What's on every supply chain leader's mind? Many will say a combination of supplier relationship management, the importance of knowing suppliers to truly understand the supply base in-depth, and why it is critical to continue investing in such functional capabilities — even in times of crisis.

However, we need to go deeper, into an area that has shifted down in priority during the pandemic: supplier diversity and inclusion.

Its importance is more than just an environmental, social and governance mandate. This past year there has been an unprecedented need for change, cultural progression and business improvement. Below explores the case for supplier diversity and inclusion, ways to bolster or create programs and the benefits.

'The triple bottom line'

More often than not, ESG initiatives are seen as public relations exercises, and not criteria related to growth or profit. But this is short-sighted. If we have a deeper knowledge of our supply base and make it a priority to get closer to our customers and communities, it can work as an innovative way to grow and achieve the bottom line while making a difference.

Whether you identify as a government, agency, Fortune 500 company or small business owner, the need to incorporate ESG objectives into operations grows more important every day. Today, implementing supplier diversity and inclusion is more than an optionality during supply chain disruptions; it's an avenue to support long-term supplier relationships committed to achieving diversity, equity and inclusion goals.

Many companies overlook the triple bottom line: profit, people and the planet. The only way to achieve a true impact on the triple bottom line is by focusing on corporate social responsibility. A strong supplier diversity and inclusion program drives growth and boosts the bottom line while expanding beyond to social benefits.

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A strong supplier diversity and inclusion program drives growth and boosts the bottom line while expanding beyond to social benefits.

Jaideep Sen

Principal Consultant at Proxima

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Companies that focus on supplier visibility are better positioned for the long-run due to nimbleness and flexibility. The more you know about your suppliers, the more efficiently and effectively you are able to procure goods and services. Businesses that effectively employ supplier diversity programs can develop relationships with suppliers that have been traditionally overlooked or underutilized by competitors, allowing for a competitive edge and more flexibility when things like supply shortages hit.

Working closely with diverse suppliers allows businesses to gain knowledge to understand customers they may not normally target or attract. These suppliers are tapped into the local population and typically are better able to serve those customers based on what knowledge they need or want — a helpful tool for growing a company's customer base.

As with all successful transformation programs, getting to the multifaceted benefits of supplier diversity and inclusion will require commitment, formal governance structures and resource investment. Here are a few steps to build and expand supplier diversity and inclusion programs to enable a growth culture.

Appoint a dedicated supplier diversity and inclusion champion

Sometimes, all we need to move things over the line is a push. A dedicated program manager that helps establish governance, ways of working and objectives, and assists the organization sponsors and responsible parties in driving toward goals is the glue that will hold your program together. This can start as one dedicated individual and eventually grow to more employees as the program strengthens.

Set targets and sub-targets, then drive forward

Goals should be set at an organizational or department level, with the leader accountable, but that's only one piece of the puzzle. Those who work in procurement know what it takes to get a diverse supplier in the pipeline and should be responsible for driving those activities. Set sub-targets for the percentage of diverse suppliers invited to supplier recruitment events and as your program matures.

Prioritize efficient outcomes

For larger companies with significant spend and larger supply bases, developing efficient focus will mean targeted attention to a diverse spend. If our prime vendors utilize significant third parties or sub-contractors in providing goods or services to us, we have the ability and the responsibility to communicate and drive our supplier diversity goals with our partners through their own utilization.

Use contract management to put supplier diversity clauses in prime vendor agreements that set targets and layout remediations. Diversity champions and category managers can set service level agreements and KPIs focused on diverse spend, and then measure and discuss against those metrics. Targeted project management around driving diverse spend with prime vendors via their third party and sub-contractor relationships is likely one of the most efficient ways for organizations to increase overall performance to achieve their targets.

Work across departments

Sales teams seek to use diversity as a competitive advantage. Business stakeholders have diversity goals they care about achieving. HR likely has significant resources dedicated to diversity and inclusion already. Linking up with these other groups and formalizing objectives is key to the long-term growth and future strength of the program.

The right partner (internal or external) can help increase awareness, communication and feedback around supplier diversity & inclusion initiatives. Possibilities include standing up diverse supplier expos, participation in industry inclusivity groups, understanding of cross-stream resource/technology needs, or simply more effective meeting calendars & agendas tied to relevant topics.

This story was first published in our weekly newsletter, Supply Chain Dive: Procurement. Sign up here.