Why focus on ESG and supplier diversity? Beyond the obvious, it’s good for business: customers, investors, and the world, in general, always want to see companies behaving ethically and increasingly adopting green policies. It’s time to make the most of the opportunities presented by a focused supplier diversity strategy.
So, you want to “focus on ESG” in your supplier base?
ESG (environmental, social, and governance) criteria are of growing interest to companies, their investors, and other stakeholders. They are a set of standards to measure the ethical impact and sustainability of investment in a company – and that includes the impact of the company’s supplier base. Investing in diverse suppliers is, therefore, integral to an ESG initiative. By sourcing goods and services from companies owned by minorities, women, veterans, LGBTQ+, people with disabilities, or just small businesses, a company is demonstrating its commitment to move with the times.
It’s not just about bolting on some KPIs to existing business activity. A good ESG strategy begins by addressing sustainability, diversity and human capital management, but then goes on to inform the company’s governance and strategic direction. Best practices are continuing to evolve, and it may be tempting to see which way the wind blows before addressing ESG in your supplier base. But don’t delay: sourcing from and developing long-term relationships with diverse suppliers is here to stay and has been proven to deliver an array of business benefits.
Centralize your data, create a baseline
When embarking on a mission to improve the diversity of your suppliers, an early task is to find out where supplier information is being held and bring it all together so it can be evaluated across the corporation (not an easy task when procurement activity data is dispersed across various online and offline locations).
This “you are here” dot is an essential first step, as it establishes a baseline of how diverse your existing supplier base is and where it may need to improve. Once all of that data is consolidated in a single, online system, you can then not only review how diverse your supply chains are, but also assess the potential for bringing more suppliers into the ‘diverse’ fold through appropriate certification or through training/upskilling. Ideally, you’d be able to track your spend with diverse suppliers and see which suppliers are ESG-compliant across many different regulations. You should also prioritize tracking your progress in diversifying the supply base across the entire organization.
Don’t stop there!
Creating this baseline and tracking suppliers will give you an overall view of how well you’re doing currently, with clear evidence of your level of supplier diversity and ESG compliance. But that’s only part of the story. You need to broaden your knowledge about your suppliers, and more importantly, about potential new suppliers. This needs to be informed by realistic goals and a clear idea of where you want the company to be in the future.
This inevitably means a new way of conducting procurement exercises, including connecting with a potentially new supply base. Ensure the tools you’re using are able to provide you with the following:
- An advanced, filterable search tool, and the latest information about both current and prospective suppliers. What used to take procurement teams hours or days to do can now be achieved by a quick search. By leveraging a powerful search function built on a foundation of accurate supplier data, identifying diverse suppliers becomes easy.
- A view into each supplier’s ESG compliance areas and diversity certifications. Knowing your Tier 1 diversity spend is critical for ensuring you’re allocating the ideal spend to diverse + sustainable suppliers and meeting ESG goals. However, it’s equally important to have detailed insight into your Tier 2 supplier data to gain a more holistic view of the diversity of your supplier network.
- Supplier insights that break down your diverse spend by category. By being able to see exactly where funds are being allocated you can better determine which areas need improvement and divert necessary spend.
Long-term gains
Improving supplier diversity is the gift that keeps on giving. Aside from raising the company’s ESG performance, the longer-term benefits can be considerable:
- Improved product quality and lower costs: Widening the pool of potential suppliers promotes competition in the supply base
- Improved resilience against supply chain disruption: Having a range of small and diverse suppliers helps to decrease backorders and improves the likelihood that you will meet with demand in case of supply shortage
- Increased agility: Small and diverse enterprises tend to be more flexible and focused on their customer base than their larger counterparts. This allows the company more scope to respond to changing market trends and customer demands. This not only provides greater resilience in times of change, it also paves the way for a more innovative long-term strategy by increasing flexible and nimble responses to novel requests
- And yet more scope for innovation: By collaborating with new, diverse suppliers in the supply chain you increase the potential for creativity through the entrance of new products, services and solutions
To sum up, when it comes to supplier diversity, tracking and reporting is only the beginning. Set realistic goals for your company with regards to supplier diversity and ESG, and then fulfill those goals with the help of a solution like TealBook.
Unleash Procurement Possibilities with TealBook
TealBook is advancing the world through supplier data by empowering the digital enterprise with an autonomously enriched supplier data foundation that powers e-procurement technology, drives supplier diversity, and enables supplier performance.
Learn more about how TealBook can help you discover diverse suppliers here.
