How to start a supplier diversity programme

In the past, we’ve talked about the benefits of supplier diversity. Supplier diversity can be one of the most effective ways to drive real business value, beyond just procurement. 
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. 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.

Supplier diversity is certainly something for companies to prioritise right now, and as more and more boards and C-suites are starting to realise this, it’s falling to procurement teams to drive these programmes. With this in mind, we’ve put together a guide for procurement teams with practical advice on how to start and grow your supplier diversity programme.

1. Understand that supplier diversity starts from within

In order to start your supplier diversity programme, you will need to establish a business case for it and garner executive support. However, before you do any of that it’s firstly important to take a look at your current company culture as it stands.

Any strong, authentic supplier diversity programme has to start with the right 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. 

When people are truly united around a socially responsible culture, you will find that people will naturally want to head up and support strategies such as a supplier diversity programme. 

2. Establish a business case for your supplier diversity programme

It’s likely that if you are a procurement professional who has been asked to create a supplier diversity programme, the request came from board level. Due to mounting data that is showing the positive impact of supplier diversity on business performance, supplier diversity is now on the agenda at board level within most organisations.

However, the responsibility for creating a supplier diversity programme is often delegated to procurement teams, and whilst you will already have board-level support, it is likely that you will still be required to educate stakeholders, secure their buy-in and show progress and value to the board.

We suggest creating a business case that covers:

– Details of strategy with particular emphasis on how it will support wider company goals.
– Details of how you will measure success and demonstrate ROI
– Details of the tactics you will employ to make the strategy happen in a way that supports the goals.
– Detail the kind of investment you feel the programme requires. Even the best strategies won’t get very far without some budget behind them.

Luckily, the benefits of supplier diversity are already well documented, and it’s becoming more and more clear that supplier diversity is a best practice that every organisation should be encouraging. Not only does it benefit the community around you, but it also provides a distinct competitive advantage for businesses. Some benefits include: supply chain resiliency, collaboration and innovation, improved brand image, cost savings, plus the community and economic impacts.

It also helps to get an ‘executive level champion’ on board: a figurehead who will be an active supporter of the programme within your organisation, but also externally too: someone who will attend supplier diversity events, and network with relevant groups. 

As discussed in point 1, if your company culture is already aligned with supplier diversity, there may well already be someone who would love to be involved with heading up your supplier diversity programme.

3. Create your policy and identify diverse suppliers

The next step is to begin to develop your supplier diversity program. What exactly this programme is going to be is up to you and your organisation. You can start by deciding on the percentage of diverse suppliers you will invite for every RFP you conduct (for example, maybe 10% of suppliers invited must be diverse).

Don’t forget that you can modify and improve the programme as you go: the key is to get something agreed and get the ball rolling, then adapt as you go along according to the results and successes that you see.

The next stage is to identify some diverse suppliers. A good place to start is by finding other organisations who already have an existing supplier diversity programme and see who the kind of suppliers on their list are. You can also check out industry groups and LinkedIn communities. You’re also likely to find that word of mouth plays a big part in forming your supplier list: once you get chatting about your supplier diversity programme to colleagues, industry peers, and people you meet at networking events, a list will naturally start to form. Speaking to procurement professionals who have walked in your shoes will be invaluable: anyone who has already been in your situation will be able to offer advice and contacts.

4. Establish goals and evaluate progress

When you established your business case in step 2, talking about how you would measure success and demonstrate ROI formed an important part of your case. This will continue to be a key part of your strategy on an ongoing basis.

It’s vital to establish a set of KPIs and goals and constantly evaluate your progress. Consider the following:

  • What does success look like to you?
  • What do you want to get out of your supplier diversity programme?

    You should keep in mind that whilst a supplier diversity programme is morally the right thing to do, it is also a business strategy and it should drive value. Deciding how to measure that is key to business success.

    KPIs will vary for every organisation, but some KPIs that you could monitor on an ongoing basis may include:

    • Number of new diverse suppliers onboarded 
    • Number of diverse suppliers invited to an RFP 
    • Percentage increase of diverse spend 
    • Savings from your supplier diversity program 
    • Increase in internal customer satisfaction 
    • Economic impact (e.g. jobs created) 
    • Impact in your local communities 
    • Brand enhancement metrics (for example, are more people applying for jobs at your organisation now? This may imply you are a more attractive employer as a result of your supplier diversity programme). 

    Whilst bottom line and value are always important to any organisation, it’s important to remember that not every KPI will have a monetary value attached to it. Some will be more qualitative, such as how your programme is affecting supplier innovation, brand perception, talent acquisition and retention, etc. 

    Creating a supplier diversity programme: how Accelerate can help

    If you’re considering introducing a supplier diversity programme within your organisation but are unsure of where to start, Accelerate can help.

    We are a team of experienced, entrepreneurial procurement leaders who have led and transformed global procurement functions and service provider organisations.

    We are also champions for diversity within the procurement sector: Accelerate is a majority female owned organisation, helping businesses embrace diversity of thought to help unlock their full potential. We believe that accepting diversity results in 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 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. Creating a supplier diversity programme is a great place to start.

    We have walked in your shoes, which means we understand the challenges that you may face in starting your programme and finding the right diverse suppliers: this is where we can help. If you would like support or advice, get in touch today.

    If you’re ready to take your business to the next level, get in touch with Accelerate today for a friendly chat.