Amid the racial reckoning catalyzed by the 2020 Black Lives Matter protests and continued calls for greater gender equality, supplier diversity has climbed to the top of the corporate agenda. But while inclusion is a priority for 70 percent of organizations around the world, only a fraction have taken the steps necessary to increase DEI in their supply chain, according to a new survey by digital procurement firm Jaggaer and supplier data platform Tealbook.
Despite the breadth of industries to which they belonged, from transportation and logistics to retail and consumer goods, respondents from 100 companies across the Asia-Pacific, Europe, the Middle East and North and South America reported similar challenges. More than one-third of them cited difficulty identifying women-managed or minority-owned suppliers that also meet procurement criteria, while 27 percent said they were stymied by a lack of supplier-diversity data and insights.
As a result, less than one-quarter (23 percent) of those polled said they already had a highly diverse supplier portfolio and that they were implementing “progressive and impactful” supplier diversity initiatives. Nearly 30 percent said they had not yet begun or invested in supplier diversity initiatives, and 34 percent said they were just getting started and that DEI was a priority for this year and next.
“Clearly, the biggest challenges that procurement professionals face relate to lack of data on supplier diversity in their current systems, even if they otherwise have good reporting capabilities and someone in the organization is taking ownership of the issue,” the report said. “This is true in all of the regions in the study.”
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Jaggaer and Tealbook noted a “sharp variation” between North American and European respondents who made up the bulk of the organizations surveyed. Almost half (49 percent) of European companies said they had not looked into supplier diversity initiatives, compared with none of the North American ones. North Americans were also ahead of their Old World counterparts in terms of just getting started (40 percent versus 27 percent), in the middle of implementation (38 percent versus 15 percent) and actively pursuing their inclusivity objectives (22 percent versus 6 percent).
Similarly, more than half (53 percent) of North American companies considered supplier diversity a “high priority,” compared with 17 percent of Europeans. The survey suggests that the Black Lives Matter movement and campaigns for diversity “have had a strong influence in North America,” where 68 percent of those polled said they agreed or strongly agreed with those appeals, the report said. Less than one-third (30 percent) of North American businesses disagreed with the sentiments, and 12 percent strongly disagreed.
In Europe, 56 percent of companies surveyed agreed or strongly agreed with the Black Lives Matters statement, almost one-third disagreed and 12 percent strongly disagreed. Respondents were more likely to strongly agree (40 percent) or disagree (20 percent) in the Asia-Pacific.
“Although organizations have faced challenging times since the emergence of the BLM movement, it has clearly made its mark on the procurement community,” the report said. “It remains to be seen if this will have a lasting impact, of course, but it appears that the majority of people are paying attention, in Europe as well as America.”
This is bearing out in procurers’ plans for the future. A significant swath of respondents, 38 percent, said their organizations plan to take action in 2021 to ensure they have reliable supplier diversity data, and 37 percent said they will increase the weight given to supplier diversity in the current year’s sourcing decisions. Others said they will leverage existing supplier relationships to diversify their network (42 percent), conduct regular audits of supplier diversity spend (31 percent), employ technology to ferret out diverse suppliers (31 percent), ask suppliers to report on their own supplier diversity spend (30 percent) and partner with certifying organizations (28 percent).
The divide between North America and Europe was apparent here as well, the report said, with 33 percent of European respondents stating that their organizations had no plans to invest in any of the listed options, compared with only 3 percent in North America. Nearly 70 percent of North American respondents said they would take advantage of existing supplier relationships, versus 23 percent of their European counterparts.
“Organizations are taking a wide range of approaches to tackle the challenges of supplier diversity, which suggests a lack of consensus within the procurement community about strategies to move forward,” the report said. Jaggaer and Tealbook also found it “disheartening” that only one-fifth of companies considered reaching out to suppliers with tools and coaching to help them scale the diversity of their supplier base. (This number fell to 7 percent among European respondents.) “Our experience indicates that building the confidence of traditionally underutilized and under-represented firms can bring benefits to both buyers and suppliers,” the report added.
Not that corporations aren’t aware of the benefits of diversity in their indirect operations. More than half (52 percent) of respondents—66 percent in North America—said they saw “positive reputational impacts” from their supplier diversity efforts. “Improved internal culture” also scored high at 44 percent. Many businesses said they also unlocked “tangible and economic” wins such as supplier innovation (46 percent), greater supply-base competition (44 percent) and organizational agility (48 percent). Some 26 percent said a broader supplier base will also drive down costs. Drilled down by region, Europeans found supplier innovation the most important benefit at 56 percent of respondents. Agility was a leading benefit in the Asia-Pacific, tied with reputational impacts at 60 percent of those polled.
“Market research indicates that a reputation for diversity and inclusiveness is becoming increasingly important among consumers, especially in the younger demographic segments,” the report said. “But more so in North America and APAC than in Europe. We were more interested, and somewhat gratified, to see that many organizations see a wider range of benefits in terms of innovation and competitiveness, that can perhaps be characterized as a kind of enlightened self-interest.”