Let’s start off with a statistic: one-third of all privately owned businesses in the world are owned by women, yet women-owned businesses earn less than 1% of large corporate and government spend with suppliers. 

What does this tell us? Firstly, women-owned businesses are regrettably disregarded in the global supply mix. Secondly, businesses are missing out on the significant value that women — as business leaders, employees, consumers, and entrepreneurs — bring. 

The truth is, suppliers that are majority owned by those with a protected characteristic such as ethnicity, disability or sexual orientation, are widely excluded. 

Now’s the time to examine the makeup of your supply chain 

There is no question that diversity, equity and inclusion (DEI) is good for business — study after study has proven this to be true. However, the monumental disruption to the world’s supply networks, caused by shifts in demand, labor shortages and structural damages, amongst other factors, has forced supply chain managers to diversify in ways that pay little heed to social responsibility and inclusion. 

While there had been signs of easing disruption earlier this year, evolving global factors continue to put supply networks under huge pressure. Ongoing disruption has cost businesses dearly in both revenue and reputation, and supply chain managers are being forced to rethink their strategies.  

Although a monumental task, this rethink gives supply chain managers an opportunity to truly examine the makeup of their supply networks. When organizations come to see where they’re spending their money and with whom, they may soon realize there is an inequitable distribution of investment. This doesn’t just mean they are missing out on the indisputable value of working with diverse suppliers; by excluding diverse suppliers, businesses are leaving themselves open to scrutiny from the group with the most influence over success: the consumer. It is no secret that the inclusive consumer has more power than ever, voting with their pocketbooks for businesses that don’t just say they are diverse and inclusive, but can show that diversity and inclusivity runs through every vein of their business. 

Supply chain managers who consider integrating diversity of suppliers in their strategy rethink will undoubtedly reap the rewards. Here are just four benefits of a diverse supply chain: 

1. Boost innovation to reach a new and diverse generation of customers 

A legacy-focused mindset is the Achilles heel of the business world — the COVID-19 pandemic proved this to be conclusively true. And with global recession fears looming, there has arguably never been a greater need for innovation.  

More-and-more, companies are turning to their suppliers — or seeking new suppliers — who can bring innovation.  

The truth is a diverse supplier will bring fresh perspectives, new thinking, and ideas that reflect the multicultural communities that your business serves. In fact, research has suggested that Ethnic Minority Businesses (EMBs) are more innovative than their non-ethnic minority counterparts. The study commissioned by the Federation of Small Businesses (FSB) found 30% of EMBs engage in recent product of service innovation, 11% higher than non-EMBs. 

It is impossible to cultivate a new and diverse generation of customers if this is not reflected in your pool of suppliers.  

Plus, because diverse companies tend to be smaller, it makes them more agile and better able to adapt to industry trends and shifting regulatory mandates. All in all, these suppliers can help you to achieve your goals quicker and bring a vision to the market faster. 

2. Attract and retain talent to differentiate yourself from competitors  

Finding and retaining talent has become an inescapable part of business in 2022. Now, financial compensation alone cannot overcome poor culture. Consumer capitalism has driven the greatest change of all — a requirement to work for businesses that do not just claim to, but actually prove they foster diversity and inclusiveness. 

And that includes holding businesses to account on who they choose to work with. In fact, research undertaken by Hootology, found that 52% of people want to work for a company that has a supplier diversity and inclusion program.  

3. Increase supplier competition in the marketplace to mitigate your risk and reduce costs 

Businesses that rely on one — especially one overseas — supplier, tend to be more vulnerable to external factors. The global supply chain crisis triggered by the pandemic, for example, may have caused huge delays for those businesses, leading to reputational damage and loss of income. 

Diversifying your sourcing options and working with a supplier that’s closer to home will make the supply chain more resilient to factors that are outside your control. Plus, broadening your force of suppliers can create a more competitive marketplace. Consequently, this can help reduce your costs. 

In fact, recent research released by McKinsey claims that adding diverse enterprises into a supplier network can increase year-on-year cost savings to 8.5%.  

4. Deliver social impact to demonstrate a genuine commitment to inclusivity 

Suppliers that are truly diverse have a huge impact on the communities in which they operate. The Centre for Research in Ethnic Minority Entrepreneurship (CREME) at Aston University and NatWest say if ethnic minority businesses can be helped to overcome the barriers in their way, their gross value added (GVA) contribution to the U.K. economy could rise from the current £25 billion ($30 billion) a year to £100bn.  

The social impact of supporting diverse businesses reaches far beyond the growth of just one company. By diversifying, you will be creating more jobs, and investing in and building local communities. Given that social values are shaping purchasing decisions more than ever, it would be beneficial to demonstrate your commitment to inclusivity and diversity.

How to prioritize supplier diversity in a supply chain rethink

In the quest for supply chain diversification, token gestures will not deliver the sustained and strategic interventions that are required. To successfully diversify your supply chain, you must be consciously inclusive. 

First, diversification requires an understanding of the wider, societal factors at play. Many diverse businesses are held back by a lack of access to capital, early investment and mentorship. 

Consider the role you can play to help set up these businesses and integrate them into the supply chain. Are you able, for example, to establish or support a mentorship program to train and upskill diverse businesses to participate in your supply chain?

Second, hold up a mirror to your existing procurement process with the aim of examining how inclusive it really is. 

On inspection of your legal contracts, you may find some of the clauses exclude diverse businesses. One example is the indemnity levels that are often required by large organizations, which can be prohibitive for diverse suppliers, putting their businesses at risk for just a single contract. 

Another example is that payment terms may be exclusionary. A 60–90-day term is not conducive to a small and diverse-owned business cash flow model. Implement terms that are supportive and realistic.

Finally, explore how you may be able to leverage your existing partners to create an inclusive ecosystem that brings minority owned and multicultural businesses together to share, learn and collaborate. Continue to help these businesses upskill and access opportunities by setting up development plans through this channel for these businesses. Then, reward your agency partners for helping you to meet your supplier diversity goals.

All of these practices can help to move from unconscious exclusion to conscious inclusion, which in turn helps to create greater social equity impact for your business and the communities that you serve. 

The truth is you will strengthen your company with diverse suppliers. Financially, yes. But of greater value is that you will be part of the global collaborative effort needed to create a more fair and equal world. As more perspectives sit at the table, more economic and societal opportunities are created. 

Debbie Tembo is DE&I Partnerships Director at Creative Equals