Heightened executive-level support for supplier diversity programs, paralleling a spotlight on diversity, equity and inclusion (DEI) initiatives across organizations., according to a new report from supplier.io.
"After half a decade of tracking supplier diversity programs through our research and partnership with world-class organizations, we are excited to bring the 2022 State of Supplier Diversity Report to help advance supplier diversity programs,” said Aylin Basom, CEO, of supplier.io in a statement. “It is great to see the leadership engagement and commitment to supplier diversity programs, however, for these programs to succeed it is critical that organizations set well-defined goals to increase spend and inclusion of diverse suppliers in the procurement process, as well as increase accountability and investment. Establishing these foundational processes is essential to program success."
Supplier Diversity Drives Organizational Value
The majority of respondents (93%) agree that engaging with diverse suppliers has a positive impact on their company internally and externally—a 15% increase from 2021—and 54% believe the impact is ‘significant’. Just 1% believe supplier diversity has had no impact on their company.
To define ‘diverse’ suppliers, companies most commonly track their spending with suppliers that are minority-owned (95%), women-owned (93%), veteran-owned (85%), LGBTQ-owned (76%), disabled-owned (73%), and small businesses (69%). Respondents spend an average of 5.9% with diverse suppliers, reflecting 3.1% with minority-owned suppliers, 2.8% with women-owned, 0.7% with veteran-owned, 0.4% with disabled-owned, and less than 0.1% with LGBTQ-owned.
The primary motivators for supplier diversity programs have significantly shifted over the last few years. The clear drivers are alignment with corporate culture and workforce inclusiveness (81%), corporate social responsibility (77%), and to improve supply chain competitiveness (63%). Fewer companies now cite customer requirements (38%) or government compliance (32%) as primary drivers for supplier diversity.
Executives Are Increasingly Engaged With Supplier Diversity, But Resources and Companywide Support are Lacking
Supplier diversity programs have had the highest level of corporate executive involvement for the second year in a row, with respondents stating they have an engaged CEO (61%), CPO (49%), and board of directors (31%). However, only 38% of respondents include supplier diversity metrics in management’s performance objectives, which signals low accountability.
Without the ability to measure the impact of supplier diversity programs and hold individuals and departments in the organization accountable to specific goals, it will be challenging to gauge program success. This may put the reputation of these programs at risk.
Organizations are also struggling to operationalize supplier diversity. The survey indicates that 32% of organizations do not have clearly defined supplier diversity goals, 19% do not integrate their supplier diversity metrics with their spend reporting platform, and 17% do not have a spend reporting platform. In addition, an alarming 24% of companies have no formal supplier diversity program in place, and another 19% have no program but are tracking diverse supplier spend.
Among the challenges that teams face, 61% of respondents indicate that receiving adequate staffing to support supplier diversity is ‘somewhat’ to ‘extremely’ challenging in their organization, and 59% say the same for obtaining an adequate budget to meet the objectives of their supplier diversity program.
Supplier diversity must be championed at all levels, but only 19% of businesses require diverse suppliers to be included in all sourcing projects, and 54% ‘highly encourage’ but do not mandate considering diverse suppliers. Engagement of everyone on the buy side of supplier diversity must rise to achieve significant change.
Opportunities Abound To Support Supplier Diversity
Despite the current shortcomings in many supplier diversity programs, there are clear ways to improve:
Create an Annual Supplier Diversity Plan:
- 33% of companies do not have an annual plan for supplier diversity, which is an essential step to drive action and awareness.
Provide Buyer Training:
- Only 48% of companies train buyers on practices for including diverse suppliers in sourcing opportunities, and 21% of companies do not provide their buyers with any training related to supplier diversity.
Adopt Supplier Diversity Technology:
- Teams continue to rely on manual and non-scalable tracking processes, and 50% of teams maintain manually collected certifications from suppliers and certifying bodies. 26% maintain Excel spreadsheets to track key supplier diversity information.
