed to making its marketplace diverse. Their marketing efforts prioritize diversity, with over half of creative-team images featuring black or brown skin tones.
The company highlights Black- and Latinx-owned shops and actively considers diverse imagery in various channels. They have also partnered with sellers to create a black-owned business Etsy team, providing a supportive community with over 2,400 members, ranking in the top 1% of active Etsy teams.
They have committed externally to auditing processes such as hiring, leveling, pay, performance and promotion decisions to ensure the diversity of their talent pipeline.
Companies that stay committed to supplier diversity long-term see better business results. They better connect with the communities they hope to serve, establishing a competitive advantage through marketplace relevance and staying relevant to the diverse array of talent they hope to attract.
This article was written by Julie Kratz from Forbes and was legally licensed through the DiveMarketplace by Industry Dive. Please direct all licensing questions to legal@industrydive.com.
