Supplier diversity isn’t a new concept, but it’s one that will come into sharp focus in 2021.
Historically, diversity initiatives focused primarily on ensuring that business continuity wasn’t in jeopardy, that if one supplier or region was unable to perform, there were other options to rely upon. And while this concern remains a priority for organizations, U.S. companies are entering 2021 with a new and expansive definition of diversity. They’re looking to ensure their supply chains include goods and services from a diverse base of historically underrepresented minority, disabled, veteran, LGBTQ, and woman-owned businesses.
While the COVID-19 pandemic disrupted global supply chains in 2020, the U.S. also faced social unrest as citizens protested the deaths of Breonna Taylor, George Floyd, and others at the hands of law enforcement. We’re already seeing companies like Apple, Hewlett-Packard, Microsoft, and more using their financial power to support racial equity and social justice. These corporations are reducing the barriers that existed across their businesses, from efforts to increase representation in their employee base to taking a look at contractual relationships with suppliers to increase supplier diversity. Microsoft chief executive officer Satya Nadella said in the summer of 2020, “We will use our balance sheet and engagement with suppliers and partners to extend the vision for societal change throughout our ecosystem, creating new opportunities for them and the communities they serve.”
Companies that serve diverse markets globally know that supplier diversity initiatives are a critical competitive advantage, helping to mitigate risk across supply chains, win new business, retain customers, and reinforce brand reputation. As more companies embrace these types of diversity initiatives in their contractual relationships, contract lifecycle management (CLM) technology should play a critical role in tracking supplier diversity and ultimately, ensuring that these initiatives succeed.
This year, we’ll see organizations incorporate diversity, equity and inclusion (DEI) into every aspect of the business, from the boardroom to the shop floor and purveyors of their raw materials. They’ll be seeking partners with supplier diversity initiatives who can help them achieve those goals. Contracts define what a company buys and from whom, what it sells, and how it runs.
Here are three things you can do to increase supply-chain diversity.
Identify contracts with supplier-diversity commitments. In any supplier-diversity program, it’s imperative to know what has been committed to by understanding which agreements currently contain clauses supporting disadvantaged business enterprises (DBEs). A CLM system powered by artificial intelligence can be extremely beneficial because it can digitize legacy and third-party contracts to surface DBE clauses for review, and store those agreements in a central contract repository, allowing for a deeper and more efficient audit when necessary. Such a system not only helps not only with identifying contracts with diversity obligations, but can also help identify and manage all contractual relationships and their underlying additional obligations, such as periodic reporting or delivery of certificates.
Once supplier-diversity commitments are identified, organizations can manage those contracts along with all associated documents, such as supplier DBE certifications and invoices, to ensure that what’s happening in the supply chain complies with what was committed to in the contract. Advanced CLM software even provides portals where contractors can upload documentation directly to the system for easier compliance tracking.
Ensure that contract clauses support supplier-diversity initiatives. Using CLM software to automate contract authoring improves consistency and governance with an extensive rules engine, which enables the dynamic creation of contracts from templates and clauses. With this functionality, companies can make good on their commitments by including standard DBE clauses in the clause library, to ensure that supplier-diversity provisions are included in all appropriate contracts.
Furthermore, advanced CLM systems enable companies to incorporate supplier-diversity requirements into their category and spend strategies. As companies’ sense of urgency about delivering against DEI commitments grows, these intelligent capabilities allow them to onboard new suppliers more quickly, while ensuring compliance with diversity initiatives.
Utilize data to showcase supplier-diversity success. CLM technology can help companies to showcase DBE success stories, especially when diversity initiatives are married to contracting metrics. A flexible CLM system allows seamless integration with third-party customer-relationship management, procurement and spend-management systems, enabling the transfer of purchase orders, invoices or payment data. This is critical to telling a holistic diversity story, because many of these systems contain data about the commercial relationship between an organization and its suppliers.
Utilizing A.I. and obligation-management technology, organizations can more easily evaluate performance data for diverse supplier relationships, and track performance against key supply diversity metrics. Companies looking to share with potential partners, customers and stakeholders about how they’re delivering on their supplier-diversity efforts will benefit from CLM software, which can surface data-driven insights that support their initiatives.
Twenty-twenty was a year defined by disruption both economically and socially, but we’re emerging stronger, and will be applying the lessons learned to building a more equitable world for the next generation. Organizations are going into 2021 with renewed focus and purpose, because the world is watching. Contract-management technology provides the means to redefine supply operations and identify ways the contracting process can support supplier-diversity initiatives and facilitate success across the supply ecosystem.
Bernadette Bulacan is vice president and lead evangelist at Icertis.