In a recent post, I shared the first key finding of the 2022 State of Supplier Diversity Report: that company culture and workforce inclusiveness have become strong drivers for committed investment in supplier diversity. This is a major milestone for progress in the supplier diversity movement and one that deserves recognition and celebration. But it wasn’t the only interesting conclusion we were able to draw from this year’s survey results.
The second key finding reveals that there is still work to be done before corporate supplier diversity can retain the progress that has been made and build upon it.
Key Finding No. 2: Accountability and Measurement Fall by the Wayside
The justification for supplier diversity has been warmly embraced by CEOs and boards of directors, but engagement at all other organizational levels is down. In addition, practices traditionally associated with formal program rigor and integrity, such as tracking and reporting, are still lacking.
- Only 64 percent of respondents indicate that supplier diversity is integrated with their spend reporting platform, making it difficult to achieve visibility, benchmark, and set specific targets by business unit or budget holder.
- For more than half of organizations (54 percent), including diverse suppliers is encouraged but not mandatory, with only 19 percent of organizations making it mandatory for all sourcing projects.
- More than 60 percent of companies do not include supplier diversity targets in the performance expectations of their management team, meaning that enthusiasm from leadership may or may not lead to tangible progress.
In addition, 32 percent of organizations do not have formal supplier diversity goals, and only 45 percent report that they have a formal supplier diversity program in place.
A Not-So-Perfect Storm
When companies combine high but passive support for supplier diversity with unclear operational expectations, they unintentionally (and perhaps unknowingly) set themselves up for a perfect storm of failure.
Rather than leveraging this moment of strong executive support to drive lasting change, too many programs are at risk of taking it for granted. A company’s commitment to supplier diversity, whether for the sake of community impact or workforce culture, must be measured in terms of real, quantifiable impact.
Opportunities for Immediate Improvement
There are two opportunities for short-term improvement that are also identified in the 2022 State of Supplier Diversity Report.
The first takes the form of buyer training. Only 61 percent of companies educate their buyers about what the relevant supplier diversity goals are. Even fewer (48 percent) train them about best practices for including diverse suppliers or about the tools that are available to them to support discovery efforts. Even buyers with the best of intentions with regards to supplier diversity are not being empowered to act upon their own instincts and the program’s mission.
The second opportunity for improvement can be found in tier 2 spend. Procurement should be working with prime suppliers to understand their commitment to and journey toward increased supplier diversity. Just over half of companies track tier 2 supplier diversity in some way, whether through an online system or manually via spreadsheets. Simply adding supplier diversity to existing meetings and conversations with current and prospective suppliers is an effective way to capture and increase the total impact of the program.
Executive leadership teams should be proud of their commitment to supplier diversity and continue to embrace the associated values and cultural benefits. That said, failing to operationalize supplier diversity through measurement and accountability increases the risk of all that enthusiasm producing no results.
This is the moment to shine a light on the potential for supplier diversity programs to grow and evolve—with the support of formal reporting rigor and measured performance targets.