Supplier Diversity: CASME’s Panel Discussion Reveals Key Challenges

Monday, July 6, 2020

CASME’s Panel Discussion on Supplier Diversity was well-timed, given the recent global incidents that have thrust this delicate issue back into the spotlight.  Seven procurement panellists who work for global manufacturing, tech and pharma brands, and who lead the supplier diversity and supplier sustainability programmes within their organisations, were invited to share their current initiatives and discuss what diversity means in practice.

One of the fundamental challenges of delivering a successful diversity programme is the absence of a well-defined international meaning.

Legislation in the US requires companies to have a supplier diversity programme in place.  Here, diverse companies are classified as being owned by:

  • Women
  • Ethnic minorities
  • Veterans
  • Disabled people
  • People who are part of the LGBTQ community.

According to this definition, ownership must be 51% or more in one of these categories and certification must exist to prove it.  Small businesses and local suppliers are also included.  Some US cities actively encourage the mission of ‘buy local, hire local, live local’, adding extra variance.  There is clearly a much larger focus on supplier diversity in the US, and the approach is more mature than in other regions around the globe.

Different definitions exist in other countries, with various levels of effectiveness, making the validation of a supplier’s diversity status difficult without formal registers and consistent processes being followed.

During the Panel Discussion, which had a virtual audience of almost 70 CASME members, a live poll revealed that 34% have been working with a supplier diversity strategy for three years or more. Plans are at an early stage of development for 38% of the audience, and for the remaining 28%, the approach is somewhere in the middle.  Yet, even within large organisations, the number of employees involved in managing diversity programmes is fewer than five.

David Natoff, who facilitated the event commented:  “While larger organisations tend to have a small number of dedicated resources supporting supplier diversity, they are supported by other procurement personnel who take on diversity goals and objectives alongside their day jobs. It was interesting to hear from the panel who discussed that they had a number of people cross-functionally acting as change agents and champions of the supplier diversity programme.”

“It was also interesting to see that corporate social responsibility is starting to play a greater role in driving supplier diversity, as opposed to legislative requirements which would have been the key driver for many companies programmes in the past,” he added.

A further challenge is that Procurement is rarely the budget holder.  Contracts should be awarded based on the supplier’s innovation, cost and quality, rather than their diversity status.  The Procurement function can therefore influence, but not direct, business stakeholders to support diverse suppliers.  In addition, the customers of many organisations are encouraging and even requesting the use of diverse suppliers, so the demand is coming from multiple stakeholders.  It is recognised that in practice, it is easier to obtain a diverse supplier mix for categories such as facilities management, IT and marketing.

Procurement’s role is one of education, influence, communication, building awareness and encouraging buy-in from stakeholders to support the inclusion of diverse suppliers.  Those companies that supply the US Federal Government have a legal obligation to track and report their achievements.  Other companies do so as part of their corporate mission to ‘do the right thing’.

The future of diversity is one that requires significant growth outside of the US, with greater business leadership support and internal awareness.  Following global campaigns for ‘Black Lives Matter’, there is increased hope that diversity will feature more highly on procurement scorecards, RFx evaluations and in procurement decisions.

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