01/03/17: Supplier Diversity and Sustainability: Inclusion and Engagement—Game Changers/Bridge Builders

By: I. Javette Hines

Introduction

This article focuses on Supplier Diversity and Sustainability as areas of interest and curiosity. Many articles have been written about both topics, which have been
subject to compliance considerations and mandatory requirements over the past 40 years when trying to assess business value. However, the more practical approach is
to recognize both not simply as another area of evaluation and compliance, but instead as an opportunity to improve business value and ensure sustainable business practices.

Supplier Diversity—The Program

The practice of inclusion, utilization and advocacy of diverse and small business suppliers in servicing supply chain requirements is referred to as supplier diversity.1
As a practice, it is focused on a process that is rooted in procurement practices. Suppliers must meet general requirements including size, scale, and scope, as well as meet the needs of business for the type of supplier. In order to be considered diverse, a fi rm must also typically show that it is owned, managed, operated and controlled as “diverse” per standard definitions. Supplier Diversity is a business imperative that has been integrated into the fabric of entrepreneurship for many decades via the concept of developing “small businesses.”

In the 1970s, President Richard Nixon’s Executive Order 11625 recommended additional actions be taken to suggest programs and goals for the development of minority businesses.4 The term “supplier diversity” was coined sometime after this period. It gained traction in the years to follow as inclusive procurement practices evolved and expanded to include business owners beyond the minority business community and consideration of majority ownership, management, and control of the business as a deciding factor.

The Benefits

Suppliers interested in doing business with larger corporations and agencies should be cognizant of their priorities. While there is no guarantee of a contract or long-term business relationship, the creation of a sustainable business is at the crux of the value and benefit of supplier diversity programs. Supplier diversity programs create access for diverse businesses and provide education and training to sustain them. Programs have evolved over the years with the founding of organizations that serve to support diverse
businesses. These include membership driven organizations that promote the sharing of best practices, so that diverse firms get a better sense of what growth looks like, how success is measured, and real insights into what is required in the short and long term to sustain business.

Membership and direct engagement with diverse firms, agencies, academic institutions and corporations contribute to viable businesses being considered and included in the supplier selection process, as well as their ability to compete for opportunities. Ultimately, working with a wide range of diverse and small businesses creates business value and contributes to a stronger economy.

Sustainability

Firms that also incorporate sustainability into their business model are more likely to be innovative and, therefore, sustainable over time. Sustainability for some denotes a focus on the environment. For a growing number of firms, however, sustainability extends to suppliers and includes: 1) human rights and labor, 2) the environment, and 3) management of those efforts.7 Over the past several years, sustainability has risen as an important consideration. Greater emphasis will be placed on all suppliers to adhere to and comply with the sustainability expectations of their current and potential clients.
Many businesses have evolved and grown beyond the traditional “small business” designation.

Many have even moved on and become multi-million dollar—and in a few
cases, billion dollar—businesses. When this occurs, the intent of supplier diversity as an integrated strategic approach is met. But the criteria with which we measure and
evaluate success also continue to evolve. Sustainability has in its evolution increased in importance, driving a need for awareness as an equal partner in strategic thinking relative to the supplier selection process. Because of increased interest by customers, as well as regulatory agencies in supplier risk management, insight into the overall general health of the supply chains of suppliers has become very important.8 Corporations, for example,
are being asked with greater frequency to demonstrate and report on sustainability, increasing the need for all suppliers to speak to sustainability within their standard
business practices.

Click here to read full report.

Reprinted with permission from: Inside Newsletter, Fall 2016, Vol. 34, No. 2, published by the New York State Bar Association, One Elk Street, Albany, New York 12207.

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