Supplier diversity: Procurement takes a star turn

This is an excerpt of the original article. It was written for the November 2021 edition of Supply Chain Management Review. The full article is available to current subscribers.

November 2021

This is the last regular issue of Supply Chain Management Review for 2021. Normally this time of year, I look forward to what’s in front of us. That’s turned out to be a fool’s errand over the last year and a half. So, instead, I looked back to see what I wrote this time last year. My column was titled “COVID hasn’t stopped supply chain progress.”

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Procurement organizations fulfill an indispensable role. Their rigor and innovation tangibly benefit the company’s bottom line. Yet procurement is rarely seen as “out front”—breaking new ground that unmistakably elevates the company’s strategic trajectory.

Supplier diversity offers procurement just such an opportunity. Why? In allocating their loyalty, today’s consumers look beyond what you make to how you make it. Environmental, social and governance (ESG) concerns are also increasingly vital to your share price as a growing number of investors focus on companies that demonstrably serve as a force for good. Most major companies have responded via formal diversity, equity and inclusion (DEI) programs and well-documented ESG strategies. Yet DEI and ESG are increasingly viewed as table stakes. At this point, few companies would dare not have such programs in place.

Intriguingly, the same cannot yet be said for supplier diversity (SD). A handful of leading companies (e.g., Johnson & Johnson, AT&T, Verizon, Ford) have demonstrated a sustained commitment to SD, but they are very much in the minority. On the whole, SD is still far less obligatory than DEI and ESG, and so remains a shining opportunity to stand out.

As supplier diversity is not necessarily expected, pursuing an ambitious SD initiative can significantly enhance brand awareness and appeal. A 2019 survey conducted by The Coca-Cola Company found that consumers who were aware of Coca-Cola’s supplier diversity initiatives were 45% more likely to perceive the brand as valuing diversity; 25% were more likely to think favorably about the brand; and 49% were more likely to purchase Coca-Cola products. In an era of evolving consumer expectations, those findings look like the tip of the proverbial iceberg.

A serious commitment to SD makes a statement to your employees and your industry talent pool, boosting your existing DEI efforts. Companies with SD programs have higher employee retention, and SD is an effective way to engage your company’s business resource groups.

In sum, a visible commitment to supplier diversity can strategically enhance the company’s standing with a broad array of important stakeholders. Procurement can lead the way, although this requires adopting an aspirational mindset that ventures well beyond procurement’s customary concerns.

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