BENEFITS OF SUPPLIER DIVERSITY Balancing short-term business value with long-term economic inclusion

Oct 29, 2015

Author: Katie Motta

Published in Purchasing B2B Magazine,  
October 2015  

You needn’t look far for evidence that organizations are grappling with making our economy more inclusive. Between 2012 and 2014, World Economic Forum members identified inequality as the most likely threat to the global economy, and numerous analyses document the rise of inequality in Canada. There are concerns that income inequality is contributing to economic stagnation, hampering growth across almost all business sectors.

A wide range of factors is contributing to the challenge. Yet Mark Carney, Bank of England governor, noted that globalization and technology are two key factors magnifying market distributions, contributing to capitalism’s growing exclusivity. Are corporations and governments considering how procurement strategies contribute to this challenge, given that sourcing strategies have leveraged globalization and technology for cost efficiencies, and vendor consolidation strategies have concentrated opportunities among fewer suppliers?

Corporations committed to an inclusive supply chain are tackling this challenge with leadership of their procurement and supply chain organizations. Twelve companies, including BMO, Coca Cola, FCA, GM, Johnson Controls, Kellogg’s, Magna, PepsiCo, RBC, TELUS, TD Bank and Toyota have joined the Inclusive Procurement Leadership Roundtable launched by the Canadian Aboriginal and Minority Supplier Council (CAMSC) on October 1. The roundtable will drive research highlighting the business value—and demonstrate the economic impact—of an inclusive supply chain.

CAMSC is a non-profit organization created in 2004 to advance the economic strength of Aboriginal and visible minority communities through business development and employment. CAMSC’s mission is to facilitate business relationships between Canadian corporations and supplier organizations owned by Aboriginal peoples and minorities.

Canadian corporations have been investing in supplier diversity for 10 years to leverage its business value.

“Since 2004, CAMSC corporate members have spent more than $1.7 billion with Aboriginal and minority certified suppliers.”

Supplier diversity is an initiative by companies to ensure they are being inclusive in their supply chain practices to Aboriginal, minority, women-owned and other diverse suppliers, by providing them with equal opportunity to prequalify and bid on corporate sourcing opportunities.

In researching its Impact Report, CAMSC corporate members reported cost competitiveness, cost savings, and enhanced product/service quality as top business reasons for awarding contracts to Aboriginal and minority-owned suppliers. By actively reaching out to include diverse suppliers, CAMSC corporate members have also benefit-ted from innovative solutions that diversity of thought offers, as well as enhanced market linkages, knowledge and relationships with growing Aboriginal, minority and immigrant communities. CAMSC certified Aboriginal and minority suppliers leverage the certification as a market access tool, gaining access to bid and business opportunities, as well as supplier development programs at major corporations in Canada and the US. They can also demonstrate their value proposition to secure contracts. CAMSC’s Impact Report also demonstrated Aboriginal-owned and minority-owned businesses are more likely to create jobs for community members than large corporations, making supply chain diversity part of the solution to challenge of economic inclusion.

Corporate leaders don’t pretend this is simple. There are pressures for procurement to demonstrate cost savings and minimize risk in the near-term, while enhancing opportunities for and building capacity of Aboriginal, minority and other diverse suppliers is a long-term challenge. And yet, since 2004, CAMSC corporate members have spent more than $1.7 billion with Aboriginal and minority certified suppliers. As corporations calculate the ROI of supplier diversity investments, they can track cost savings or innovative solutions, but are also challenged to measure non-financial value like flexibility, brand enhancement, community engagement, local wealth creation and so on.

As procurement continues to take leadership positions in the C-suite, they should ask how sourcing strategies contribute to long-term economic prosperity, as well as delivering near-term business value. Organizations don’t need to do this individually. Working with CAMSC and other leaders, the Inclusive Procurement Leadership Roundtable will highlight practices that advance the business value and economic impact of supply chain inclusion.

KATIE MOTTA is director, business development & partnerships, Canadian Aboriginal and Minority Supplier Council.

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