“Diversity” appears to have become a dirty word in some quarters of the business world today — but not when it comes to supplier selection.

Walmart is just one of many corporations pulling back from diversity, equity and inclusion (DEI) programs for hiring in recent weeks. But the trend has given rise to confusion over companies’ commitment to promoting diversity within the supply chain.

COVID-19, war in Ukraine, attacks on shipping in the Red Sea and the bizarre blockage of the Suez Canal by a single containership are among recent events that reminded businesses of the perils of single-sourced supply chains — no matter how much money they thought they were saving by concentrating offshore production in countries such as China. In this context, “diversity” carries a decidedly positive connotation.

“Supplier diversity is not DEI, and DEI is not supplier diversity,” says Ralph G. Moore, president and founder of Ralph G. Moore Associates (RGMA), which advises companies on the subject. “It’s a business strategy for engaging outstanding diverse suppliers throughout your value chain.”

When it comes to crafting supplier strategies, the word “diversity” carries a double meaning: reliance on multiple suppliers to mitigate the risk of any one of them failing, and the increasing use of suppliers owned by “historically underutilized population groups,” including women and non-white entrepreneurs. Turns out that, in times of extreme uncertainty like today, the two meanings go hand-in-hand. As Moore puts it: “We like to use the phrase, ‘Supplier diversity is really the intersection of value and values.’”

Notwithstanding the popularity of single-sourcing of critical raw materials, parts and finished goods in recent decades, the notion of supplier diversity has been around for some 50 years, according to Moore. More than 40 global corporations spending over $1bn a year with diverse firms have formed the Billion Dollar Roundtable, he notes. The group shares best practices and white papers advising companies on how to improve supplier diversity. (One has to wonder whether the “Under Construction” notice currently on BDR’s home page signals a change in direction.)

There’s also the statement issued in 2019 by the Business Roundtable, comprising chief executive officers of leading U.S. companies. It sought to redefine the “purpose of a corporation” to go beyond mere shareholder returns and serve the interests of “customers, employees, suppliers, communities and shareholders.”

In the U.S., the idea of supplier diversity can be traced back to 1969, when President Nixon issued an executive order creating the Office of Minority Business Enterprise, renamed 10 years later as the Minority Business Development Agency. The intent was to give minority-owned businesses greater access to capital, contracts and marketing opportunities on both a domestic and global basis. “That set the stage for Black capitalism,” Moore says.

The agency has been mired in controversy ever since. President Trump eliminated the MBDA’s budget in his first administration in 2018, although it was restored the following year. President Biden subsequently upgraded its status to that of a permanent agency, not just one just serving under an executive order.

Now, MBDA’s ultimate fate is again in question. In January, Trump issued an executive order eliminating federal programs promoting affirmative action and DEI, and revoking a 1965 executive order establishing those criteria for prohibiting discrimination in government contracting.

Not surprisingly, confusion reigns over the whole subject of DEI in business and the supply chain. “It’s like being caught up in the undertow of a sinking ship,” says Moore.

In 2008, RGMA worked with Walmart to promote the diversity of second-tier suppliers. Moore calls the giant retailer’s recent action against DEI “a reactionary move” with uncertain consequences for supplier diversity. “The jury is still out as to what exactly they’re going to stop doing,” he says.

RGMA chief technology officer Reginald K. Layton stresses that supplier diversity isn’t concerned with issues of corporate culture such as fair hiring, employee training and opportunities for career advancement. “It’s about expanding the supplier selection process, increasing competition,” he says. “It’s about supporting economic development in diverse communities.” And in doing so, global supply chains boost resilience by drawing on a broader selection of suppliers.

Moore also cites the work of the Global Supplier Diversity Alliance, which addresses the issue on a worldwide basis. Founding members include organizations based in Canada, China, South Africa and Australia.

But without the support of American companies, which are feeling the pressure in the current political environment to walk back their DEI efforts both internally and with supply chain partners, the work of those international groups could be undermined. Moore, who has trained hundreds of supplier diversity leaders over the years, says such training today “is not what it used to be. We have a generation of supplier diversity leaders who have not been trained to understand the points we’re making. And a corporate person who doesn’t understand them is not in a position to defend or make a distinction when the C-suite says we’ve got to get rid of [a supplier diversity program].”

It remains to be seen whether internal DEI programs will be conflated with supplier-diversity efforts, leading to a possible shrinkage of global sourcing options and ramping up of supply chain risk.

“This is no longer a social conversation,” says Moore. “This is a business imperative.”