Supplier Diversity That Works: The Mistakes Organisations Make and How to Avoid Them
A supplier diversity programme is an intentional effort by an organisation to include businesses owned by underrepresented groups -- including women, Indigenous peoples, racialized minorities, persons with disabilities, veterans, and LGBTQ+ individuals -- in its supplier base and its procurement processes. In the public sector, supplier diversity programmes are increasingly required by policy; in the private sector, they are increasingly expected by customers, investors, and employees.
In 2022, with increased attention to supply chain resilience and with Indigenous procurement policies becoming embedded in public-sector contracting requirements in Canada and other jurisdictions, supplier diversity is a more prominent strategic procurement topic than in previous years. Here are the mistakes that undermine supplier diversity programmes -- and how to avoid them.
Mistakes in Programme Design
Mistake: Treating supplier diversity as a compliance exercise rather than a business objective. A supplier diversity programme that is designed to check a box produces box-checking results. A supplier diversity programme that is designed to improve the quality and resilience of the supplier base, while also increasing economic inclusion, produces real results. The difference is whether the programme has meaningful targets, senior sponsorship, and resources -- or just a policy statement and a reporting template.
Mistake: Not defining which diversity categories are in scope. Supplier diversity programmes differ in which categories of business ownership they recognise and which certifications they accept as evidence of qualifying ownership. An organisation that has not clearly defined its scope criteria will struggle to count spend accurately, will face inconsistent certification decisions, and will be unable to set or measure meaningful targets.
Mistake: Setting spend targets without a realistic baseline. A supplier diversity spend target that is set without first measuring current diverse supplier spend is a target without a foundation. The baseline measurement is often a significant undertaking -- spend data systems were rarely designed to track supplier diversity attributes, and supplier self-identification data is often incomplete.
Mistakes in Programme Operation
Mistake: Not supporting diverse suppliers to become competitive. Diverse-owned businesses are often smaller and have less institutional support than incumbent suppliers. A supplier diversity programme that simply changes the procurement process without also investing in supplier development -- helping diverse suppliers understand procurement requirements, prepare bids, and build the operational capacity to compete for and win larger contracts -- will generate limited diverse spend.
Mistake: Counting spend that isn't really diverse. 'Tier 2' supplier diversity spend -- subcontract spend that a prime contractor directs to diverse-owned firms -- counts toward some organisations' supplier diversity metrics. But if the prime contractor has no genuine commitment to their tier 2 diverse spend, the reported number may not reflect any real economic inclusion. Scrutinise what you count.
XNM supports public-sector and capital-project organisations in designing and implementing effective supplier diversity programmes. Reach out to XNM's procurement, sourcing & contract management team to discuss supplier diversity strategy for your organisation.