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The “Why” and “How” of Supplier Diversity

Thursday, April 29, 2021

5 minute read

The “Why” and “How” of Supplier Diversity

Supplier diversity programs are becoming a regular part of supply chain management. What’s the value of these initiatives and how can your business take steps to include diverse suppliers to your supplier arsenal? Read more to find out. 

 

What is a “diverse supplier”?

Simply put, a diverse supplier is a supplier that is majority owned and operated (51%+) by an individual or group that is part of a traditionally underrepresented group. This includes firms that are small-business-enterprises (SBEs), minority-owned business enterprises (MBE), and woman-owned business enterprises (WBEs). And as supplier diversity programs begin to become a regular part of supply chain management, it’s even expanded to include other minority groups including LGBTQ and others.

Supplier diversity programs are a natural element of businesses’ corporate social responsibilities (CSR). A supplier diversity program is a business program that encourages and intentionally seeks out minority suppliers to include in a firm’s supply chain. Its rise in importance comes at a time when consumers are expecting increased transparency and ethical prowess from the businesses they buy from. In fact, research from Mintel reveals that more than three in five consumers feel that ethical issues are becoming more important when making purchase decisions. 62% of respondents to an Accenture survey stated that when a brand has clear ethical values and is authentic in how they commit to these values, they’re much more likely to buy from that brand. They want transparency into the businesses they buy from and want to ensure their purchase goes towards supporting initiatives they believe in.

Benefits of supplier diversification

From a purely supply chain management angle, supplier diversification is vital for business continuity. We saw how important this became during the COVID-19 pandemic’s early days when the global economy became severely disheveled due to warehouses and suppliers temporarily closing. Quickly, many businesses realized that they had limited options for backup suppliers. From this perspective, expanding your supply chain could be the missing link to business continuity amid disruption.

From the CSR perspective, it’s the right thing to do. Diverse suppliers typically work within the communities they represent so when you invest in them, you also invest in their community and local economies. Additionally, inclusivity and ethical actions are also what consumers want and it helps to maintain high moral standards for your company. According to the Harvard Business Review (HBR), there’s also quite a big economic value to be gained. The HBR article states, “The National Minority Supplier Diversity Council reports that certified MBEs generate $400 billion in economic output that lead to the creation or preservation of 2.2 million jobs and $49 billion in annual revenue for local, state, and federal tax authorities. And those numbers are steadily increasing.”

Visible commerce, supplier diversity, & Basware Supplier Management

The value of diverse suppliers and including them in your supply chain is clear. A good first step in expanding your business’ supplier diversity is gaining transparency into which of your suppliers are already minority suppliers. From there, you can identify further gaps and seek out additional diverse suppliers. Transparency here is key. It ties into our concept of Visible Commerce: Complete visibility across all the flows of money, goods, and services around the world. A state where transparency and data lead to more effective and ethical decision making – a better world economy for all.

To increase this transparency and add to our visible commerce initiative, Basware has added diversity data to our Supplier Management solution. This tool adds data provided by Dun & Bradstreet into Basware Supplier Management and allows customers to quickly identify minority-owned and small businesses suppliers already existing within their supply base. This data will also be available for all new suppliers once onboarded, as automatic enrichment is updated during the onboarding. Included as a part of the supplier’s information, it will help customers easily see who in their supply base is a diverse supplier. Then, that data, customers can kick off a supplier diversification program in their business.