Why inclusive supply chains are a boost for business
By Jo Faragher on 14 June 2022
There’s a lot of buzz about organisations proving their purpose right now: with investors dedicating more focus to businesses with strong ESG (environmental, social and governance) credentials, and candidates in first and second jobs asking potential employers difficult questions about the authenticity of their values and messages. One area that can be overlooked, however, is the diversity and inclusion they demonstrate in their supply chain.
According to a report by supplier diversity organisation MSDUK and procurement body The Chartered Institute of Procurement & Supply (CIPS), diversity in supply chains “can not only bring new ideas and solutions to an organisation, but also boost competitiveness and market growth”. Other advantages of tapping into a more diverse range of suppliers include increasing customer base (by providing access to a more diverse range of customers); new opportunities for business expansion in previously overlooked groups or geographies; and the ability to tap into the widest available pool of talent when accessing services. It’s great for corporate reputation, too. A survey by Hackett Group in 2016 found that 70% of US supplier diversity initiatives were driven by improving corporate image in the marketplace. Two-thirds agreed that it supported their internal corporate culture around diversity and social responsibility.
Access to networks
“There is no doubt that the pandemic disrupted supply chains. However, by engaging with diverse suppliers, corporates can improve their partnerships and collaboration, successfully delivering a diverse supply chain, and achieving the best outcome for all stakeholders,” says Mayank Shah, CEO and founder of MSDUK. “Moreover, when instilled properly, diversity in procurement creates social value to strengthen and embed resilience in our local communities.” Shah argues that the biggest challenge for ethnic minority-owned businesses is gaining access to mainstream supply networks. MSDUK supports members to understand the procurement process in the UK and build vital connections. “We are currently working with over 100 global and British companies, all committed to a more diverse supply chain and will continue to offer ethnic minority businesses a platform to access these opportunities,” he adds. “With many global business leaders finally waking up to the enormous potential in supplier diversity, businesses that understand how to use this to their advantage will stand to gain a competitive advantage and genuinely be able to make a positive contribution to a fairer society.”
Caulibox is a lunchbox scheme based in London, aiming to minimise the vast amounts of waste created by disposable food packaging by offering a reusable system. Using diverse and sustainable suppliers to support this goal is crucial, according to co-founder Josephine Liang. “As a tech company that is building a complete system tackling a problem as complex as replacing disposable packaging in the food-to-go sector, it is important we work with diverse suppliers with innovative solutions in each part of the supply chain,” she explains. This includes everything from who supplies its point-of-sale software and scanners, to container manufacturers and food producers. “This ensures we have a comprehensive view of the current global supply chain, where it is going, and how it is working in other parts of the world. We see diversity and inclusivity in all aspects of our business as a strategic imperative to cater to our clients worldwide,” she adds. “By choosing to work with a mix of bigger and more experienced stakeholders alongside smaller and more innovative producers, we are able to keep a close eye on developments in the UK and beyond. This helps us build solutions that are more resilient, innovative, and competitive in the global market.”
Buying responsibly
Larger companies are getting in on the act too. Property company CBRE runs a supplier diversity programme, which is a business commitment to “mentor, develop and integrate” diverse suppliers into how it provisions products and services. In 2020, the company announced a pledge to spend at least $1 billion with diverse suppliers in 2021 and to grow this spend to at least $3 billion in five years. Its definition of a diverse supplier is one that is at least 51% owned, operated and managed by an underrepresented group, and it wants to increase its engagement with businesses owned by minorities, indigenous people, women, veterans, LGBTQ+ individuals and those with disabilities. One of the ways it does this is by connecting with social enterprises, and the company is one of the signatories to Social Enterprise UK’s Buy Social Corporate Challenge, which encourages corporates to spend money with social enterprises, and in the past five years this has totalled almost £165 million.
Buying from social enterprises is a good way to make your supply chain more inclusive – these are businesses that aim to make a profit, but use that profit to “do good”, whether that’s supporting local communities or tackling social problems. According to statistics from Social Enterprise UK, 47% of social enterprises are run by women, 31% have directors from Black, Asian and minority ethnic backgrounds, and 22% operate in the most deprived areas of the UK. But there’s plenty of room for more – SE UK estimates that the average procurement budget of a FTSE 100 company is 400 times what they spend on corporate social responsibility (CSR).
“The impact in terms of supply chain opportunities [from investing inclusively] is far greater than the direct impact of the business itself,” says Charlie Wigglesworth, deputy chief executive of SE UK. “The supply chain is a real place where organisations can drive change. It shows you’re a business moving to being a responsible business rather than a business that does responsible things.” He describes the impact of ethical and inclusive procurement as the opposite of embracing CSR for compliance reasons, as well as a real opportunity for procurement professionals to show what their function can do. “They’re often seen as a department that avoids risks and does things as cheaply as possible, but increasingly they can have a role in shaping responsible business,” he adds.
It’s clear to see that taking a more inclusive approach to procurement is a win-win, expanding access to vital business for a wider diversity of suppliers, and boosting the reputation of the business (and its procurement professionals) at the same time.
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