Diversity and Inclusion (DI) - simply human
In many companies generating revenues in the United States, United Kingdom, South Africa, or India, there is awareness of the concept and regulatory requirements of diversity and inclusion (D&I) sourcing. However, except for some clear leaders in this field (and most other fields while at it), over the years I have observed, that many companies make little or no strides to significantly change the status quo regarding D&I unless governmental contracts or public opinions are at stake.
It is, therefore, not surprising how many leaders in corporations underestimate the societal needs and regulatory requirements for D&I sourcing while overestimating the efforts to establish the processes in their own companies.
Let’s take a step back…
…and understand some of the backgrounds of the societal needs with a walk down memory lane, starting with the US and ending at the UN:
US Supplier Diversity has its roots in the American Civil Rights legislation of the 1960s. In 1961, an Executive Order by President John F. Kennedy amended a federal order to consider affirmative action for federal contracting. In 1969, President Richard Nixon issued an executive order requiring government contractors and third-party agencies to contract with minority-owned companies to address the economic disparity. The results of this initiative were to be reported against pre-identified goals. Around the same time, companies like IBM, General Motors, Ford, AT&T, and others launched their first Supplier Diversity Programs in the USA.
On a global level, in many UN General Assembly agendas since the 1992 Earth Summit in Rio de Janeiro, Brazil, most countries have sought ways to reduce inequality and drive sustainable development globally. Finally, in 2013, the UN General Assembly set up a 30-member Open Working Group to develop a proposal for the 2030 Sustainable Development Goals. Two years later, the process culminated in adopting the 2030 Agenda for Sustainable Development, with 17 UN Global Goals at its core, at the UN Sustainable Development Summit in September 2015. Since then, diversity and inclusion, two of the 17 important goals (including water, energy, climate, oceans, urbanization, transport, science, and technology) are tracked annually as well by the UN in the so-called SDG Progress Report and are, for many companies and nations today, the gold standard for sustainability focus.
What we can learn from this short excursion into D&I history is that it just takes three things to see change happening:
clear goal setting
governance
relentless reporting
There is nothing special or different from any other change we introduce in our corporate and family life day in and day out.
Many companies live this change: global leaders such as Cisco, Nestle, SAP, Unilever, Proctor & Gamble, Johnson & Johnson, and IBM. Smaller firms in the US, such as PagerDuty, Rackspace Technology, Splice, Nando's, Siyakha Consulting, EOH in South Africa, and European companies, such as Atomico in the UK, Typeform in Spain, and Unbabel in Portugal.
They demonstrate that when integrative company policies are written and lived, all stakeholders can attest to the positive impact on their bottom line, employee satisfaction, and market perception.
It may be possible that you have not thought much about D&I in the context of your company, and the whole topic of 17 Global Goals, etc., was not on your radar.
Still, if you review the global goals and can see the rationale behind them (and most members of the human race do), you already took the first step on a journey to define a path forward for your company/supply chain.
Below are some questions/statements to help establish what it takes to be a leader in diversity & inclusion (D&I) within your extended enterprise (you and your suppliers). The focus in my blog is on the supply chain, and while there may be additional D&I opportunities within your organization and towards your customers, I leave these to your imagination.
How many of the following eight statements can you answer with a resounding, fact-based "yes"?
We understand the regulatory D&I requirements in the countries we sell to and act accordingly (with a focus on the supply base).
We have set targets and measured the status quo and trend of D&I sourcing over the years.
Our track record is consistently improving and reported quarterly in and outside procurement and our company.
We can differentiate in our reporting sourcing to diverse companies owned according to race, gender, and other criteria that are relevant to us or regulated.
Beyond regulatory reporting requirements, we calibrate our ESG objectives against the 17 UN Global Goals and have adequate resources/projects linked to these that are ring-fenced from annual budget cuts.
Economies of skill or scale are NOT the main criteria we use to find D&I suppliers, and we understand that D&I requires a hands-on approach by the whole internal team, not just procurement.
We promote D&I suppliers internally and cover them regularly in our internal company media.
We are active members of D&I associations (i.e., NMSDC, WBENC, NAWBO, WEConnect).
If you agree with most of the statements, you are a leader in D&I sourcing, and no need to read further. If you do not know or answered several questions with a "no," you have an excellent opportunity to update your ESG performance in the interest of all your company's stakeholders.
How to set up diversity & inclusion (D&I) processes in your supply chain?
Timeline: 18 months (depending on the current lack of focus)
Board Sponsor: CHRO, CEO
Lead: Chief Procurement Officer (CPO)
Project set-up: Weekly task force with clear objectives in procurement, the definition of targets overall (how much, by when), and by main spend categories, set-up systems & reporting with clear metrics (for a start: % spend coverage; # of suppliers by D&I category; % of buyers/internal customers trained). The Sustainability team supports (not leads) the procurement leadership leads and has personal objectives (consider targets for division/business unit leaders).
Change Management: Communicate targets and the "why" – be brutally open with the status quo - it earns you the respect of your employees and suppliers. Report progress regularly throughout the organization. Celebrate success & promote interested personnel in and out of the D&I teams. Invite leaders from D&I associations or leading D&I companies to speak at board and leadership meetings.
Sustain success: Regular quarterly reporting to the executive board. Communicate progress in the firm. Establish consequence management when targets are missed.
Digitalization/Automation opportunity: low (besides the obvious need to track the main KPIs in the supplier records and be able to do automated reporting)
Risk: Low – Very few D&I suppliers need to be vetted and supported differently than the rest of the supply base - mostly just at the beginning.
Cost: D&I suppliers are not higher in price. Small deltas can be compensated in the same category usually.
Watch out for: Lip service by all parts of the organization without real action. Blaming missing progress on unavailability or quality of D&I suppliers (primarily inaccurate). And having blind spots about finding D&I suppliers: They can be found in all walks of corporate life, including but not limited to law firms, accounting firms, insurance firms, etc. etc.
In summary
The journey towards diversity and inclusion in the supply chain requires a commitment from all levels of the organization, but first of all, a clear goal is set by the board. By setting clear targets, measuring progress, and communicating regularly, companies can make a real difference and promote diversity in their supply chain, not just to satisfy regulatory requirements but - being human. As a result, they enhance their reputation and create a more inclusive working environment for all - and, with that, improve their bottom line.
It is not difficult. It just needs focus.
Stay safe. Be bold.
Daniel
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