The U.S. Supreme Court’s decision to end affirmative action in higher education created a lot of questions for businesses, especially around efforts to promote diversity. Supply chain and procurement leaders in particular might be wondering how to view their supplier diversity programs, which aim to increase spending with smaller and more local providers.

So for organizations that have dedicated years to nurturing their supplier diversity programs, what lies ahead?

Affirmative action, widely known in the context of higher education, has been a subject of debate well before the Supreme Court’s recent ruling. And it has nothing to do with supplier diversity programs in our supply chains today.

Supplier diversity isn’t an affirmative action policy. It’s a voluntary and intentional procurement practice, designed to increase supply-base competition and value. Unlike the use of affirmative action in higher education admissions, reliance on diverse suppliers isn’t mandatory for companies. They choose to use them — and for good reason.

Supplier diversity represents more than increased access. The goal isn’t to be more diverse — it’s to strengthen business by opening supply chains to new ideas, alternative providers, disruptive technologies, new talent, specialized insight and local expertise.

Opening the supply chain, and increasing supplier diversity, means a lot of things. It includes minority-owned businesses, but also those run by women, veterans, people with disabilities and more.

In all these cases, supplier selection isn’t a zero-sum game. Diversity programs don’t mandate that a contract be awarded to a specific group, whether it’s a small business or a veteran-owned organization. Decisions are always based on which supplier provides the best value for the buyer. Supplier diversity programs ensure that procurement has a plethora of options and capabilities from which to select.

The main reason supplier diversity isn’t going anywhere: It’s good for business.

Mature programs have been proven to mitigate risk, increase innovation, reduce costs and positively impact brand reputation. Previous studies show that supplier diversity programs lead to a 133% greater return on procurement investment.

Supplier diversity helps enable two of the most critical procurement mandates right now: cost savings and mitigation of supply chain risk. 

According to a McKinsey study, minority- or women-owned businesses enterprises (MWBEs) generate year-over-year cost savings of 8.5% —considerably higher than the average 3% to 7% annual procurement savings that most companies realize.

Supplier diversity also fosters a more resilient supply chain ecosystem. Small or diverse suppliers bring agility, flexibility and local expertise, while broadening procurement options and mitigating risks associated with disruptions. Diversification of the supply base enhances a company's ability to adapt to market changes.

The ultimate impact is on the bottom line. A recent study by Bain & Company and EcoVadis draws a direct link between environmental, social and governance (ESG) activities and increased earnings. 

Jobs. Tax revenue. Wealth creation. Supplier diversity is proven to have an impact on all three. According to McKinsey, a doubling of spending with MWBEs, to $2 trillion, could generate $280 billion in additional income, as well as another four million jobs. Many high-growth areas of the economy — including finance, IT, legal, and engineering — remain underrepresented in supplier diversity programs. McKinsey calculates that if enterprises were to direct 40% percent of the funds already committed to MWBEs to high-growth economic sectors, it would generate more than 190,000 jobs and $15 billion in additional income.

To reap the full benefits of supplier diversity, along with broader ESG programs, businesses need the right data, technology and overall approach. Too many organizations are still managing their programs manually, or relying on outdated and inaccurate information.

That’s a problem, because the supplier diversity landscape changes constantly. Certifications constantly change or expire. Requirements evolve. New standards are introduced to the market. Businesses merge, change ownership and get acquired. An estimated 23% of supplier diversity data changes each year. Procurement needs to stay on top of the changes, while avoiding the risk of over- or under-reporting diversity data. 

It's a similar story when it comes to expanding supplier diversity. Most mature organizations understand the benefits of supplier diversity, and actively invest to expand their programs. But for those with data issues or manual programs, it’s easier said than done. The number-one supplier diversity challenge, as reported by 75% of organizations surveyed, is finding credible new suppliers. 

Reporting is another challenge. While many businesses still measure supplier diversity as a percentage of spend, the opportunity is much bigger. How does your supplier diversity program impact your business and the economy? Those insights can be demonstrated with the right tech, data and process.

Ultimately, supplier diversity is a strategic and intentional practice that’s driven by companies' recognition of its potential to enhance competition, foster innovation and yield positive business outcomes. Double-digit growth in supplier diversity programs between 2021 and 2022, as noted in Supplier.io's annual State of Supplier Diversity report, is evidence that some of the world’s most successful companies recognize the value of diverse suppliers. 

Embracing diversity and inclusion in the supply chain isn’t just a matter of social responsibility, but also a critical driver of business success. The bottom line: Supplier diversity is here to stay — and that’s a good thing for the economy, supply chains, and businesses of all sizes.

Aylin Basom is chief executive officer at Supplier.io.