Does your diversity and inclusion strategy extend to your suppliers?
Diversity champion, leadership expert and coach Jenny Garrett explains why diversity and inclusion company efforts should extend to supply chains. Although the UK, is lagging behind countries like the US in supplier diversity, she provides some useful advice on why organisations should make a start and how.
Diversity and inclusion is about more than just your staff, it includes your supply chain as well. Businesses are increasingly realising that working with a more diverse range of suppliers brings real benefits.
When we talk about diversity in suppliers, two of the leading advocate organisations in this space in the UK, MSDUK and WEConnect International, agree that a diverse supplier is one that is majority owned (51% or more) by those from a protected characteristic such as gender, race, disability or sexual orientation.
A US PERSPECTIVE
The US are global leaders on supplier diversity, with General Motors being among the first companies to set up a diversity programme back in 1968 and Public Law 95-507 being passed in 1978 to provide opportunities for small business concerns of disadvantaged owners to participate in the performance of Government contracts.
The US Small Business Administration estimates there were 8 million minority-owned companies in the United States in 2018. The National Minority Supplier Diversity Council reports that certified MBEs generate $400 billion in economic output that led to the creation or preservation of 2.2 million jobs and $49 billion in annual revenue for local, state and federal tax authorities. Those numbers are steadily increasing.
The UK, like the rest of the world is lagging behind in terms of suppler diversity. Whilst the Local Government Act of 2000 outlined the responsibility of local authorities to promote the social, economic and environmental wellbeing of their communities through diverse procurement practices, it was not tied to government contracts. So whereas in the US federal contractors must track and report diversity spend and meet goals, this is not required in European countries.
UK & EUROPEAN OUTLOOK
Since a directive was passed in 2014 requiring greater transparency with regards to business and supply chain partnerships, many UK and EU companies are devoting more attention to diverse procurement practices. A step in the right direction; but there’s a way to go. The intention to work with a more diverse range of suppliers in line with your organisation’s diversity and inclusion strategy applies no matter the size of your organisation; or whether you are procuring multi-million pound contracts; or spending a few hundred pounds for some printing services.
You don’t have to be working in a procurement role to impact supplier diversity. 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. As well as demonstrating your company’s social responsibility ethos by promoting equal opportunities for all suppliers, greater social inclusion and fostering of local economic development and the diversification of supply risk, diversifying your supply chain can offer benefits for your bottom line. They include:
- Innovation: Research commissioned by the Federation of Small Businesses (FSB) suggests that businesses run by entrepreneurs from an ethnic minority are more innovative than their rivals.
- New perspectives: Diverse suppliers can bring new perspectives and open doors to new audiences that you may not have been able to access otherwise. Instead of just thinking about whether a potential supplier matches your values and culture, you could instead consider what they bring to the table that will add to your culture and help you move it in the right direction.
- Potential savings: Working with large suppliers can stifle competition and block out smaller suppliers. Traditionally this approach was considered the most economical option due to economies of scale. However, because diverse suppliers are often small and medium sized businesses, their size makes them agile; they have fewer overheads, are more flexible and that can offer better value for money.
- Local vs global: With Covid-19 restricting freedom of movement (and with Brexit), many sectors saw a reduction in productivity meaning businesses are being forced to consider what is available more locally to them. The predicted trend is an increase in regionalisation; and if your company is only relying on the global option it could cause delays, reputational risk and even loss of business. You could consider keeping your global supplier in conjunction with a diverse supplier closer to home.
- Feel good factor: Studies show that as well as being the right thing to do, increasing your supplier diversity is also good for your brand. A 2019 study for Coca-Cola found that individuals who were aware of Coca-Cola’s supplier diversity initiatives were 45% more likely to perceive the brand as valuing diversity; 25% were more likely to think favourably about the brand; and 49% were more likely to use Coca-Cola products.
MAKING A START
To start diversifying your organisation’s supply chain, take the following steps:
- Check your current level of supplier diversity. Do you know who you buy from? If you don’t already have the data, undertake a research exercise. Send all current suppliers a questionnaire about the diversity of their ownership; and make your commitment to diversify your supply chain clear to them.
- Where should you focus effort? Once you know the diversity of your supply chain, you can consider where to focus effort. You may have a good percentage of business suppliers who are women-led but not many who are ethnic minority-led or vice versa. The aim is not to simply ‘tick a box’, but to create a strong articulated business case for supplier diversity, aligned with your diversity and inclusion strategy; and to gain senior level commitment and full support for the programme.
- Set targets and measure progress. Your business case must have targets. After all ‘what gets measured gets done.’ And by measuring your progress, you can understand what’s working and what’s not. Remember that you are aiming to create a long term and sustainable programme of supplier diversity. Do not expect instant results and then be able to move on to the next initiative; your targets should be short, medium and long term.
- Find diverse suppliers. Diverse suppliers do exist, but you may need to look beyond your usual ‘go to’ suppliers to find them.
FINDING DIVERSE SUPPLIERS
Advocacy organisations like MSDUK for ethnic minority-owned businesses and We Connect International for women owned businesses are a great start; but of course not all diverse businesses are registered or certified by them.
You can look out for directories such as the BAME Executive Coach Directory; or look at businesses that are nominated for or win awards, such as the Black British Business Awards or Asian Business Awards. Your local Chamber of Commerce will know its members well, and the Federation of Small Businesses (FSB) and Institute of Directors (IoD) have leads for diverse groups who you could ask for recommendations.
You could also ask your network; every person in your network has an extended network that could include the diverse supplier that you are looking for. As with any business undertaking, you will always need to do your own checks and due diligence to make sure that the diverse supplier is right for you. For more information and tips on sourcing diverse suppliers, see the guide I created for the CIPD, here.
AUTHOR BIOGRAPHY
Jenny Garrett OBE is an award-winning career coach, author and leadership trainer. Through coaching and leadership development, her company supports women and ethnically diverse leaders to progress at work. As well as supporting majority group leaders in making inclusion happen. For more information, check out her website.
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