In any team environment, diversity is a strength. From baseball teams to boardrooms, having people with different backgrounds, life experiences, cultures, and abilities improves outcomes. In the business world, diversity drives innovation and collaboration by connecting workers with varied perspectives and skillsets to achieve a common goal. Today, lack of diversity is actively hurting businesses, especially in technology. Fast Company recently reported that lack of diversity is driving employees away from companies.
In a survey conducted by Wiley, 68 percent of respondents said they’ve felt uncomfortable in a tech role. They attributed this discomfort to their treatment in relation to their gender, ethnicity, socio-economic background, or neurodevelopmental condition. This is a massive issue in today’s world where consumers reward brands that capture diversity and share their inclusive values. To this end, it is vital for companies to prioritize diversity and inclusion from the inside out. This means ensuring it exists within your own organization and within the friends you keep (i.e., partners, suppliers and even clients). Simply, the focus on diversity can’t end at the front door of your office. It must be evident throughout the supply chain. Here are three reasons why creating a diverse partner network is important.
Creating Economic Impact
In the U.S., population diversity is trending upward quickly. Minority groups are set to make up 56 percent of the U.S. population by 2060. The number of minority business owners in the U.S. is growing 17 percent annually, which is six times faster than the growth rate of all firms. Overall, minority business enterprise (MBE) sales are growing at a rate of 34 percent per year, nearly twice as fast as the national average, per a recent report from CVM Solutions. Because of this, MBEs are becoming a driving force of economic growth.
By partnering with diverse suppliers that are minority owned or that intentionally invest in disempowered communities such as people impacted by incarceration, those who live below the national poverty line or who have been unemployed for extended period of time, companies can drive economic growth by providing economic opportunity to people in places that need it.
General Motors Corp. (GM) is a great example of the long-term effects of supplier diversity. Though GMs commitment to supplier diversity started back in the 1960s, the company formalized the program in the 1990s. GM’s strategy empowers their women-owned and minority-owned suppliers through loans that help these businesses further develop and establish themselves. GM’s program now includes more than 200 women-owned and minority-owned suppliers. The company also offers a diverse supplier development program to mentor and train their high-value partners, setting them up for success with GM and other organizations. The end result is greater employment and more opportunity in minority communities. In return, these suppliers often promote GM products in the communities where they operate, driving revenue for both GM and their own company.
Working with diverse suppliers and partners provides the unique opportunity to produce new products and solutions to overcome competition. Diverse suppliers are typically smaller in size and more agile. They can adapt more quickly to market changes and business fluctuations. Diverse suppliers are also likely to be active in their communities, which makes them more attuned to the needs of those communities. This can be valuable for companies trying to expand their reach into new markets and acquire new customers. This all makes diversely-owned businesses top candidates for larger companies looking to form strategic relationships.
Larger organizations have found that their smaller, diverse business partners can help them improve their own efficiencies and drive innovation. These enterprises can connect women, minorities, LGBTQ+, veterans and other marginalized groups with business opportunities that foster innovation in their supply chain. For example, Google outsources areas that aren’t even part of their primary business, like food and transportation, to encourage information sharing. These companies frequently use Google’s products and will provide feedback for improvement. With diverse suppliers come diverse perspectives that are valuable in helping companies improve, evolve, and grow.
Better for Business
Beyond the economic impact and innovation that diverse partnerships can enable, they are also good at driving revenue and attracting customers. Investors and consumers are becoming savvier, and both expect the companies they do business with to reflect their values. Diverse and ethical supply chain practices can be a significant attractor for consumers. A separate supplier diversity report from CVM Solutions found that 82 percent of professionals from diverse suppliers are more likely as consumers to buy form corporations with supplier diversity programs.
Partnering with diverse suppliers can also be great for a company’s bottom line. Per research from the Hackett Group, companies with above-average supplier diversity generated 133 percent greater returns in the cost of procurement than the average performer. What’s more, companies that dedicate 20 percent or more of their spend to diverse suppliers can attribute as much as 15 percent of their annual sales to supplier diversity.
Diverse suppliers can be fundamental to any organization’s success, especially in today’s world. Many companies have already reevaluated their supply chains due to the COVID-19 pandemic, opting to bring in more diverse suppliers. Now is a great time for organizations to rebuild their partner network with a renewed focus on diversity. Diversity within companies and throughout supply chains will drive business forward for years to come.
Creating a diverse partner network is about so much more than checking a box on an annual corporate social responsibility report. Diverse suppliers can help companies source products and services efficiently and ethically while maintaining profits, improving the economy, growing customers and driving innovation By building a diverse and robust supply chain, companies empower communities, marginalized groups and small business owners while creating value for their own organizations. It creates a world where everyone wins.
Want to learn more about the benefits of supplier diversity? Televerde can help! Contact us today to learn more.