The supplier diversity of 2024 is not the same supplier diversity you knew in 2023 and previous years. 2024 ushers in a world of supplier diversity shaped by heightened scrutiny, growing regulations, and increased significance to the business. This new environment requires a strategic approach defined by legal awareness, business value, and proactive internal planning.
In a recent Supplier.io webinar guest speaker, Lisa Whaley Morris, Vice President of Strategic Alliances and Programs, National Minority Supplier Development Council (NMSDC), shared data from McKinsey and Gallup studies that solidify the business case for supplier diversity. In addition, Supplier.io’s General Counsel, Dominic (DJ) Merino, went beneath the surface on two dismissed corporate supplier diversity-related cases to highlight the disconnect between media storytelling and real business perceptions of supplier diversity.
This blog explores these components, drawing from recent legal precedents and business insights, to offer a roadmap for effective supplier diversity programs.
Diversity Legal Challenges
The legal environment surrounding diversity has become increasingly complex, as highlighted by several recent cases. In the summer of 2023, the Supreme Court ruled against affirmative action in college admissions programs in the case Students for Fair Admissions, Inc. (SFFA) v. President & Fellows of Harvard College (Harvard) and SFFA v. University of North Carolina (UNC). While the ruling disallowed race-conscious admissions processes specific to educational institutions, it underscores the evolving legal landscape that organizations have to navigate in their diversity initiatives. Additional high-profile lawsuits, such as Byron Allen’s case against McDonald’s for lack of diverse media spend and a shareholder’s challenge to Starbucks’ DEI initiatives, stress the scrutiny organizational DEI efforts are under.
The Business Value of Diverse Suppliers
Even under increased scrutiny, the business case for supplier diversity has never been stronger. With 82% of business leaders considering diversity initiatives essential to their strategy and 67% anticipating diversity initiatives will grow in importance in the coming years, diversity is a clear business enhancer and driver of innovation (Public Private Strategies Institute). Diverse suppliers not only contribute to positive brand perception, leading to increased consumer loyalty, but they also offer significant cost savings that directly impact the bottom line. A study by McKinsey & Company found that minority- and women-owned business enterprises provide their business partners with year-over-year cost savings of 8.5%, significantly higher than most businesses experience.
Internal Planning for Supplier Diversity
To facilitate the business value, internal planning for supplier diversity must be both strategic and forward-looking in light of the evolving legal and business landscape. Organizations need to:
- Rebrand Supplier Diversity: Elevate supplier diversity from a compliance-driven initiative to a strategic business imperative. This involves redefining diversity beyond exclusively race-based criteria to encompass a broader understanding of diversity.
- Proactively Plan with Data: Leverage accurate data to articulate a compelling business case for diversity and anticipate future challenges by planning 12–24 months ahead. This data-driven approach demonstrates the tangible business value of diverse suppliers, aligning supplier diversity with overall business goals.
- Integrate Supplier Diversity Across Business Functions: Ensure supplier diversity is not siloed within procurement but integrated across all business functions. This integration facilitates a holistic approach to leveraging diverse suppliers, enhancing innovation, cost efficiency, and market responsiveness across the organization.
Embracing Supplier Diversity as a Business Driver
As supplier diversity becomes increasingly integral to business success in 2024, organizations must navigate the complexities of legal challenges, maximize the business value of diverse suppliers, and engage in strategic internal planning. By rebranding supplier diversity as a strategic business imperative, leveraging data to make informed decisions, and ensuring a holistic approach to diversity across all business functions, organizations can set the stage for a future where diversity and business success are inextricably linked. By adopting this comprehensive approach, organizations can not only ensure a successful supplier diversity program but leverage supplier diversity as a driver of innovation, competitive advantage, and market differentiation.
To enhance your business value, learn five ways to ensure success for your supplier diversity program by
downloading the Supplier Diversity Top 5 Best Practices for 2024 report today.