Supplier diversity impacts a company’s internal diversity efforts by helping them to accelerate entrepreneurship efforts in highly impacted minority groups, improving consumer perceptions of their diversity programs, allowing them to become aligned with workplace inclusiveness and corporate culture, and enabling them to satisfy customer expectations related to diversity. Also, read the importance of improved business environment in every business.
1. Bolsters Entrepreneurship Efforts Within Highly Impacted Minority Groups
- For large companies, supplier diversity programs can play a significant role in encouraging entrepreneurship within highly impacted minority cohorts. Some renowned companies, such as Coca-Cola in partnership with Georgia State University, have created supplier-development institutes to offer education for disadvantaged groups on ways to start a business. Coca-Cola also distributes more than $800 million each year to diverse suppliers, in part to assist entrepreneurship in minority groups, and it intends to raise this spending to over $1 billion.
- Many of those large companies require or recommend that their various suppliers develop diversity initiatives of their own to assist in strengthening the effect of the programs. Target has spent upwards of $1.4 billion on products and services supplied by its first-tier diverse suppliers. The company directly guided those suppliers in purchasing more than $800,000 in products and services from suppliers in the second tier.
- Companies can reap benefits, in some form, from these efforts. The Hackett Group’s 2017 Supplier Diversity Study indicated that businesses that contribute at least 20% of their overall spending towards diverse suppliers can credit up to 15% of their yearly revenue to supplier diversity programs. Also, these companies can witness a return on investment (ROI) of up to 133% when they invest in supplier diversity programs, but this figure is completely dependent on their yearly sales.
2. Improves Consumer’s Perception of Company’s Diversity Efforts
- Research from the ANA revealed that the biggest benefits of implementing a supplier diversity strategy, as listed by the respondents to a survey, is sustaining a positive social effect on communities and community empowerment (cited by 84% of participants). According to Harvard Business Review, a company’s usage of supplier diversity and diversity programs can lead to them experiencing a remarkable “feel-good factor.”
- Many consumers may see the company as one that greatly values diversity and maintain a favorable view of the brand. Up to 82% of consumers are more prone to purchase products from businesses that have supplier diversity programs.
- Hootology’s, which operates as a diverse supplier, 2019 research for the global beverage company Coca-Cola found that 45% of consumers claimed that they were more likely to view Coca-Cola as a business that favors diversity after becoming aware of their supplier diversity initiatives. Another 25% of the respondents said that they were more prone to think about the business positively. Meanwhile, nearly half of the respondents (49%) said that they were more likely to purchase items from the company due to their awareness of its supplier diversity initiatives.
- Hootology estimated that the positive perceptions of Coca-Cola and its supplier diversity initiatives could result in 670,000 additional shoppers utilizing its items more often.
- In another study for UPS, Hootology discovered that up to 86% of respondents that were aware of its supplier diversity program were more likely to utilize services from the company than individuals who were unaware of the initiatives.
3. Allows Businesses to Align with Workplace Inclusiveness and Corporate Culture
- One of the leading drivers for implementing a supplier diversity strategy in a business is that it allows them to align with both “corporate culture and workplace inclusiveness.” In a research report from the ANA, more than two-thirds (82%) of survey respondents, which included the ANA’s media and marketing committee members, listed this as a driver for supplier diversity strategy.
- Several companies and organizations have enhanced their concentration on inclusion and diversity, viewing a connection between diversity and inclusion and supplier diversity. UPS created a supplier diversity program to become more inclusive and it currently spends around $2.6 billion each year to conduct business with 6,000 various divers suppliers.
- Additionally, the opportunity to mirror their diverse customer base is another driver for the implementation of a supplier diversity strategy for companies. Nearly two-thirds (57%) of the respondents to the ANA survey listed this as a driver. As of 2019, multicultural consumers make up nearly 40% of the U.S. population.
4. Diversity Supplier Programs Help with Employee Recruitment/Engagement
- Supplier diversity programs are used as an effective method for recruiting diverse talent, as 52% of individuals wish to work for a business that maintains a supplier diversity and inclusion initiative.
- UPS used research from Hootology on awareness of the company’s supplier diversity programs to develop its approach to recruiting a diverse talent pool.
- The UN Global Compact and Ernst & Young’ State of Sustainable Supply Chains report revealed that “an effective supply chain diversity program can be crucial in “winning the war for talent,” since workers typically promote such initiatives and act as ambassadors for the businesses they work for.
5. Enables Companies to Satisfy Consumer Expectations on Diversity
- According to Harvard Business Review, “Supplier diversity programs can be part of a company’s efforts to maintain high moral and ethical standards.”
- Companies are actively increasing their connections with diversified suppliers in order to satisfy ethical business expectations from consumers. Around 44% of respondents to the ANA survey listed “customer requirement” as a driver for using a supplier diversity strategy.