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As more organizations launch diversity initiatives, the attention being paid to the supplier selection process is also increasing. “Supplier diversity is moving up the agenda for many procurement teams,” Jaggaer points out in its recent 2021 Supplier Diversity Survey, “in response to pressure for greater inclusion in the supply chain of businesses that are at least 51% owned and managed by disadvantaged members of society and marginalized groups.”
While companies appear to be making progress on the supplier diversity front, there’s still much work to be done in this area. The survey found that:
- About 23% of companies already have a “highly diverse” supplier portfolio and are “implementing progressive and impactful supplier diversity initiatives.”
- Another 13% said they’re actively pursuing supplier diversity and plan to have a diverse supplier base by the end of the year.
- 29% replied that they have not started or invested in supplier diversity initiatives yet.
- 34% stated that they are just getting started and that it is a priority for this year and next.
By the Numbers
Supplier diversity is slowing moving up the corporate agenda. Jaggaer says 70% of survey respondents stated that supplier diversity is either high or medium priority, while about 16% said it was “not a priority at all.” In North America, almost one-third of organizations cannot put a figure on the current spend allocated to diverse suppliers.
“Of those that do have some insight, however approximate, more than 48% (30% of the total) have less than 10% of current spend allocated to diverse suppliers,” Jaggaer points out in the survey, noting that just 18% of those that have insight (10% of the total) allocate more than half of their spend to suppliers they regard as diverse. “The situation is perhaps a little less bleak in APAC, although two-thirds of organizations with visibility over spend allocate less than 10% of spend to suppliers that qualify as diverse.”
Companies have been slow to officially document their supplier diversity policies. According to the survey, two-thirds of respondents have yet to put a documented supplier diversity policy in place, while one-third said they do have such a policy in place. Thirty percent of firms have established and published their organizations’ corporate social responsibility (CSG) or environment, social and corporate governance (ESG) principles. About 28% have established environmentally friendly, diverse, ethical and sustainable sourcing practices.
According to the survey, just over 25% of companies actively source from historically underutilized vendors, and just under a quarter of them actively investigate suppliers’ claims that they are “diverse.” Just under 16% of respondents say their firms had received a supplier diversity certification from a relevant organization (i.e., National Minority Supplier Development Council or Supplier Diversity Europe).
About 46% of companies have senior executive backing for their supplier diversity and CSR initiatives, while 75% of North American companies have top-level executive support for supplier diversity and CSR initiatives (versus 26% among European companies).What Constitutes Diverse Spend?
Asked to reveal their organizations’ biggest challenges in increasing spend with diverse suppliers, about 25% of respondents said it’s the fact that the issue is either “not applicable” or not on the corporate agenda. One-third of respondents said their biggest challenge is “difficulty identifying diverse suppliers that also meet procurement criteria” while 27% named “lack of supplier diversity data and insights” as the primary obstacle.
Looking ahead, 38% of companies plan to act this year to ensure that they have reliable supplier diversity data, while 37% stated that they will increase the weight given to supplier diversity in this year’s sourcing decisions. Other moves that companies plan to make include:
- Tapping into existing supplier relationships to expand the diversity of their supplier networks (42%)
- Conducting regular audits of supplier diversity spend (31%)
- Leveraging technology to find diverse suppliers (31%)
- Asking suppliers to report on their own supplier diversity spend (30%)
- Partnering with certifying organizations (28%)
According to Jaggaer, the business benefits associated with supplier diversity are substantial, but the path to achieving diversity goals isn’t always clear cut. “Organizations find it difficult to identify minority-owned or managed companies that also meet their procurement criteria,” it concludes. “They often lack data and insights, find it difficult to verify diversity claims or face challenges deciding what constitutes ‘diverse’ or ‘diverse spend.’”
