Customers across industries are becoming more conscious of who they buy from, and how those brands source and produce their service or product. An Accenture study, for example, found that a growing number of consumers are looking to make more sustainable choices and limiting waste. When they investigate their suppliers they are looking for organizations that are prioritizing diverse and responsible sourcing in their supply chain.
As Harvard Business Review defines it, a diverse supplier is a business that is at least 51% owned and operated by an individual or group that is traditionally underrepresented or underserved. This includes small business enterprises, minority-owned enterprises, and woman-owned enterprises, and the definition is continuing to expand. Relatedly, responsible sourcing is a voluntary commitment by companies to consider social and environmental impacts when managing their relationships with suppliers.
Aside from being seen as the right thing to do to maintain high moral and ethical standards and support a broad swath of communities with your business dollars, there are business advantages to a diverse sourcing strategy. For example, inclusive sourcing and procurement strategies create competition in the supply base, which can drive down costs and improve quality. Further, especially relevant in times like these full of supply chain disruption, more sourcing options can increase supply chain agility and resilience during potential turmoil.
While diverse and sustainable supplier efforts can be difficult and seem overwhelming, there are levels if you start with the right people and the right statistics to get going. Here are 3 ways to start prioritizing ethical sourcing and procurement.
Prioritize responsible and diverse sourcing from the top
In order to successfully increase an organization's diverse sourcing, it's important to drive alignment and ensure that diverse sourcing is an initiative that the entire company is bought into. When this is a priority from the leadership level, this will add accountability across the sourcing and procurement team and broader supply chain.
To drive consistency and progress towards your diverse sourcing goals, a first step your sourcing and procurement team can take is to ensure that for every RFP, there is at least one diverse supplier being assessed.
Taking this one step further, incorporating the proper questions, related to responsible and diverse sourcing, into a supplier assessment will make an immediate impact. This kind of due diligence will ensure that the supplier is not on any sanctioned lists, have strong compliance with ESG best practices and will help your team better keep track of how responsible / diverse suppliers your organization is working with.
Prioritize the right metrics
The focus on diverse and responsible sourcing does not end once you sign a contract with a new supplier. Setting metrics for success will make sure that diverse and responsible sourcing is a continued focus and is being analyzed for success on a regular basis. Ensure that your organization can track key metrics, such as:
- Cost – dollars spent on diverse suppliers
- Count – number of diverse suppliers in your mix
- Deals lost – number of times disqualified suppliers have ended a deal
Focusing on these stats, plus effectively and intentionally classifying the organizations you are trying to bring aboard as suppliers, will give your focus on responsible and diverse suppliers the structure it needs to remain a priority.
Set internal policies
Finally, ensuring that you're taking the right actions to adhere to a responsible and diverse sourcing commitment comes with collecting the right information to establish and inform policies. From collecting the right pieces of information from organizations to performing regular audits, setting internal requirements will go a long way towards driving success. A "supplier code of conduct" can be a great tool for this as well.