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Supplier diversity: inclusive sourcing can drive shareholder value

EuropeSupplier relationship managementDiversityCorporate social responsibilitySupplier Development+-
SME_suppliers.jpg

In this guest post, Procurement Leaders invites former MSDUK chair Justin Lambert to explain inclusive sourcing and what he regards as the driving force behind supplier diversity in Europe.

 

Over the past twenty to thirty years the population demographics of the UK and Europe have changed significantly due, in part, to the increased inflow of migrants from other part of the world. Increased diversity is being reflected in the market place in terms of greater demand and increased purchase power of the ethnic minority population. As a result the market place is changing significantly: corporations, large business and public sector organisations have to take into consideration customers and consumers who have an ever-increasing diversity of cultural needs and preferences.

As we see the changes in population demographics we are also seeing an equally seismic shift in the make-up of businesses across Europe. Diverse and “Under-represented” businesses are making up a much larger proportion of the Small Medium-sized Enterprises (SMEs). It is the increased importance of SMEs in Europe (minority businesses included) that has led to changes in European legislation designed to make the commercial environment more SME-friendly.

An example of this would be the EU Small Business Act: The act advocates for a more active engagement with SMEs at the supranational and national level, but also encourages member states to create an environment where diversity in business is viewed as an important part of the economy and encouraged to flourish.


Unlike the US, where diversity has been an important part of the commercial and business landscape and there has been an active engagement to support supplier diversity, or in other words "inclusive sourcing" – a practice still is in its infancy here in Europe, due to a lack of data on ownership, status and size of suppliers around Europe being limited at best and the limited number of bodies in Europe that will certify suppliers as "diverse".


So what is inclusive sourcing? It’s the proactive business process of sourcing products and services from previously under-used suppliers. This process helps to create competitive intelligence and advantage whilst sustaining and progressively transforming a corporation’s supply chain thus quantitatively reflecting the demographics of the community in which it operates by recording transactions with diverse suppliers, such as SMEs, ethnic minority and women-owned business.


Inclusive sourcing practices ensure the identification and inclusion of target groups, such as SMEs, Women Owned Enterprises, Ethnic Minorities, social enterprises and the community sector. Potential suppliers are given the opportunity to compete to win based on merit, inclusive sourcing practices should break down barriers to inclusion so Diverse businesses can compete on a level playing field.


With the increased use of UK and EU Equalities Legislation that promotes “positive action” and not “positive discrimination” we are seeing a greater need to ensure transparency and access to procurement activity in public and private sectors. A progressive, forward-thinking procurement organization should be embracing these changes and linking them to the commercial organization within their company to promote and develop the business case for inclusive sourcing, and so delivering true community and shareholder value over the long term.

There is plenty of evidence to show that minority-owned micro, small and medium-sized enterprises (SMEs) are an integral part of the UK and European economies. They are an essential source of jobs, community regeneration and innovation and now is the time to have a more meaningful engagement and make inclusive sourcing a reality.


How can Europe-based procurement professionals show true commitment to inclusive supply chain and act in a manner that delivers measurable outcomes? We all have responsibility to ensure all our buying decisions has an impact on local economies and communities around us, we are catalyst to sustained economic growth of our local, regional and national economy. Let us make inclusion of under-used suppliers’ part of our procurement process, let this be part of personal objectives of each buyer and make reporting spend a yardstick for performance.

Justin Lambert is former chair Minority Supplier Development UK.

 

This contributed article has been written by a guest writer at the invitation of Procurement Leaders. Procurement Leaders received no payment directly connected with the publishing of this content.

Jonathan Webb
Posted by Jonathan Webb

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