At EudaOrg, one of our core missions is to support organisations to develop sustainably inclusive environments. Oftentimes when we speak to organisations, they may have reviewed how inclusive their colleague and candidates' experiences are. Yet there is still a lack of engagement in diversity, equity, and inclusion (DEI) outside of people management. In recent times, there is increasing awareness of the role that procurement teams need to play in organisations' DEI initiatives. Sustainable inclusion, like any other type of organisational change, requires leadership and broader colleague support and buy-in. But why specifically should organisations be considering suppliers in their DEI initiatives?
The Benefits Of Having Diverse Suppliers
Corporate Social Responsibility (CSR)
Organisations should prioritise supplier diversity as it aligns with broader societal goals of economic empowerment and equity. With the EU’s Corporate Sustainability Reporting Directive (CSRD), organisations are required to consider the role they play in creating a fair and just society. Through providing opportunities for diverse and underrepresented suppliers, organisations can actively positively affect and report change they are making in their communities and society at large. This has many knock-on effects, one of which is attracting talent, with 64% of millennials saying they won’t work for companies that perform poorly on CSR.
Financial Benefits
Organisations with diverse suppliers are more profitable. Research has found that organisations that have diverse supplier bases have a greater financial return on their procurement investments. In fact, research has indicated an ROI of 133% in annual sales revenue.
Innovation
In an increasingly competitive business landscape, organisations must constantly be innovating and creating products that capture the markets interest. Research has reacted to that need and there has been increasing academic research on what are the determining factors in product innovation.
Having diverse suppliers and partners has been found to be a determining factor in multiple studies in diverse sectors. Research in the manufacturing sector found that having diverse partnerships had the most positive impact on innovation. In fact, research in the services sector found that having diverse supplier partners was a more significant predictor of innovation than the strength of the relationship with partners.
What Are The First Steps My Organisation Should Take?
There really is no one size fits all and research has found a range of contributing factors to organisational success in diversifying their suppliers. Organisational culture and buyer team behaviour have been found to be correlated with how diverse organisations suppliers are. A case study of three Fortune 500 companies found a significant positive effect of teams building an internal business case for diversifying their suppliers.
The importance of making a business case is something we have seen at EudaOrg when speaking to businesses across sectors and organisation sizes. Connecting these organisational efforts to real business outcomes can have a transformational effect on getting broader organisational buy-in.
How EudaOrg Can Help
At EudaOrg we understand how challenging it is to support and be a trailblazer for organisational change. This has led us to embed two commitments into how we work. Firstly, we understand that diversity, equity, and inclusion needs to be connected to the broader organisational strategy and business goals. We support our customers to communicate the benefits of diversity, equity, and inclusion internally and to tie it to your organisation's goals.
Secondly, we let the research lead and take an evidence-based approach to everything we do. With this in mind, we have developed a diverse supplier assessment that allows you to benchmark your current supplier initiatives across three key areas. This assessment allows you to identify areas for growth in your organisation and our software provides you with the goals to affect positive change.
Contact us if you would like to hear more about how we can help you to make the business case for DEI and how you can benchmark your current supplier diversity. You can also read here about how to effect real change in diversity, equity, and inclusion.
Posted by Nessa.
References:
Asthana, R. (2024). The Role of Supplier Diversity’s Impact on Equal Opportunity and Business Performance https://www.gainfront.com/blog/role-of-supplier-diversity-business-performance/
Cho, M., Bonn, M.A., Han, S.J. and Kang, S. (2018), "Partnership strength and diversity with suppliers: Effects upon independent restaurant product innovation and performance", International Journal of Contemporary Hospitality Management, Vol. 30 No. 3, pp. 1526-1544.
David, A. (2023). Supplier Diversity is the Present and the Future. https://www.scmr.com/article/supplier-diversity-procurement-future
Jesús Nieto, A, and Santamaría, L. (2007). The importance of diverse collaborative networks for the novelty of product innovation. Technovation. https://doi.org/10.1016/j.technovation.2006.10.001
Prilepok, M., Stewart III, S, Yearword, K., and Zegeye, A. (2022). Expand diversity among your suppliers—and add value to your organization. https://www.mckinsey.com/capabilities/operations/our-insights/expand-diversity-among-your-suppliers-and-add-value-to-your-organization
Shah, M. and Ram, M. (2006). Supplier diversity and minority business enterprise development: case study experience of three US multinationals. Supply Chain Management, Vol. 11 No. 1, pp. 75-81.
Whitfield, G, and Landeros, R. (2006). Supplier Diversity Effectiveness: Does Organizational Culture Really Matter? Journal of Supply Chain Management. https://doi.org/10.1111/j.1745-493X.2006.00019.x
