DEI remains a key force for corporate success
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#### Companies that educate their employees on diversity initiatives are more likely to achieve broad success in the supply chain.
_**Editor’s Note:**_ The Academy will focus on education within the supply chain sector on the third Wednesday of every month at scmr.com. If you’re interested in upcoming topics, check our editorial calendar for what’s coming up next.
Diversity, Equity, and Inclusion (DEI) faced certain challenges in 2024. National political winds have linked DEI with preferential hiring policies in companies and universities. Once, many firms actively promoted their DEI programs, but the situation has changed. An increasing number of companies are scaling back or at least downplaying their DEI initiatives.
A survey by Gartner early in 2024 found that 49% of supply chain organizations had formal DEI goals in 2023, a growth of more than 50% from the previous year’s survey. Additionally, the survey revealed that attracting and retaining talent was the primary reason for setting these DEI targets.
This aligns with current workplace trends. LinkedIn’s employment survey released in April 2023 found that 82% of employees believe it is important to work for a company whose culture and values match their own. A Pew Research Center survey of 5,902 American workers in 2023 discovered that 56% viewed DEI positively in the workplace, while 61% reported that their companies had policies ensuring fair hiring, treatment, or promotion. Although Pew’s survey did not focus on supply chains, its findings do support Gartner’s employer survey.
DEI Drives Internal Value
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Dan Pellathy, a clinical associate professor at the University of Tennessee Knoxville, recently wrote about DEI within organizations.
“A six-year study by consulting firm McKinsey confirmed strong business reasons for introducing gender, racial, and cultural diversity in corporate leadership. Simply put, diverse companies outperform their less diverse peers. Linking [DEI] to supply chain success requires nurturing talent from underrepresented groups and leveraging their knowledge and experience as resources for learning how to improve core operations,” he wrote.
Pellathy added that “a comprehensive DEI program has tremendous potential to benefit the entire planning organization, particularly those who are not directly impacted by DEI hiring and retention efforts.” He noted that DEI programs can influence tolerance of ambiguity, awareness, change leadership, compelling communication, conflict management, cultural leadership, empathy, negotiation skills, and team leadership.
DEI Can Cause Division
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In Gartner’s survey, many executives (63%) were concerned about division caused by DEI initiatives, but nearly 80% agreed with the statement: “DEI values are an important part of my organization’s mission.” While executives had reservations, employees did not; only 21% believed their organizations’ DEI efforts led to division.
Dana Stiffler, Vice President and Distinguished Analyst at Gartner’s Supply Chain Research and Advisory group, told Supply Chain Management Review that employee values do play a role, but she also observed companies adopting DEI programs out of concern for missing opportunities due to the competitive nature of securing talent affecting operations.
“We expected to see a decline in attention and investment—that was our hypothesis,” Stiffler said. “We would have seen a weakening of efforts on DEI, yet surprisingly, that’s not what we found. We were surprised to find an increase in focus.”
Supplier Diversity is Procurement Reality
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While DEI is often associated with employee programs, it encompasses other aspects of the organization as well. Supplier diversity is one such area.
A 2023 report by supplier data and analytics provider supplier.io found that annual spending on diverse suppliers was $1.4 trillion, but the top ten diverse suppliers received 17% of total diverse spend. The “2023 Supplier Diversity Benchmark Report” tracked spending across 466 companies in 15 industries to compile results.
Diverse spending is defined as “certified diverse spend” from suppliers with industry-recognized certifications that can be verified. Self-certified suppliers were not included in the analysis.
The report noted inconsistent outcomes for those aiming to support diverse suppliers while including small businesses in their reporting. Across all spending, 3.6% of amounts went to certified diverse suppliers across all industries, but this figure rose to 7.5% when small businesses—potentially not diverse enterprises—were included, which could lead to misleading results for companies investing in diverse suppliers.
However, Alphonso David, President and CEO of the Global Black Economic Forum, stated that including diverse suppliers in procurement spending can enhance business opportunities.
“Investing in supplier diversity programs also impacts a company’s talent recruitment and retention. In a survey commissioned by UPS and conducted by Hootology, 52% of respondents said they would consider a company’s supplier diversity and inclusion initiatives when job hunting. As ESG investments become more important to potential hires, companies with robust ethical positioning have greater opportunities to attract diverse and talented candidates,” he wrote for Supply Chain Management Review.
According to the National Minority Supplier Development Council (NMSDC), certified minority-owned businesses generate over $400 billion in annual revenue and economic output, creating and retaining 2.2 million jobs and bringing in $49 billion annually in state, local, and federal tax revenues.
Educating on DEI
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To achieve quantifiable business benefits at all levels from supplier to employee, how can companies educate their employees about DEI initiatives for supply chain success? Pellathy offers ten recommendations:
1. Engage individuals across different organizational levels and functional areas.
2. Align DEI with a range of goals related to outcomes, company culture, and professional development.
3. Evaluate choices from diverse perspectives.
4. Highlight ethical considerations in decision-making.
5. Connect with a broad array of people.
6. Develop employee resource groups to foster community and belonging.
7. Set data-driven targets for the representation of diverse talent.
8. Place core business leaders and managers at the center of DEI efforts and hold them accountable for progress.
9. Implement zero-tolerance policies against bullying, harassment, and discriminatory behavior.
10. Clearly assess inclusion through internal surveys and focus groups.
While DEI may no longer be a focal point in many company annual reports, it remains significant in talent recruitment (and more importantly, retention) and supplier procurement processes. Companies are not moving away from DEI—they might just be approaching it differently.
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Source: New SCMR
