The world is changing – we hope for the better – with people more connected than ever before and ready to accept diversity and different points of view. And with this comes many benefits: smarter ideas and solutions created by people from different backgrounds and experiences.
At Accelerate, we believe that the ‘ideal’ future scenario is for supplier diversity to be less of a defined strategy or an agenda item for businesses, and instead become ‘business as usual’, where quotas and targets are no longer required. However, we of course recognise that progress has to start somewhere, and targets and metrics are the first step towards changing mindsets and taking purposeful action, as a precursor to becoming a natural part of how companies operate.
Businesses need to understand that supplier diversity can be one of the most effective ways to drive real business value, beyond just procurement.
The impact of supplier diversity
Whilst many companies are keen to promote their partnerships with Minority/Women-owned Business Enterprises (MWBE), supplier diversity must be more than just a marketing tool or a placatory measure, it should be an intrinsic part of business strategy; put simply, diversity helps to create better workplaces.
As more companies take steps to increase diversity on executive teams, it’s becoming clear that there is a relationship between diversity and improved financial performance. This applies to gender, ethnic, and cultural diversity: the most diverse companies are now more likely than ever to outperform less diverse peers on profitability.
Research by McKinsey said benchmarking data showed most organisations claim savings annually between 3-7%, however a survey of 163 procurement leaders at US corporations found those with corporate partnerships with MWBE’s increased savings to 8.5% on an annual basis.
The benefits of supplier diversity in the workplace
The workforce is now more socially-aware than ever before. A recent study found that 64% of millennials in the US won’t take a job if their employee doesn’t have a strong corporate social responsibility (CSR) policy. At a time where recruiting the right candidates is notoriously difficult across all industries, ensuring that your company is an attractive option to the most eligible candidates has never been more important. With this in mind, increasing the diversity of suppliers has become more urgent in line with the spotlight on social issues and the impact this can have on business growth.
Furthermore, investors are now also prioritising companies with a strong diversity, equity, and inclusion (DEI) strategy.
Supplier diversity starts from within
What is clear is that the procurement function can impact the engagement of minority and women-owned business enterprises (MWBEs), by inviting more MWBE’s to compete for this business. However, is it that simple?
For any business considering broadening their supplier diversity portfolio, they should first consider their existing company culture. Supplier diversity starts from within: without an existing company culture that supports diversity, it’s unlikely that you can create a meaningful supplier diversity programme. When the company culture is truly aligned and the people within that company have a genuine interest in social responsibility, it’s much easier to get stakeholders on board, set up good processes and drive the strategy forward in an authentic, sustainable way.
Supplier diversity is certainly something for companies to prioritise right now. Not only does it have the potential to change business for the better, it can also increase innovation and unlock additional value.