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Why Partnering With Diverse Suppliers Is a Win-Win for the Enterprise

Procurement teams have an opportunity to meaningfully contribute to their companies’ diversity and inclusion goals by consciously partnering with diverse businesses, defined as any company that is at least 51% owned by persons identifying with underrepresented groups.

As companies continue to prioritize diversity and inclusion (D&I) in the workplace, D&I leaders are finding ways to promote diversity through every line of business. While most D&I initiatives focus on increasing diversity through equitable hiring practices and coaching employees on inclusive practices, they often overlook one key area of contribution: suppliers. 

Though focusing on internal diversity goals is critical, enterprises aiming to make equitable contributions beyond their business must include supplier diversity in their corporate D&I goals. A company’s supply base is an extension of its workforce and should therefore track against its diversity metrics and goals. 

As the link between the business and its suppliers, procurement teams have a unique opportunity to meaningfully contribute to corporate D&I goals by consciously partnering with diverse businesses, defined as any company that is at least 51% owned by persons identifying with underrepresented groups. By partnering with these companies, enterprises can both drive competitive advantage and deliver on their D&I promise. 

“To create a truly equitable workplace, enterprises must look beyond traditional D&I goals and prioritize diversity in every area of the business, from their own workforce to their supplier partners.”  

Carin Taylor, Chief Diversity Officer, Workday

A more diverse supply base not only enables agile sourcing processes, but also drives widespread impact beyond the business. According to the U.S. Senate Committee on Small Business and Entrepreneurship, “minority business enterprises accounted for more than 50% of the two million new businesses started in the United States and created 4.7 million jobs.” Today, there are over 4 million diverse businesses that produce a combined revenue of around $700 billion per year. 

While contracting with diverse suppliers contributes heavily to the bottom line and promotes core values, it also helps ensure business continuity by embedding resilience into enterprise supply chains. With ongoing supply chain disruption, more and more enterprises are understanding the massive impact that contracting with more diverse and local suppliers generates. 

Supplier Diversity Enables Organizational Agility

Organizational agility remains a top priority for business leaders as they plan for their enterprises’ futures. Successful businesses must be able to respond quickly and efficiently to the unexpected. Partnering with local diverse suppliers can help these leaders drive agility while simultaneously enriching the community. 

For BlueCross BlueShield of Tennessee, this commitment to diversity is reflected in company-wide KPIs. “Every vice president and above in our company has measurable goals tied directly to supplier diversity,” says David Geyer, director of corporate procurement at BlueCross BlueShield Tennessee. 

“In one case, we were able to switch from a large corporation to a minority supplier based in Tennessee—an important way we can better align interests with the community we are serving.” 

David Geyer, Director of Corporate Procurement, BlueCross BlueShield

With 95% of businesses reporting some level of sourcing and supply chain disruption during the pandemic, many procurement leaders turned to smaller, diverse suppliers to ensure continuity for the business. Smaller, local suppliers lend procurement teams added agility when it comes to last-minute or urgent requests. Unlike their larger counterparts, smaller suppliers can often act with more flexibility in times of uncertainty. 

Supplier Diversity Drives Competition and Innovation

A wider supply base made of diverse perspectives not only creates healthy competition, but it also sparks innovation. Because diverse businesses can often act with more agility, they can drive costs down, challenging even the largest suppliers to keep pace. A 2019 McKinsey study found that more diverse companies outperform other businesses by 36%. Moreover, the Hackett Group found that nearly all diverse suppliers either meet or exceed buyer expectations. With access to a broad range of experiences and perspectives, diverse suppliers can often outperform their counterparts and find creative solutions to supply chain disruption. 

Businesses rely on supplier-enabled innovation (SEI) to create better quality products or services. According to Procurement Leaders, “with 25%-45% of revenues coming from product innovation and up to 65% of innovations sourced externally through external partners and suppliers, SEI represents a treasure trove of opportunity.” But innovation cannot exist in a vacuum. By partnering with diverse suppliers, enterprises are opening themselves up to new perspectives and new ways of doing business. 

Supplier Diversity Builds Trust and Attracts Top Talent

Partnering with diverse suppliers doesn’t just lower costs and drive innovation, it also builds trust with consumers and attracts top talent. Harvard Business Review cites a Hootology study conducted for Coca-Cola that found that 45% of those who were aware of Coca-Cola’s supplier diversity efforts were more likely to perceive the brand as valuing diversity, and nearly half of respondents were more likely to consume Coca-Cola products. 

By demonstrating a commitment to D&I, enterprises can forge better relationships with their customers and establish themselves as trusted brands. Companies like Walmart and Target are also prioritizing supplier diversity. In its 2018 Global Responsibility Summary, for example, Walmart reported that it had sourced nearly $14 billion from diverse suppliers.

If boosting the brand wasn’t enough, supplier diversity also attracts top talent throughout all lines of business. Job seekers are prioritizing company mission statements and core values more than ever. Forbes cites a Cone Communications study that found that 64% of millennial job seekers will pass on a job offer if the employer does not have a corporate social responsibility policy in place. Indeed, 52% of the Hootology survey respondents indicated they would like to work for a company with a supplier D&I program. With employees as a company’s greatest asset, supplier diversity programs can help attract incredible talent as well as retain high-performing people. 

Supplier Diversity Enriches the Enterprise and Local Communities

Enterprises that prioritize supplier diversity set their business up for success while simultaneously enriching the lives of their employees, their supplier partners, their customers, and the greater communities they serve. Cecil Plummer, president and chief executive officer of the Western Regional Minority Supplier Development Council (WRMSDC), explained that the benefits of effective supplier diversity efforts are far-reaching. According to WRMSDC research: “Diverse businesses in the Western Region alone generate over $11B in value, which translates to job creation, tax revenue, and access to healthcare, housing, and higher education for underserved communities.”

As Workday scales and grows as a company, we continue to prioritize supplier diversity as a core value of our global sourcing strategy, ensuring our supplier community is representative of our equitable workplace.

Through supplier diversity programs, purpose-driven enterprises can live up to their core values and make meaningful contributions while gaining some serious ROI. Commitment to diversity must extend beyond D&I departments, and enterprises that take every opportunity to bake diversity into their business will be better equipped to navigate future disruption. 

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