P&G — Where Revenue, Savings and Sustainability Go Hand-in-Hand (Part 3)

One area that many individuals tend not to lump in with supply chain sustainability initiatives is supplier diversity. But supplier diversity, which still falls under the same CSR umbrella as other sustainability programs in some companies -- at least from a corporate initiatives perspective -- is very much a component of this area. And when it comes to doing it for the right commercial reasons (e.g., driving profit, reducing supply risk, improving margins, etc.) it can make tremendous sense to pay far more than just lip service to it. Consider how in P&G's latest sustainability report, the company notes that "supplier diversity is a fundamental business strategy ... [and] in 2009, P&G spent more than $2 billion with minority-and women-owned businesses". Which is far more than just a rounding error in spend, even for such a large organization. But what types of programs has P&G invested in? And why does P&G care beyond just wanting to not deviate from the multicultural lemming philosophy that seems to underlie far too many supplier diversity programs today?

The Win-Win Partners website has some great historic detail on the subject. It quotes a P&G representative noting "Supplier diversity is an important plank in P&G's efforts to build our brands' business with the country's diverse consumer base." In other words, supplier diversity is not just about being a good corporate citizen. It's about chasing green on a consistent basis. Moreover, it's not a fad -- P&G has been doing it for over two decades. Consider, for example, how P&G "made loans in the 1980s to several minority businesses and start-up companies, based on ideas loan recipients had and the needs of P&G". In one case, P&G assisted a supplier in acquiring two companies. The result? "These acquisitions allowed [a supplier] to [expand its footprint within P&G to] manufacture cartons for Tide, Swiffer and Crest." More recently, P&G has continued to follow a similar program that goes beyond just basic supplier diversity initiatives. Consider a relatively recent "$30 million, 3-year contract [award] to a minority business to manufacture body shampoo". The supplier awarded this contract is building a facility "from the ground up" in "Cincinnati's Empowerment Zone ... [generating] up to 200 jobs," in the process.

P&G’s experience with supplier diversity issues over the long haul suggests that driving real change with diverse supply bases requires more than just educating the business about the benefits of supplier diversity or punting on the issue and forcing your lower tier suppliers (e.g., staffing firms) to sub to minority suppliers to drive multi-tier diversity reporting numbers. By investing in large-scale programs with diversity suppliers that go beyond core supplier development initiatives (e.g., lean, six-sigma work), P&G has proven that true sustainability in supplier diversity comes at a significant cost of not just dollars, but also time. Will the return from their diverse customer base prove worth it? Perhaps, but in the current economy minorities -- and all other consumers for that matter -- are no doubt focused more on minding their own pennies, purchasing private label and off-branded products, than on supporting the P&G's of the world based on an underlying corporate operating philosophy.

Jason Busch

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