Diversity, Equity and Inclusion (DE&I) programs are all the rage these days, with workplaces scrambling to make their offices more welcoming to workers with a wide range of backgrounds. However, company headquarters is not the only place that should be seeing a boost to diversity; business practices as a whole should be transitioning toward more diverse solutions — which means increasing the Supplier Diversity of a business’s suppliers.
To some business leaders, supplier diversity might seem like overkill. After all, how much do clients and customers know let alone care about where a company gets its supplies? However, the diversity of a brand’s network becomes more important as consumer choice increases and as consumers become more informed. Read on to learn why and how you should improve your company’s supplier diversity.
Supplier Diversity Definitions
A supplier that is at least 51 percent owned and operated by an underrepresented or underserved group can be considered a diverse supplier. Most often, companies think of diversity in terms of race or gender, with minority-owned enterprises (MBEs) and woman-owned enterprises (WBEs) earning the most interest and coverage. However, within their supply chains, organizations should also introduce businesses owned and operated by other types of marginalized groups, such as fat people, people with disabilities, veterans, LGBTQ+ people and more.
Unfortunately, diverse suppliers are in high demand. Though diversity is increasing across the business landscape, in 2022, business remains overwhelmingly white, cis, hetero and male. Among Fortune 500 companies — the largest and most successful organizations in the U.S., ranked annually — there are only:
- 41 female CEOs
- 10 Asian CEOs
- 3 Black CEOs
- 3 LGBTQ+ CEOs
Initiatives to increase representation of marginalized groups in business leadership circles have been present since the 1950s and ‘60s, the Civil Rights Movement compelled companies to integrate. Today, dozens of government programs assist members in marginalized groups in launching and managing businesses, to the extent that white men are now the minority of small business owners in the U.S., giving organizations plenty of diverse suppliers to build relationships with.
The first supplier diversity program as we understand it today was created by General Motors in 1968, and GM remains an industry leader in its commitment to working with a wide range of diverse suppliers. Today, some companies that top the list in terms of supplier diversity include:
- Johnson & Johnson
- Procter and Gamble
Reasons for Greater Supplier Diversity
There are two good reasons that all business leaders should develop and maintain supplier diversity programs:
It is morally and ethically good. In business — and elsewhere in life — marginalized groups struggle to attain the same level of success as white, straight, able-bodied men because of systemic inequalities that result from generations of deep-seated prejudice. By working with diverse suppliers, a company is investing in progress, not just for the individual institutions receiving their business but for the communities of people who have long been ostracized. Developing a network of diverse companies helps to elevate the status of marginalized groups within the culture of business and within society as a whole. A business that maintains values of ethical and moral behavior should always look for ways to improve their diversity and inclusion, which includes scrutinizing their supplier relationships.
It has commercial advantages. Business leaders should also be aware of the ways that a diverse supplier network can improve the bottom line. Social media platforms give consumers louder voices to make public a corporation’s behavior, and because more consumers care about supporting organizations that are putting effort toward positively impacting the world, companies that demonstrate their commitment to diversity with a diverse supply chain will win greater online visibility and greater consumer loyalty. Though it might seem that supplier relationships is a small issue, research has found that 49 percent of consumers are more likely to buy products from a brand that utilizes diverse suppliers.
The main challenge to supplier diversity programs is tokenization — that a business develops relationships with a diverse supplier only to capitalize on the perceived commercial advantages. Treating diverse suppliers as essential — at least as essential as non-diverse partners within the supply chain — is a good way to reduce tokenization and ensure that businesses develop mutually beneficial relationships that are morally and ethically positive.