Supplier Diversity – why should procurement bother?

 After our review on Monday of the excellent comments we got on Supplier Diversity from our previous article, (and do go and read Justin Lambert's comment on our Monday piece), today let’s go back to square one and ask some really basic questions about the topic. And a good starting point is this – why should we as procurement professionals (or indeed finance, marketing, whatever) be interested in supplier diversity?

In most cases, I’d argue the reasoning behind organisations getting interested in following some sort of supplier diversity strategy falls into one or more of three categories.

1. The least clearly defined is when the Board, CEO or business owner just has a general feeling that “we should be doing something” in this area. It may well be linked to a general desire to be considering corporate social responsibility matters more seriously, but it may not be linked clearly to business goals or outputs. That’s not to criticise this – in private businesses, for instance, it may come from a genuinely concerned and socially conscious owner who just feels that it is important to do the right thing.

2.  An extension of this, and perhaps the most common driver for these programmes is the motivation that says, “our customers want us to do it, and therefore we will look better in their eyes if we do”. So that is taking the diversity issue and assuming it will lead to better customer perception and therefore presumably more sales and profits eventually. Now governments as customers have been major drivers of this. In many countries, not just the US, government or other public bodies ask or require their suppliers to show that they operate some sort of supplier diversity programme. That may even extend as far as quotas and similar.

But it is not just governments. If your core business is selling clothes to pregnant women and new mothers, you may want to be able to show that you promote female owned firms amongst your supply base.  If you’re marketing a Polish style lager in the UK to the growing Polish community, it might be good to say that Polish-owned firms have a chance to bid for work with you. Or it may be more generic – showing how open and diverse you are in your business practices may just generally appeal to a young and upmarket customer base.

3. The third reason for engaging in supplier diversity is arguably the most fundamental and sustainable. That is, a belief that the buying company will actually gain, in a real economic sense, from pursuing such policies. And that’s not through a potential, somewhat hard to quantify customer perception sense, but rather in tangible ways though suppliers contributing to better value, more efficiency, innovation and new product development, improved product quality...

Now this is fundamental stuff. If we were clear that supplier diversity would bring these benefits, then of course we would do it like a shot. So in the next installment we’ll look in more detail at whether there is a strong case for supplier diversity in fundamental business terms.

First Voice

  1. Alis Sindbjerg Hemmingsen:

    Supplier diversity to me is, when companies actively work to integrate under utilized businesses into their procurement processes, strategies and decisions. Integrating diverse suppliers is important to the supply chain to ensure diversified thinking. Simply, to get other ways of getting things done. Other ways of generating ideas. And of course wealth creation is also adding value to the brand.

    To me there is a strong case for Procurement. Because Procurement simply needs to manage the contracts among the companies that will have an impact in the communities that need help. It is as simple as that. This also means non-diverse owned companies with high employment in the targeted communities. Impact comes from employment and job creation not just wealth building for a few.

    In Responsible Procurement Management only a few mention the risk associated with a less educated workforce, higher unemployment, increased poverty levels and a lowered standard of living in society. Really it is a high risk.

    That is why Procurement plays a vital role in ensuring the possibility of diverse suppliers to participate in developing the business.

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