Sustainable Purchasing Leadership & Supplier Diversity

This blog article is excerpted from SPLC’s Guidance for Leadership in Sustainable Purchasing v1.0.

Types of Diverse Suppliers
  • Small and medium sized
  • Locally owned
  • Women owned
  • Minority owned
  • Aboriginal owned
  • Veteran owned
  • LGBT owned
  • Service-disabled veteran owned

Note: Naming conventions and definitions vary between regions and organizations

Ensuring that contracting opportunities are accessible to diverse suppliers is a key part of promoting the health and resilience of local and global economies. Collectively, these businesses drive significant job creation, and are hotbeds of product and service innovation.[1] By broadening the diversity of its supply base, an organization can help strengthen the economy while at the same time gaining access to new ideas, increasing competition, receiving greater value for money, and better serving and reflecting its customers and communities.[2] For this reason, SPLC believes strongly that leadership on supplier diversity is an essential part of leadership in sustainable purchasing.

However, there are times when supplier diversity goals and broader social, environmental, and economic supply chain performance goals can appear to be in competition. For example, the financial impact of attaining a social or environmental certification may be greater for small or medium sized business than for their larger competitors.[3] Does that then mean that preferring products with better environmental, social, and economic performance deters the use of diverse suppliers?

The use of sustainability criteria, in and of itself does not present a unique challenge for supplier diversity. When given the chance, small and medium sized suppliers regularly demonstrate an ability to compete on whatever performance criteria is important to their customers. This includes earning necessary third-party certifications, whether for safety, quality control, sustainability, or any other criteria.

However, when purchasers send mixed signals to the marketplace about what qualifies as sustainability leadership within a purchasing category, small and medium sized enterprises in that category are disadvantaged because they cannot match a large organization’s capacity “to be everything to everyone.” The Purchasing Category Guidance found in Chapter 4 of Guidance for Leadership in Sustainable Purchasing v1.0 was developed by volunteer Technical Advisory Groups (made up of purchasers, suppliers and public interest advocates) in an effort to provide purchasers and suppliers alike with clarity and consistency on what represents environmental, social, and economic leadership in a given category. If purchaser demand coalesces around these shared definitions of leadership, then suppliers can focus their efforts and financial resources more effectively, which will help level the playing field for small and medium suppliers.

Similarly, the burden of replying to numerous similar-but-different supplier sustainability surveys weighs heaviest on small and medium sized suppliers. Suppliers of all sizes are better able to focus on what matters when they can report their sustainability performance data to many purchasers at once via shared reporting frameworks and database platforms. There is guidance in Chapter 3 on how purchasers can find shared survey platforms that may meet their needs.

Programmatically, the Council recognizes that small and medium sized businesses often do not have ready access to specialized sustainability expertise and resources; this is different than lacking the ability and willingness to achieve high environmental, social, and economic performance. Of course, this problem is not unique to matters of sustainability. Organizations with supplier diversity programs have long recognized the need to provide small and medium sized suppliers with access to training and technical assistance on how to meet their organization’s performance expectations.[4] As a result, suppliers regularly respond with exemplary ability and willingness. The Council is interested in exploring, as part of the Pilot Program, how it can most effectively partner with purchasers and supplier diversity councils to make sustainable purchasing training programs and resources based on SPLC’s Guidance available to diverse suppliers.

The Council is committed to promoting supplier diversity in its guidance, events, community of practice, and via its planned rating system. The Council believes strongly that sustainability will increasingly be a competitive requirement in procurement, and that leadership in sustainable purchasing means both finding ways to increase the use of diverse suppliers and improving environmental, social, and economic performance in a holistic fashion. Leaders don’t settle for one without the other.

References
[1]    US Small Business Administration FAQ, March 2014 (http://tiny.cc/1cg5rx)
[2]    Supplier Diversity Europe website (http://tiny.cc/e5jdsx)
[3]    Not all diverse businesses are small or medium in size, but the vast majority of all types of businesses are small and medium enterprises (http://tiny.cc/1cg5rx), so the majority of businesses with diverse ownership encounter the challenges addressed here.
[4]    The Council encourages organizations to expand their current supplier diversity technical assistance programs to include sustainability, if they have the capacity to do so. An example of this is PG&E’s Diverse Suppliers Go Green Program. Their resources are freely available online: (http://tiny.cc/d3b5rx).

Leave a Reply