Supplier diversity — why does it matter

Supplier diversity — why does it matter

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Contributors:

Cynthia Dorrington

Supplier Diversity is a strategic business process aimed at providing minority-owned companies an equal opportunity to become suppliers to major corporations across Canada and the US. It is an initiative launched by companies to ensure they are being inclusive in their supply chain practices to suppliers of diverse backgrounds and to enhance community economic development and prosperity.

Many companies spend millions, and some, billions, of dollars each year on goods and services. Historically though, minority-owned business enterprises (MBEs) and women-owned business enterprises (WBEs) have struggled in procuring supplier contracts with large organizations. It is for that reason that supplier diversity programs have become increasingly popular in companies of all industries and areas. Today, some companies are going beyond MBEs and WBEs by also considering LGBT-owned and veteran-owned businesses in their procurement process.

Supplier diversity is gaining traction, and more and more Canadian businesses are incorporating this process. TD Bank, RBC, Telus, and the City of Toronto (just to name a few) have made a significant impact in Canada and are proud leaders in this field. In comparison though, to our neighbours in the south, we are still in the infant stages of this business practice. With roughly 97 per cent of the Fortune 500 companies engaged in supplier diversity, Canada has some catching up to do.

Minority-ownedd businesses are vital to Canada’s economic prosperity. Diverse, well-developed supply chains can help these companies reduce costs, enhance innovation, successfully integrate acquired businesses, and reach new markets. However, many of these businesses have had difficulty gaining access to the supply chains of leading Canadian businesses and government organizations. Reinforcing this challenge is the fact that the benefits of diverse supply chains are not widely known in Canada, even though they create a win-win opportunity for both the supplier and the producer.

There is a strong business case for leveraging businesses owned by minorities and women in larger organizational supply chains. Beyond corporate social responsibility, diverse supply chains may help corporations to:

  • better represent a corporation’s diverse customer base, thereby increasing customer satisfaction and revenues
  • better reflect the diverse backgrounds of employees, thereby increasing their job satisfaction and retention
  • build more robust supply chains by identifying a wide range of qualified suppliers and reducing the risk associated with streamlined supplier pipelines
  • open new markets (e.g., in the United States), which can lead to economic development for the corporation and the local economy
  • build and maintain a competitive advantage
  • win new business and retain customers
  • reinforce their brand and expand brand recognition

Although many of these programs were formed to promote a positive public image, many corporations are now realizing that maintaining diverse suppliers can also help the company improve its bottom line in countless ways.

Growing a diverse supplier base only makes sense given the increasingly diverse markets that most companies serve in this global age. Partnering with a diverse range of suppliers to provide products and services that meet or exceed customer needs enables a company to serve its consumers to the best extent possible.

So what exactly does this mean to you? In Canada, a business can qualify as a diverse supplier if they are 51 per cent
owned, operated, and controlled by one
or more of the following: minority, woman, aboriginal, LGBT and veteran. If your business fits this description, we encourage you to get involved so that national organizations, like the Canadian Aboriginal and Minority Supplier Council, can start promoting your goods or services to businesses across the world.

In the coming months, initiatives at a Federal level in Canada will start implementing many of these supplier diversity initiatives in their procurement, which will commence a movement of such an initiative to roll-out to big businesses in Canada. It’s time to start thinking beyond just employee equity and public image. Supplier Diversity is a win-win for all involved.

So what are you waiting for, be the organization your employees are proud to work at.

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