Developing a sustainable global supplier diversity programme

In a world where we see growing socio-economic inequality, a real commitment to supplier diversity enables companies to encourage entrepreneurship in underserved, underrepresented communities which in-turn results in job and wealth creation, as well as better health and education in those disadvantaged communities. Additionally, a more diverse supply chain impacts the bottom line through innovation, competitiveness and sustainability.

As businesses become more global, and technological advances remove barriers to trade and offer easy access to the best options available, there is increasing pressure on procurement to remain relevant, look beyond traditional ways of sourcing, become more agile, embrace innovation and be more competitive and inclusive. It is within this framework that most organisations are trying to create a more strategic understanding around supplier diversity and inclusion as they develop a global strategy.

US legacy

In the United States, supplier diversity initiatives aimed at supporting the growth of minority business enterprises (MBEs) were born out of the civil rights struggle in the late 1960s and early 1970s. Encouraged and supported by the US government through a legislative framework, these initiatives were designed to empower underrepresented and disadvantaged groups. The aim was to provide access to economic and financial opportunities and reduce inequality for communities that had been previously excluded and discriminated against because of their ethnicity, race and gender. The National Minority Supplier Development Council (NMSDC) was formed in the 1970s to certify businesses as a Minority Business. Since then, other national organisations have been created to address the needs of different minority groups, including women (WBENC), LGBT+ (NGLCC), disabled groups (Disability Inc.) and others.

Growth of Global supplier diversity advocacy networks

Outside the US, their legacy of engaging with minority suppliers has led to the spread of supplier diversity programmes further afield. This has happened due to the realisation within the corporate world that taking their supplier diversity programme outside the US would economically empower underrepresented minorities, reduce socio-economic inequality, and create stronger, more stable communities in the countries and regions they have presence. Since 2000, a number of supplier diversity advocacy networks including certification agencies have established themselves worldwide (see Table 1).

There are now established organisations in countries like the UK, Australia, Canada, Europe and South Africa that certify minority-owned businesses, for example: MSDUK in the UK, ESDP (European Supplier Diversity Programme) , Supply Nation in Australia, CAMSC in Canada, South African Supplier Diversity Council (SASDC) , WEConnect International which works with women-owned businesses globally, OutBritain and EGLCC - The European LGBTIQ Chamber of Commerce that represents LGBTQ+businesses. These organisations and others like them now actively promote and act as advocacy groups for minority owned businesses and other under-represented groups, influencing and changing government policy in their respective countries. Moreover, the creation of the Global Supplier Diversity Alliance (GSDA) - an initiative set up by MSDUK, Supply Nation, CAMSC and SASDC to take supplier diversity in unestablished markets through research and advocacy, will help set up a consistent framework around advocacy and certification across the world.

?Supplier diversity beyond the USA: why go global?

·?????? Similar global issues require similar global response.

Growing socio-economic inequality, social injustice and lack of economic opportunities within disadvantaged minorities is a global issue that needs similar global response. Global approach to supplier diversity and inclusion addresses this inequality heads-on. Procurement has not only got the power to create wealth in some of the most disadvantaged communities across the world but attract the most enterprising and innovative solutions to address business critical challenges.

·?????? What is and should be common?

Fundamental purpose behind any supplier diversity strategy should remain the same, and that is to economically empower some of the most socio-economically disadvantaged communities by encouraging entrepreneurship, whether they be ethnic minority-owned, women-owned, disabled-owned, LGBTQ+ or any other under-represented groups.

Critical factors for consideration going global with supplier diversity

???????? Approach: Approach to supplier diversity strategy should differ from country to country, taking into consideration local social, cultural, political and legal framework. I call it GLOCAL approach- global vision driven by local strategy.

???????? Flexibility in definitions: Many US companies are still hanging on to the 50yr legacy of supplier diversity- what works in and is relevant in the US doesn’t always remain constant across the world. Be ready to adapt to local framework and remain flexible. Focus on who the beneficiaries are, where you want to make an impact and tailor your programme to deliver that.

???????? Terminology: Socio-economically disadvantaged groups, especially when it comes to racial and ethnic minorities differ across the world. For example, in the UK, they are represented by ethnic minority businesses, in Australia, they are indigenous businesses, in New Zealand they are Maori and Pacifika, in India they may be Dalits and in South-Africa, they are black businesses who are in majority but under-represented. Even more complex is defining the minorities across Europe. While putting together a global supplier diversity strategy, be flexible on definitions.

???????? Assumptions: Develop your global supplier diversity strategy on strong research and evidence and not assumptions. Leverage existing advocacy networks and peer networks to learn from their experiences.

???????? Expectations: Don’t expect like to like outcomes between the US program and global program. Minority businesses are much more matured and larger in the US due to 50yrs of investment corporations and federal government have made. It's not the same outside the US. Do not expect that minority businesses outside of the US are large and ‘fit to supply’ and that from the year one, you will be able to measure significant spend in each of those countries. Global supplier diversity program must be long term with significant investment needed in the beginning.

What is different when taking supplier diversity programme outside the USA?

???????? History: If we take example of racial minorities, in most cases, its directly linked with history of immigration in different countries. In the UK, majority immigrants have come from former British colonies like India, Africa, West Indies whereas in France, most immigrants are from the former French colonies in North Africa, in the Netherlands, its former Dutch Colonies like Suriname, Dutch Guyana. In some parts of the world, like India, minorities are based on religion.

???????? Social and cultural issues as well as political and business culture has a major role to play to decide what should be your focus in different countries. In certain countries, supplier diversity program may exclude LGBT or racial minorities due to legal frameworks, hence these factors need to be considered before deciding on the scope for supplier diversity programme in individual countries.

???????? Legislation: US has a successful history of affirmative actions backed by law and similar examples can be seen in South Africa (BBBE program), Australia and New Zealand. However, there is no policy or legal framework that supports utilisation of underrepresented businesses in public and private sector procurement in countries like the UK, Canada and Europe.

Essential elements of a successful global supplier diversity program:

Recent focus in the corporate world on Environment and Social Governance (ESG) has brought supplier diversity to the centre stage where it is becoming part of corporate strategy and not just procurement strategy. However, even now, majority of companies around the world that have a global supplier diversity program are being managed and driven from the US. With very few exceptions (IBM, Cummins, EY, Accenture to name a few), major US companies with global programs are not delivering desired impact and outcomes. At the same time, there are a number of new entrants like Meta, Amazon and CBRE that are showing a new approach to supplier diversity and have been making great strides in delivering significant impact through their programs. Here are some best practices that shall help any organisation to deliver a successful supplier diversity program:

1.?????? Strategic Approach: Embed supplier diversity in local business strategy rather than having it as a fixed-term project.

2.?????? Leadership Commitment: Find senior leadership support and engagement in each country where you want to start the program.

3.?????? Resourcing: Invest in full time resource to manage the program- don’t have SD as 5-10% of anyone’s full time role.

4.?????? Ownership: Make local in-country team own the program and resource them adequately

5.?????? Budgeting: Give local teams in every country ownership of supplier diversity budget and don’t limit your budget to membership fees of advocacy networks- that’s a tick box exercise- include internal training, investment in minority supplier development and outreach part of overall budget.

?6.?????? Certification: Focus on building a community of minority businesses before starting certification. Certification should be an enabler rather than a barrier. Be creative when it comes to certification, next generation entrepreneurs are mobile, working from co-working spaces or from home- make certification process simpler, easier and user friendly.

7.?????? Focus on next generation of entrepreneurs: All global supplier diversity programs should focus on building supply chains of the future that are inclusive and diverse. Which means, invest in today’s diverse founders so that they become future suppliers.

8.?????? Move beyond spend: To see global supplier diversity program deliver real impact, move beyond spend when it comes to measuring outcomes. Increase in spend along with increase in number of suppliers as well as investment in minority supplier development should be the measure of success.

9.?????? Influence policy in driving change by working with advocacy networks. Policy drives public behaviour so encourage your local public affairs team to work with advocacy networks.

Finally:

For supplier diversity to truly become part of organisational DNA, there has to be a coming together on the process of sourcing and engagement with the supply base, of those responsible for it and those for whom the suppliers are engaged, namely stakeholders. For procurement to engage the wider business with supplier diversity they must reposition it as a business-wide initiative rather than a procurement strategy. By linking the benefits of engaging with diverse suppliers back to corporate goals, the sell-in is easy. Why wouldn’t you engage with these underrepresented suppliers to gain market share or get new products to market quicker than your competitors.

When going global, supplier diversity should transition from a mere function to a corporate strategy; from ‘nice-to-do’ to ‘must-do’. However, for supplier diversity to succeed it has to be driven into an organisation at all levels using a change management methodology. Procurement function may well be the instigator but ultimately, supplier diversity will have to be championed by senior leadership across all functions. Enlightened procurement leaders need to push these capabilities out to their stakeholders and see their role as educators as much as owners.

Diversity within supply chains can not only bring new ideas and solutions to an organisation, but also boost competitiveness and market growth. With many global business leaders finally waking up to the huge potential in supplier diversity, businesses that understand how to use this to their advantage will stand to gain a competitive advantage and genuinely be able to make a positive contribution to a fairer society.

Remember: Inclusive Procurement leads to Inclusive Growth.

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