How to source diverse suppliers

COVID-19 wasn't the great leveller many thought it would be. Instead it highlighted inequality and societal issues that still exist, with those from ethnic minority backgrounds being hit the hardest. Organisations responded by examining their workforce diversity, recruitment, talent pipelines and their ethnicity pay reporting. As part of its work to help people professionals tackle racism and racial discrimination in the workplace, the CIPD also published guidance on developing an anti-racism strategy.

Inclusion and diversity is good for business for many reasons; firstly it enables you reflect and understand your customer/client base better, a Harvard Business Review study found that when at least one member of a team has traits in common with an end user or client, the entire team better understands the them. Secondly, research from Deloitte and McKinsey have shown that it can significantly increase your bottom line and ability to innovate Deloitte’s research, which included the findings of seven major research studies, showed that I&D enhances innovation by about 20%. and McKinsey’s report, Diversity Matters, examined data for 366 public companies across a range of industries in Canada, Latin America, the UK, and the US. They found that companies in the top quartile for racial and ethnic diversity are 35% more likely to have better financial returns than their non-I&D industry competitors.

Lastly, but perhaps most importantly creating inclusive workspaces where all employees feel that they belong, that they can contribute to the business and thrive is the right and fair thing to do to.

This guide offers some practical advice on how to source diverse suppliers for your business, with examples of race and gender diversity that can be broadly applied to any protected characteristic, such as: age, sexual orientation, disability etc.

What do we mean by ‘diverse suppliers’?

When we talk about diversity in suppliers, two of the leading advocate organisations in this space in the UK, MSDUK and WEConnect International, agree that a diverse supplier is one that is majority owned (51% or more) by those from a protected characteristic such as gender, race, disability or sexual orientation.

You don't have to be working in a procurement function to impact supplier diversity. If you spend your company’s money on lunch for a meeting or securing the guest speaker for your company awards ceremony, you affect the supplier diversity. The intention to work with a more diverse range of suppliers in line with your organisation’s diversity and inclusion strategy applies no matter the size of your organisation, or whether you are procuring multi-million pound contracts or spending a few hundred pounds for some printing services.

Benefits of a diverse supply chain

As well as helping to meet your organisation’s diversity and inclusion strategy, working to ensure you have a diverse supply chain has additional benefits:

1. Innovation

With warnings of an imminent recession, there has arguably never been a more critical need for innovation in the UK. Recent research commissioned by the Federation of Small Businesses (FSB) suggests that businesses run by entrepreneurs from an ethnic minority are more innovative than their rivals – 30% have recently invested in new product or service innovation, compared to only 19% of their counterparts.

2. Culture add

Diverse suppliers can bring a new perspective and open doors to new audiences that you may not have been able to access otherwise. Instead of just thinking about whether a potential supplier matches your values and culture, you could instead consider what they bring to the table that will add to your culture and help you move it in the right direction. This shift in viewpoint paves the way for you to engage with a more diverse supply chain and think outside the box when considering your procurement options.

3. Potential savings

A downside of deciding only to work with large suppliers is that it can stifle competition, and the barriers to entry for the smaller suppliers (typically where diverse suppliers fall) become insurmountable. You may believe that this approach is the most economical option due to economies of scale, however, because many diverse suppliers are often small and medium sized businesses, their size makes them agile; they have fewer overheads, are more flexible and that can offer better value for money.

4. Local option

During COVID-19, many sectors saw a reduction in productivity, meaning businesses were forced to consider what is available more locally to them. The predicted trend is an increase in regionalisation and if your company is only relying on the global option it could cause delays, reputational risk and even loss of business. You can still keep your global supplier in conjunction with a diverse supplier closer to home.

Seven steps to increase the diversity of your supply chain

The steps below will enable you to diversify your suppliers in a meaningful and sustainable way, to benefit your company and wider society.

Step 1 - Examine the data

It’s important to understand your current level of supplier diversity. Do you know who you buy from? If you don’t already have the data, undertake a research exercise and send all current suppliers a questionnaire about the diversity of their ownership and make it clear to them your commitment to diversify your supply chain. You can also encourage them to complete the same process with their suppliers. If you are a large company with a team of procurement specialists, you might also look at that team’s level of diversity, and how that might be impacting your diverse supplier search.

Step 2 - Craft the business case

Once you know the diversity of your supply chain, you can consider where to focus effort. You may have a good percentage of business suppliers who are women-led but not many who are ethnic minority-led or vice versa. The aim is not to simply ‘tick a box’, but to create a strong articulated business case for supplier diversity, aligned with your diversity and inclusion strategy, and to gain senior level commitment and full support for the programme.

Maggie Berry OBE, Executive Director at WE Connect International, suggests that companies commit to at least one diverse supplier on every request for proposal (RFP). This is an accepted form of positive action to get the supplier on the list, and give them an equal chance to be considered. It does not guarantee the diverse supplier the contract, and they will still need to be evaluated as the best choice for the work in competition with other suppliers. “It’s important not to waste the diverse supplier’s time, you shouldn't just include them to make up the numbers, they should have a real chance of winning the business” she says.

Step 3 - Set targets

The articulated business case must have targets, after all ‘what gets measured gets done.’ And by measuring your progress, you can understand what’s working and what’s not. Remember that you are aiming to create a long term and sustainable programme of supplier diversity. Do not expect instant results and then be able to move on to the next initiative; your targets should be short, medium and long term.

Step 4 - Find diverse suppliers

Diverse suppliers do exist, but you may need to look beyond your usual ‘go to’ suppliers to find them. Advocacy organisations like MSDUK for ethnic minority owned businesses and We Connect International for women owned businesses are a great start, but of course not all diverse businesses are registered or certified by them. You can look out for directories such as the BAME Executive Coach Directory, or look at businesses that are nominated for or win awards, such as the Black British Business Awards or Asian Business Awards. Your local Chamber of Commerce will know its members well, and the Federation of Small Businesses (FSB) and Institute of Directors (IoD) have leads for diverse groups who you could ask for recommendations. You could search your network; every person in your network has an extended network that could include the diverse supplier that you are looking for. As with any business undertaking, you will always need to do your own checks and due diligence to make sure that the diverse supplier is right for you.

Step 5 - Engage with diverse suppliers

To begin to develop relationships with potential future diverse suppliers you could provide information events on your business, how you work and how you procure contracts. This would help the diverse supplier be better equipped to submit proposals when the opportunities arise. If you are a smaller business, one to one meetings are a good way of getting to know potential diverse suppliers, perhaps a quarterly virtual coffee.

One of the key elements is to provide feedback to diverse suppliers if they are unsuccessful so that they can learn and grow from the experience. It’s also helpful to let them know that most organisations don't win contracts the first time that they apply for them.

Step 6 - Monitor performance and remove obstacles

Depending on the size of your company, the number of diverse suppliers that you have, and the number of contracts running, you might review your success against your targets, monthly, half yearly or annually. When you do review progress, you should be looking to understand what’s working and what obstacles are getting in the way. Obstacles could include onerous paperwork, time consuming online portals or not enough turnaround time for the diverse supplier to respond. Once you know what’s working you can do more of it and when you know what the obstacles are, you can take steps to remove or help the supplier overcome them.

Step 7 - Celebrate and share success

Once you are making some progress on your target, however small, do let others in your company know. You can share case studies on an internal intranet or newsletter, include it in your annual report, or share it publicly on your website or in a newspaper article. This reinforces your commitment and galvanizes energy to make continued progress.

Final thought

We all have biases and although unintentional your previous supply chain activity is likely to have been impacted by your own biases and structural bias that exists in your company and wider society. Do educate yourself on the topic of race, diversity and inclusion by reading or following anti-racist activists on social media and be prepared to have difficult conversations around race and diversity, which will become easier with practice.

Further resources

Advocacy organisations

MSDUK - MSDUK brings together innovative and high growth EMBs (ethnic minority owned businesses) with global corporations committed towards creating an inclusive & diverse supply chain. MSDUK has a wealth of resources, toolkits and events to support those in procurement and EMBs
WEConnect International - WEConnect International is a global network that connects women-owned businesses to qualified buyers around the world. WEConnect International provides regular events and training, as well as providing resources and toolkits for those in procurement and women owned businesses
National LGBT Chamber of Commerce - NGLCC Global is a network comprised of lesbian, gay, bisexual, transgender, and intersex (LGBTI) Chambers of Commerce and Business Networks all over the world. It is devoted to promoting economic empowerment as well as inclusive economic growth for LGBTI people and LGBTI-owned businesses. It’s reach in the UK is virtual
Disability: IN - Disability:IN is the leading non-profit resource for business disability inclusion worldwide.

Sources of connection to UK Diverse Business

Federation of Small Business (FSB) - As experts in business, the FSB offer members a wide range of vital business services including advice, financial expertise, support and a powerful voice heard in government. They have over 200,000 members.
British Chambers of Commerce - The British Chambers of Commerce sits at the heart of a unique network of businesses across the UK. The 53 Accredited Chambers which make up the network are trusted champions of businesses, places, and global trade. Together, they represent tens oof thousands of businesses of all shapes and sizes, which employ almost six million people across the UK. They have over 75,000 members.
The Institute of Directors - The 25,000-member strong Institute of Directors (IoD) represents and set standards for business leaders nationwide.
The Guild of Entrepreneurs - The Guild of Entrepreneurs is a Guild of the City of London and an aspirant Livery Company. It is made up of men and women who have invested their own money and time in setting up and running successful businesses. They have a membership in the hundreds.

Directories of ethnic minority led businesses

BAME Executive Coach Directory - Connecting corporate organisations with qualified coaches from diverse backgrounds
Shop Black - Discover great black owned businesses. Find shops, restaurants, salons, events, and more in the UK
Women Like Me Business Directory - On this page, you can find profiles for diverse owned businesses. Each profile comes with a hyperlink to their website and any social media handles
Black2Business - UK Black-Owned Businesses & Service Providers Including Traders, Freelancers, Practitioners & Good Causes
Black in Business - Find and Connect with Black Owned & Black Focused Businesses, Professionals, Contractors and Other Suppliers
Black Business Directory - This platform exists to help bring both the online and offline of all black-owned businesses together, for other business owners and consumers to have easy access to them.
Jamii - A discount card and discovery platform, making it easy for you to find and shop at the best of independent black-owned businesses in the UK
The National Black Women’s Network - The National Black Women’s Network champions the advancement of women across all professional disciplines by recognising excellence, promoting leadership and effectively positioning its members at the forefront of the rapidly changing corporate and business world
Asian Business Directory - The first Asian Business Directory in the UK whose mission is “to provide a service that is valued and brings the community together to grow and prosper further.”

Jenny Garrett

Jenny is an award-winning career coach, author and leadership trainer. Her books explore the empowerment of working women and women in leadership roles. She also delivers talks and programmes to support the progression of those from Black, Asian and Minority backgrounds in the workplace.