Supplier Diversity and Sustainability: Inclusion and Engagement—Game Changers/Bridge Builders

Supplier Diversity and Sustainability: Inclusion and Engagement—Game Changers/Bridge Builders
By I. Javette Hines

Introduction

This article focuses on Supplier Diversity and Sustainability as areas of interest and curiosity. Many articles have been written about both topics, which have been subject to compliance considerations and mandatory requirements over the past 40 years when trying to assess business value. However, the more practical approach is to recognize both not simply as another area of evaluation and compliance, but instead as an opportunity to improve business value and ensure sustainable business practices.

Supplier Diversity — The Program

The practice of inclusion, utilization and advocacy of diverse and small business suppliers in servicing supply chain requirements is referred to as supplier diversity.1 As a practice, it is focused on a process that is rooted in procurement practices. Suppliers must meet general requirements including size, scale, and scope, as well as meet the needs of business for the type of supplier. In order to be considered diverse, a firm must also typically show that it is owned, managed, operated and controlled as “diverse” per standard definitions.2 Supplier Diversity is a business imperative that has been integrated into the fabric of entrepreneurship for many decades via the concept of developing “small businesses.”3

In the 1970s, President Richard Nixon’s Executive Order 11625 recommended additional actions be taken
to suggest programs and goals for the development of minority businesses.4 The term “supplier diversity” was coined sometime after this period. It gained traction in the years to follow as inclusive procurement practices evolved and expanded to include business owners beyond the minority business community and consideration of majority ownership, management, and control of the business as a deciding factor.5

The Benefits

Suppliers interested in doing business with larger corporations and agencies should be cognizant of their priorities. While there is no guarantee of a contract or long-term business relationship, the creation of a sustain- able business is at the crux of the value and benefit of supplier diversity programs.

Supplier diversity programs create access for diverse businesses and provide education and training to sustain them. Programs have evolved over the years with the founding of organizations that serve to support diverse businesses. These include membership driven organizations that promote the sharing of best practices, so that diverse firms get a better sense of what growth looks like, how success is measured, and real insights into what is required in the short and long term to sustain business.6 Membership and direct engagement with diverse firms, agencies, academic institutions and corporations contribute to viable businesses being considered and included in the supplier selection process, as well as their ability to compete for opportunities.

Ultimately, working with a wide range of diverse and small businesses creates business value and contributes to a stronger economy.

Sustainability

Firms that also incorporate sustainability into their business model are more likely to be innovative and, therefore, sustainable over time. Sustainability for some denotes a focus on the environment. For a growing number of firms, however, sustainability extends to suppliers and includes: 1) human rights and labor, 2) the environment, and 3) management of those efforts.7 Over the past several years, sustainability has risen as an important consideration. Greater emphasis will be placed on all suppliers to adhere to and comply with the sustainability expectations of their current and potential clients.

Many businesses have evolved and grown beyond the traditional “small business” designation. Many have even moved on and become multi-million dollar—and in a few cases, billion dollar—businesses. When this occurs, the intent of supplier diversity as an integrated strategic approach is met. But the criteria with which we measure and evaluate success also continue to evolve.

Sustainability has in its evolution increased in importance, driving a need for awareness as an equal partner in strategic thinking relative to the supplier selection process. Because of increased interest by customers, as well as regulatory agencies in supplier risk management, insight into the overall general health of the supply chains of suppliers has become very important.8 Corporations, for example, are being asked with greater frequency to demonstrate and report on sustainability, increasing the need for all suppliers to speak to sustainability within their standard business practices.

Engagement: What Needs to Happen?

Awareness: Guidelines and policies that educate firms on diversity and sustainability as areas which drive value and support economic growth are needed to promote awareness. The cost of not considering diversity and sustainability when reviewing business opportunities and drivers can be a bigger risk than failure to consider either as part of standard business practice.

Commitment: The integration of Sustainability and Supplier Diversity into general business operations beyond the supply chain will result in awareness of both as integral to business. Education and training should be developed and provide guidance on Supplier Diversity and Sustainability practices within firms. This should be required reading and engagement.

Strategy: Both Supplier Diversity and Sustainability present an opportunity to cross collaborate between legal, procurement, and business partners. The time is ripe to engage in a smarter and more logical approach to shared processes and values as businesses shift towards collaborative thinking.

Conclusion: Supplier Diversity and Sustainability are areas in which the business case is revisited on a consistent basis. In addition, Supplier Diversity and Sustainability have evolved into matters implicit in risk considerations, governance, policies, practice and even culture.

The business case is straightforward: the goal of sup- plier diversity is to ensure that all suppliers have visibility and access to opportunities where traditionally consideration might be limited. The process for selection is the same; the business requirements for engagement do not differ. A diverse supplier base simply mirrors an equally diverse community, employee, and customer base and demonstrates smart business thinking.

In the world of sustainability, all suppliers must understand the impact of their sustainability efforts and share a commitment to protect the environment, respect human rights, and have an appreciation of a diverse citizenship.
Focus, commitment, and a willingness to shift cultures and thoughts can bring about collaborative success.
The views and opinions contained in this article are those of the author and do not necessarily reflect those of Citigroup, Inc.

Endnotes
1. Citi Supply Chain Development, Inclusion and Sustainability Program, Diverse Supplier Definition.

2. Ibid.

3. Small Business Act was originally enacted as the Small Business Act of 1953 in Title II (67 Stat. 232) of Pub.L. 83–163 (ch. 282, 67 Stat. 230, July 30, 1953).

4. The provisions of Executive Order 11625 of Oct. 13, 1971, appear at 36 FR 19967, 3 CFR, 1971-1975 Comp., p. 616, unless otherwise noted.

5. Citi Supply Chain Development, Inclusion and Sustainability Program, Diverse Supplier Definition.

6. Citi Supply Chain Development, Inclusion and Sustainability Program, Frequently Asked Questions.

7. Citi Statement of Supplier Principles.

8. Citi Corporate Sustainability Strategy.

The Supply Chain Development, Inclusion and Sustainability department resides within Enterprise Supply Chain. Javette leads Citi’s efforts to ensure the consideration and inclusion of diverse firms within Citi’s sourcing practices. Additionally, she is responsible for working across the firm with sourcing and business units to align supplier selection efforts with Citi’s 10 year $100B Climate initiative and 5-year Sustainability Strategy.
Javette holds a Bachelor of Arts in Middle Grades Education from Clark Atlanta University, and a Juris Doctor from the Wake Forest University School of Law. She recently received her CPSD from the ISM.