Supplier Diversity Programs Gain Steam as Top Execs Buy In

In the face of new ESG regulations and increased attention on their back-end operations, many companies have started the work of variegating the companies that pepper their supply chains .

This AI Tool Connects Brands to Suppliers--And Does the Negotiating

New data from Supplier.io, a software-as-a-service company that helps companies track the outputs of supplier diversity and ESG programs, shows that many companies are making progress toward building out more robust supplier diversity programs, though they are still spending time ironing out specific reporting metrics and processes.

Aylin Basom, CEO of the company, said supplier diversity can help companies enhance their reputation, increase business outcomes and compete in an uncertain supply chain environment; adding differing suppliers to a company’s network can help prevent major disruptions in the event of an issue impacting at-large supply chains.

“The essence of supplier diversity is really about helping companies enhance competition and ensuring at the end optimal business outcomes. It’s extremely important, and it’s helping companies enrich their supplier pool, and in making sure that there’s no viable businesses overlooked due to unconscious bias,” she said.

Particularly in the retail industry, Basom said having products that stand out from others on the market can be a boon. Sometimes, that can come from a diverse supplier network.

“By 2045, more than half of the U.S. population is expected to be diverse, and we [tell] the retail companies, this is not optional. Targeting those fast-growing demographics is going to be so critical for business growth,” she said. “We started talking about how do we attract those customers? How do we make sure that we have an innovative assortment that speaks to them?”

Today, six in 10 companies reported thinking of supplier diversity programs as a business driver, while 40 percent of companies reported that they think of it as a cost of doing business. The margin between those responses could widen as C-suite leaders buy into the programs. Supplier.io’s data shows that’s already starting to happen, but Basom projects that high-ranking leaders’ interest in supplier diversity will only continue to increase.

As that happens, she said, data around programs’ impact will need to become more refined; over half of organizations reported that their supplier diversity results get presented directly to the C-suite or board of directors.

“From the trends perspective, we’re expecting for companies to, now in front of the CEO and board, they have to actually have tools to be able to report on and be able to set and measure against it,” Basom said.

Typhoon Yagi-Battered Vietnam Begins Recovery

Already, nine in 10 respondents said their organizations use the amount of spend with diverse suppliers as a metric to report on the success of their supplier diversity program. Nearly half of respondents’ organizations use business impact as a metric. Other, less popular metrics include economic impact on communities, cost savings and brand impact.

Using metrics like these can help determine a program’s direct impact—and as an increasing number of companies begin to report on their supplier diversity, the validity and accuracy of the data matters deeply, Basom noted.

One of the most major question marks around supplier diversity reporting is self-certification among suppliers. While 40 percent of organizations said they track and include data from self-certified suppliers in their reporting, the majority of companies do not include it in reporting, whether or not they track it as an internal metric.

Third-party data seems to be many companies’ preference for reporting purposes. Today, about six in 10 organizations use third-party supplier data providers to track their suppliers’ certifications, registrations and other metrics. The same proportion of organizations stated that they report their supplier diversity program results on a public stage, which has decreased slightly from the percentage of companies that said they did so in 2023.

Even as companies sort out the nuances of supplier diversity programs, some organizations have plans to take their efforts global; 27 percent of companies said they have plans to build out a supplier diversity company in Europe within the next two years, and an equal percentage said the same about Canada. That’s up from 16 percent and 19 percent, respectively, in 2023.

Basom said part of the reason for that shift could be regulations like the EU’s Corporate Sustainability Due Diligence Directive ( CSDDD ) or its Corporate Sustainability Reporting Directive ( CSRD ), which require more in-depth disclosures from companies about their supply chains and impacts.

“The global recognition of the economic and innovation benefits of diverse suppliers is definitely increasing. There’s some increased market demands of transparency and sustainability in the supply chains, and it’s becoming more of [a consideration] for both sides—the consumers are asking for it, but there’s also the regulations coming down and now companies have to solve for that,” Basom told Sourcing Journal.

Texworld NYC Showcased Diverse Sourcing Destinations, Sustainable Materials and Top Trends