From an increased public awareness of corporate supply chain behaviour to the widespread adoption of the UN Sustainable Development Goals, as well as regulatory and compliance restrictions intensifying, the presence of good ESG practice in the procurement process is no longer a nice to have, but rather a key differentiator that can alleviate pain points, avoid disruption, and create competitive advantage.
Heightened awareness of racial, gender, and LGBTQ+ issues in society, especially in the US, in 2020 have translated into a lot of noise around the topic of diversity and inclusion. Three years later, however, there’s a gap emerging between companies that walk the walk and those who just made a lot of noise.
The supplier diversity gap
In the procurement sector, greater supplier diversity in the sourcing pool can enhance competition for contracts, leading to enhanced quality and reduced costs.
This expanded range of sourcing options also strengthens the supply chain. It increases its resilience and agility, particularly in times of uncertainty. In case supply routes are disrupted in one region, businesses can swiftly pivot to alternative suppliers.
Additionally, certain suppliers may adapt more rapidly to changing requirements than others. For instance, as highlighted in a report released by Accenture, during the peak of the pandemic, a minority-owned business in Georgia adeptly shifted from producing hair products to manufacturing hand sanitizer and multi-purpose cleaning products.
Adopting a Supplier Diversity Program that promotes diversity and inclusiveness within the sourcing process is also a proven driver of innovation. If currently cultivated, “not only can diverse suppliers co-innovate with their customers, but they can adapt and ramp up rapidly, helping customers swiftly execute innovations,” write Accenture researchers. The result is that a more diverse supplier network can bring new capabilities to the marketplace faster.
At its most visible, a diverse supplier network is a positive mark against your organisation’s brand, as public perception can have a direct impact on the bottom line, as well as stock value. Criticism of supplier diversity often stands on shaky logical legs. Critics claim that rewarding work based on ethnic or gender criteria dilutes the supplier selection process.
However, as noted by the Hackett group in a study they conducted in 2017, “Virtually all diversity suppliers meet or exceed expectations, and top corporate performers in supplier diversity experience no loss in efficiency.”
