Supplier diversity programs are hardly new. Most procurement professionals have some experience with deliberately including certified diverse suppliers in sourcing projects and even onboarding and partnering with suppliers that win contracts.
But supplier diversity is a program with value that extends far beyond procurement and supply chain. Here are some of the benefits for other functions:
When the company is trying to close a deal with a prospective customer, shared vision and values are often more of a differentiator than pricing and contract terms. As author and speaker Simon Sinek wrote, “People don’t buy what you do; they buy why you do it. And what you do simply proves what you believe.” Supplier diversity programs not only demonstrate a company’s culture and values in action, their impact can be measured – both in terms of growth and also in terms of economic impact in the communities represented by diverse business owners.
In this age of virtual events and social media fragmentation, it can be hard for a brand to get the attention they deserve. With evidence of a clear value proposition and a message that emphasizes how the customer wants to see themselves, brands can make themselves stickier and more attractive to customers. Marketing expert Donald Miller addressed this effect in the book Building a StoryBrand: “Brands that position themselves as heroes unknowingly compete with their potential customers.” Whether a company is B2B or B2C, customer decision makers want to see themselves as the hero – and seeing your company as an opportunity to partner with a fellow hero may be the differentiator they are looking for.
If it weren’t difficult enough to ensure corporate financial health in difficult economic conditions, finance is also responsible for regulatory compliance. This ever-increasing web of requirements from government agencies, customers, and oversight boards can be an opportunity to exceed expectations or a source of heightened risk. In a landmark public statement about equity and inclusion, BlackRock CEO Larry Fink wrote, “We believe that diversifying the companies we partner with to serve our clients helps us to deliver better outcomes.” In that same statement, he also addressed the importance of transparency and accountability – making the case that investments in diversity must be accompanied by investments in reporting and analytics.
So, why now?
As with all other corporate programs, supplier diversity may spring from a vision, but it must be backed by data and strategic planning. The sooner companies start the process of benchmarking and goal setting, the sooner they will be able to show the impact they have had – demonstrating their ability to achieve their vision.
Supplier diversity not only represents an opportunity for multi-form value creation, but it also aligns naturally with digital transformation and data analytics projects that may already be underway. As one of many non-cost decision making factors, supplier diversity programs show that the company is committed to high-visibility social change and that risk management and collaboration with small businesses are being explored to improve the sustained operational health of the company.
According to the 2022 State of Supplier Diversity Report, procurement is responsible for finding diverse suppliers in 69 percent of companies. But every function in the company has a responsibility to support – and a vested interest in – the health of the supplier diversity program.