Hey Procurement: Let Supplier Diversity Help with Sustainability, Not Compete with It
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Corporations and their Procurement teams have historically set their Supplier Diversity and Sustainability goals up to compete with each other. Procurement organizations should instead leverage diverse suppliers to lead on sustainability. Embracing principles of antiracism, equity and sustainable impact in Procurement’s supplier engagement capability will drive greater sustainability impact and avoid leaving diverse suppliers behind.
In a recent conversation with a Chief Procurement Officer of a major Fortune 500 company I was asked: how should I balance investment in my procurement organization’s Supplier Diversity and Sustainability goals? The underlying question that we uncovered was really: I feel like I only have the resources to prioritize one of these – which is more important? My simple, if not easy, answer: Both. Because if you are thinking about your diverse-owned suppliers as strategic suppliers to your organization, and if you are relying on your strategic suppliers to help the organization achieve its sustainability goals, then you should be investing in your diverse-owned suppliers’ ability to drive your supply chain sustainability.
Saying so is the simple part. The not so easy part comes from the tendency in Corporate America for areas of ESG (Environmental, Social and Governance) to collide and compete for resources. In my former role as Director of Procurement ESG at Google the areas of diversity (via Supplier Diversity) and sustainability (in initiatives like Scope 3 Decarbonization) were both in my remit. And in my experience DEI and Sustainability have always directly competed for resources. I know from extensive benchmarking with colleagues in the industry that this is a consistent phenomenon. The question is: how can the procurement organization operate to support both its E and S remits?
Embracing Supplier Diversity and Sustainability as Supplier Engagement priorities
When Procurement understands Climate Responsibility and Social Impact as non-dispensable and strategic to corporate success, it can pursue areas of mutual impact through its strategic capabilities. One procurement capability to leverage is Supplier Engagement, which is how procurement creates value through its relationships with its suppliers. Procurement’s E and S can be mutually reinforced when thinking about DEI and Sustainability in the context of engagement with its strategic suppliers, who should be both a diverse group of suppliers, and a group helping procurement uphold its sustainability responsibility to the corporation.
To spell out the logic on this:
GIVEN Your strategic suppliers should be a diverse group;
AND Your strategic suppliers should help you lead on sustainability;
THEN Your diverse suppliers should help you lead on sustainability.
So, your strategic suppliers, including your diverse suppliers, should be your sustainability leaders. In organizations where Sustainability and Equity are pursued as strategic Procurement capabilities, the organization’s most strategic suppliers are seen as being – among other indicators of suppliers’ service capabilities and risk profile – beneficial to the diversity of the supplier pool and the sustainability goals of the organization. A strategic CPO would never ask her team to choose between supplier relationships that are either cost effective or less risky for the organization; similarly she should not ask the team to choose between a diverse supplier base or a sustainable one.
In order to achieve this mindset, Procurement will need to embrace the following principles:
Antiracist action: Procurement will need an unbiased or Antiracist mindset that understands that individual suppliers who are diverse-owned are not more or less capable when it comes to Sustainability or any other aspect of their business;
Equitable outcomes: Procurement will need to embrace equity, which in this context means helping close the gap between the success of diverse-owned suppliers and non-diverse-owned suppliers that exists in nearly all corporate supply chains. The desired outcome should be that your diverse-owned suppliers are no less likely to be sustainability leaders than your non-diverse-owned suppliers;
Sustainable impact: Procurement will need to embrace its role in the advancement of the corporation’s goals and responsibilities around the protection of our global climate through the reduction of waste, emissions and use of natural resources, and the role that suppliers play as an extension of Procurement’s impact.
Engaging your Diverse Suppliers in your Sustainable Procurement
Once the organization is ready to embrace its role in climate & equity impact it is ready to engage its diverse suppliers to help them advance sustainability goals. I use “partnership” in the broadest sense of that word, to define a relationship where both the buyer’s and the supplier’s needs, requirements and capabilities are optimized to ensure mutual benefit. Partnerships imply that both parties will do the work to align business needs, in this case around sustainability. Procurement can boost its engagement with diverse suppliers by doing the following:
Communicate your company’s Sustainability standards and requirements. Share your company’s sustainability standards and requirements with your diverse suppliers. Make sure these commitments are clear and measurable so that your suppliers can understand their role in the sustainability of your supply chain and will be able to measure their impact. If you’re already communicating with your diverse suppliers, incorporate sustainability in your existing resources. This will reinforce sustainability as a regular part of doing business with your company and prevent creating additional forums for time-constrained suppliers. Don’t forget to include incentives – articulate how meeting, exceeding and leading on these requirements can help your supplier do more business with your company. Utilize standard industry reporting mechanisms – such as EcoVadis – to reduce the likelihood of creating unique or duplicative reporting for suppliers.
Learn about your suppliers on their existing sustainability capabilities. Solicit Suppliers’ sustainability metrics and future plans to find out: are they aware of their most material issues? Are they investing in solutions around clean energy use, decarbonization, safety standards and other areas? Are they already supporting the sustainability requirements and needs of other clients, such as Scope 3? Do any current practices represent an advantage your organization can leverage? Might they already be offering sustainability services? Diverse-owned suppliers everywhere are participating in and driving the services sector around sustainability – you may be surprised by the capabilities already existing in your diverse supplier base.
Assess the Sustainability materiality and capabilities of the supplier. Use this knowledge to assess your diverse suppliers as you would your other suppliers. How material (significant) is what they provide to our carbon footprint and environmental risk factors? Are they beginners in this space or experts? Based on this, how might we engage them in existing programs, such as requirements and incentives?
Provide education resources. If you have resources available to help your suppliers improve in the areas you require, share these with your diverse suppliers. Suppliers may have knowledge gaps around measurement of initiatives like carbon emissions, waste and materials requirements. Ensure they have access to tools to help. You can leverage publicly available resources like the EPA’s Smart Steps to Greening for businesses, among many others.
Invest in long-term supplier relationships. Reducing the climate impact of what you buy may now or in the future require you to change the way you do business with your suppliers. This can include mandating the use of new materials, changing how materials are shipped, and even buying a whole different service or product. Having a strong, consistent and ongoing relationship will make the change management of this work for you and your suppliers in the long-term.
Watch-outs when engaging with your diverse suppliers
I’ve been asked before, wouldn’t it be easier if we exempted our diverse suppliers from our sustainability requirements? While exempting diverse suppliers from sustainability or any other business-critical requirements can be done with the best of intentions, it typically results in disastrous consequences. Eventually your organization will decide to mandate sustainability performance across all of its suppliers, and when it does, guess what happens? Diverse suppliers will lose their business with you. There is also the implication within this impulse that diverse suppliers will not have the capability of meeting sustainability requirements – the Procurement organization should have the Antiracist mindset to say that diverse suppliers are no more or less likely to meet these requirements, and the Equity mindset to say that it is Procurement’s responsibility to close any existing gap.
What’s at Stake for Procurement
The stakes are high for the Procurement organization’s ability to engage and develop supplier relationships that bring value to the organization. The CPO wants more than just “good” firms in her supplier base, she wants leaders who innovate in their industries around delivering goods/services, de-risking the supply chain, providing financial value, and on ESG responsibilities. In this context, preparing diverse suppliers to lead on sustainability ensures the long-term viability of your diverse supplier base.
The CPO oriented towards equity and antiracism understands the potential for diverse suppliers to be sustainability leaders, and that it is the responsibility and opportunity of corporations to close gaps in knowledge by actively engaging with diverse suppliers to help them achieve and exceed requirements. This is really a form of Climate Justice, where advancing sustainability goals comes with a lens of fairness around the benefits and barriers of climate action. This is the mindset that will generate stronger strategic supplier partnerships, better Procurement value for the organization and better outcomes for people and our planet.
– Chris Genteel
Interested in developing more strategic engagement with your diverse suppliers on sustainability? Contact Glidelane to see how we can help.