The State of Supplier Diversity: Highlights from Our Latest Report
- Supplier Management
Supplier diversity is rising to the top of corporate agendas. Major corporations such as Walmart and McDonald’s, for example, recently set new public commitments around working with more diverse suppliers and expanding early payment programs for small vendors.
Our research shows 68% of organizations globally say the Black Lives Matter movement and greater calls for inclusion and equitable practices have increased internal pressure for supplier diversity initiatives over the past year.
Its clear supplier diversity programs are gaining momentum, but how far along are organizations in their journeys?
We teamed up with TealBook on a global study to uncover the answer to this question. We surveyed procurement and supply chain leaders across various industries on their progress in creating a diverse supply base, their biggest challenges, where they plan to invest, and more. Here’s a quick look at the findings.
Supplier diversity is top of mind, but slowly gaining ground.
Seventy percent of respondents globally said supplier diversity is a high or medium priority for their organization, yet many are still in their early stages of implementation. Sixty-three percent haven’t started, or are just getting started, with these initiatives. Just over 25% actively source from vendors from historically disadvantaged communities today.
The slow progress is surprising considering procurement holds the cards to drive real change: 46% of procurement and supply chain teams say they have senior-level executive backing for supplier diversity and CSR initiatives. This high level of support is encouraging. Teams should feel empowered to develop or expand supplier diversity programs and ask for what they need to be successful.
Progress differs by region. Sixty percent of North American organizations have a supplier diversity program in place and 53% consider these initiatives a high priority compared to just 23% and 16% of European organizations respectively. Thirty-nine percent of North American respondents have established diverse, ethical and sustainable sourcing practices versus 26% in Europe.
Organizations’ investment areas have varied to date.
When asked about where they’ve invested, a third of organizations said they have a documented supplier diversity policy and 31% regularly report on the diversity of their supply base. Less than a third report having published CSR or ESG principles. Sixteen percent have received a supplier diversity certification from a relevant organization and just under a quarter actively investigate suppliers’ claims that they are classified as diverse.
European companies are less active in all these areas, with 42% saying they’ve taken none of these actions compared to just 9% of North American organizations. The Asia Pacific region is farther along, with half of respondents reporting they have public CSR and ESG principles. Forty percent have a documented supplier diversity policy.
Companies are strategizing to boost inclusiveness.
Despite the motivation to increase supplier diversity, many organizations say that a lack of supplier diversity data and insights (27%) and visibility into spend with diverse suppliers (38%) is hindering progress. As such, 38% are taking action to ensure they have reliable supplier data and 31% plan to conduct regular audits of supplier diversity spend.
Other strategies organizations are implementing this year include tapping existing supplier relationships to expand the diverse supplier network (42%), asking suppliers to report on their own supplier diversity spend (30%) and partnering with certifying organizations (28%). Twenty percent will provide suppliers with the tools and coaching to help scale the diverse supply base.
Steps to inclusive procurement
Thirty-seven percent of organizations say they’re increasing the weight given to diversity in sourcing decisions. Thirty-one percent are leveraging technology to find diverse suppliers. These two steps are critical for a strategic and impactful supplier diversity program.
Beyond being the right thing to do, working with diverse suppliers promotes agility and innovation. By sourcing from multiple demographics and locations, organizations inherently reduce risk and can be flexible in the face of disruption. Tapping technology and data that increase supplier visibility and connect you to a network of certified diverse suppliers are key for the effectiveness of any program.
Want to learn more about global progress in supplier diversity? Read the full report here.
Stay tuned for our upcoming blog post that explores and addresses the specific challenges related to implementing supplier diversity programs.