Driving the Value of Supplier Diversity Programs

Companies with supplier diversity programs are realizing increased value, while experiencing a growing relationship between supplier diversity and environmental, social and governance (ESG) business units, a report by Supplier.io has found.

“The landscape of supplier diversity has undergone transformative changes recently,” Aylin Basom, Supplier.io CEO, said in the 2024 State of Supplier Diversity report. “Based on key findings from the report, more organizations are now reporting supplier diversity results directly to CEOs and Boards, reflecting the increasing recognition of its strategic importance.”

Speaking during the “2024 State of Supplier Diversity,” presented by Supplio.io and Institute for Supply Management^® (ISM^®), Daniel Dorr, vice president of marketing at Supplier.io, said three trends stood out in the seventh annual report:

• Supplier diversity professionals are working more with peers
• They are using data and new tools to demonstrate greater value
• Supplier diversity programs are growing, adding deeper value to the business.

Executive support and business relationships have increased, Dorr said. CEOs and boards of directors are much more aware of their company’s supplier diversity programs and impact than in the past: According to the report, which surveyed 360 supplier diversity professionals, 56 percent of respondents said they share results, compared to just 26 percent in 2021.

“It’s doubled in the last three years,” Dorr said, “so huge visibility for many in the supply chain space, which is incredibly exciting.” Visibility is also happening elsewhere in the organization, as 39 percent of respondents said they are sharing results with business units leaders and 37 percent with environmental, social and diversity or sustainability leaders, he said. This means there is increased scrutiny of the results, which is big, he said.

Key Findings

Which factors drive organizations to engage in supplier diversity and supply diversity programs?

The top answer, from three out of four respondents, is that it is part of company culture. It’s no longer a check-the-box activity. “Year over year, there has been huge growth in organizations saying, ‘This helps us improve our supply chain competitiveness (65 percent compared to about 45 percent in 2017) and enhance our brand’ (48 percent compared to about 35 percent in 2017),” he said.

For the first time, respondents were asked whether they use supplier diversity to win new business, with nearly half (48 percent) responding yes. This indicates that businesses are gaining greater value from their supplier diversity programs, Dorr said.

Among the supplier diversity metrics being tracked are spend with diverse suppliers (92 percent of respondents), business impact (such as RFP wins, 47 percent), and economic impact on communities (37 percent). The latter represents big growth; last year, only about 10 percent of respondents tracked community economic impact, Dorr said.

“It’s been fascinating to watch the metrics shift over time,” said Lois Eichacker, MBA, vice president of customer success at Supplier.io. “We’ve seen supplier becoming more of a business driver, a strategy driver, a business results driver,” she said.

Other results:

• Four in 10 organizations are tracking self-certified as well as certified diverse suppliers.
• Higher numbers of companies are externally reporting supplier diversity impact reports, giving visibility to how supplier diversity programs can make a difference.

Moving on to Growth

Regarding growing programs to add more value to the business, the report found that three areas stood out:

Geography. Companies are expanding their supplier diversity programs beyond the U.S. In 2021, only 6 percent of respondents said their companies had plans to do so. The latest study found that 27 percent planned to expand their programs to Europe; 27 percent, to Canada; Asia, 12 percent; Latin America, 11 percent; Africa, 11 percent; and Australia, 8 percent. Supply diversity associations are setting up in these regions, providing support and certifications, Dorr said.

Senior leader participation. Senior leaders are more involved with supplier diversity initiatives. As programs are implemented, they spend more time initially with procurement, ensuring processes are in place and the like, before shifting to partnering with business unit leaders, Dorr said.

ESG connection. Four in five respondents said ESG programs help, not hurt, supplier diversity efforts, which 36 percent both programs report to the same organization. Nearly half (47 percent) are asked to report spend not only on diverse suppliers, Dorr said, but on social — in other words, supply diversity — and sustainability of suppliers, too.

“This is a big shift,” he said. “More and more, supplier diversity professionals are being asked to do more.”

The ESG connection also enables organizations to develop positive partnerships with business counterparts, the speakers said.

In essence, more eyes across supply management organizations and beyond are scrutinizing supplier diversity data. “The level of scrutiny among executives and business unit leaders is greater than it has been in the past,” Eichacker said. “The scrutiny on supplier diversity numbers being reported externally has increased dramatically as well.”

Among the report’s recommendations to enhance supplier diversity programs:

• Partnering with the organization’s ESG counterpart
• Demonstrate positive impacts
• Engaging with senior leaders.

(Photo credit: Getty Images/FG Trade)