A business strategy that incorporates diverse-owned businesses, suppliers and vendors, supplier diversity taps into the strength of companies that are at least 51% owned and operated by members of ethnic minority groups, women, veterans, members of the LGBTQ+ community and people with disabilities.
The benefits of supplier diversity programs are well documented. “Supplier diversity is vital for driving innovation, expanding into new markets and fostering a more equitable business climate,” J.P. Morgan says. “It’s also a meaningful tool for economic growth and job creation—especially in often-overlooked communities.”
To work best for both the customer and the supplier, these diversity programs have to go beyond paying “lip service” and should include clear actions, strategies and goals. “Putting diversity and inclusion out front will attract more customers, clients and partners,” Spend Matters points out. “It also helps build company morale and retention, as a more inclusive and equitable workplace helps everyone feel seen and valued.”
Held to a Higher Standard
As a SaaS provider of supplier diversity and ESG data and management solutions, Supplier.io keeps its finger on the pulse of the nation’s supplier diversity programs, strategies and successes. In its new Supplier Diversity Best Practices for 2024 report, the company outlines how leaders plan to leverage supplier diversity programs to overcome new challenges this year.
“Whether it’s emerging regulations or the growing demand for reducing risk, supply chain is in the spotlight,” Supplier.io Aylin Basom said in a press release. “Supplier diversity programs play a critical role in enhancing supply chain competitiveness amid these challenges.”
With business decisions and investment dollars now being allocated based on supplier diversity data, Supplier.io says supplier diversity leaders are now “held to a higher standard.” Data has to be accurate and reliable, for example, and leaders have to be able to make a clear case for the positive business impact of their supplier diversity efforts.
5 Steps to a Successful Supplier Diversity Strategy
To procurement leaders that want to improve upon an existing supplier diversity program or start a brand new one in 2024, Supplier.io offers these five best practices that it says companies should master for success.
- Get your data act together. Accurate data remains key. Get your data-house in order and make it easy to get reliable metrics. The business is counting on you and accurate results. “Data is the backbone of any successful supplier diversity program. You need to know how much you spend with small and diverse suppliers,” Supplier.io recommends. “To do this, you need to accurately identify which suppliers are certified small and diverse.”
- Provide the right context. Provide more context for your results, including business unit (BU) specific tracking, benchmarks and economic impact analysis. “Benchmarking has proven to be very successful in helping leadership see the importance of a supplier diversity program,” Supplier.io says. “Nothing grabs executive attention faster than seeing that competition is winning in a business metric.”
- Make it a business-wide effort. Partner with your business unit peers to identify the benefit of supplier diversity. Demonstrating business impact is more important than ever. “Start with your spend data and look at which leaders are spending the most overall,” the company suggests. “Or, sit down with sales, marketing, or public affairs. Invite them for coffee and ask them what is happening with their business and discuss how small and diverse suppliers might help them meet their business objectives.”
- Do the advanced planning. Short-term wins like including supplier diversity initiatives in requests for proposals (RFPs) won’t help you grow fast enough. Plan further out and be sure to include contracts that may be expiring soon, new business ventures, and even design and research level projects.
- Factor in your company’s environmental, social and governance (ESG) goals. Plan to add more tracking attributes including sustainability, carbon and other social attributes. Supplier.io recommends reviewing any current supplier diversity data and adding more ESG and sustainability data to current reporting.
