LET’S TALK ABOUT SUPPLIER DIVERSITY

29 Sep 2021

National Inclusion Week

Inclusion Week 2021 takes place this week (27 Sept – 3 Oct). Inclusion Week is designed to celebrate everyday inclusion in all its forms. This is the 9th year Inclusive Employers has brought organisations together from across the globe to celebrate, share and inspire inclusion practices.

The theme for this year is #UnitedForInclusion.  But one area which if often missed in these discussions is diversity in supply chains.  Supplier diversity doesn’t get talked about.

We caught up with our CEO and Founder, Mayank Shah, and asked a few questions to shine the spotlight on supplier diversity and unearth some of the facts around the challenges ethnic minority businesses (EMBs) face. 

  1. Please can you explain supplier diversity?

As a concept, supplier diversity can be defined as purchasing goods or services from traditionally excluded or under-represented groups, including minority, women, and LGBT suppliers. It focuses on creating a diverse supply chain that aims to increase the inclusion of underrepresented groups in the procurement processes of public and private sector organisations. Sourcing products and services from previously underrepresented suppliers enhance supply chain diversification. It also leads organisations to reflect the demographics of the community in which they operate. Research has shown that supplier diversity positively affects an organisation’s long-term growth and a successful supplier diversity programme leads to long-term relationships that provide superior value in the supply chain. Ultimately, supplier diversity aims to create an equal marketplace where opportunities are open to all participants regardless of their gender, race, ethnicity, and sexual orientation.

  1. What is economic inclusion?

In a world where we see growing socioeconomic inequality, a real commitment to supplier diversity enables companies to encourage entrepreneurship in underserved, underrepresented communities, resulting in creating jobs, wealth, better health, and education in those disadvantaged communities. And a more diverse supply chain impacts the bottom line through innovation, competitiveness, and sustainability. Let supplier diversity take centre stage in driving economic inclusion.

  1. What impact do EMBs have on the UK economy?

Our society is more diverse and globalised than ever. The Black Lives Matter movement has shone a light in today’s society and the need to address them.

The recent publication of the Minority Businesses Matter report commissioned by MSDUK shows that despite the challenges minority entrepreneurs face, over 1million ethnic minority businesses in the UK contribute £74 billion pounds per year to create 3 million jobs.

The report also reveals that 8 of the UK’s 23 tech unicorns – private start-ups valued at $1 billion (£740 million) or more – were co-founded by minority entrepreneurs. In addition, 23 of the UK’s top 100 fastest-growing companies in 2019 were co-founded by minority entrepreneurs, including the No1, Bulb Energy.

  1. What challenges do EMBs entrepreneurs face in the UK?

The Minority Businesses Matter report finds that minority entrepreneurs succeed against the odds, identifying consistent challenges when establishing and scaling up their businesses. These include direct and indirect discrimination, disconnection from key financial, business and political networks, and disproportionate levels of doubt.

Mayank Shah mentioned, “The biggest challenge for EMBs is the access to the mainstream networks, it happens with everyone that goes to a new country, it takes time to fully understand the culture, the way that businesses work and that’s what MSDUK does, we support our members to grow, connect and understand the procurement process in the UK. We are currently working with over 70 global and British companies, all committed to a more diverse supply chain and will continue to offer ethnic minority businesses a platform to access these opportunities.”

  1. What characteristics define the majority of minority entrepreneurs?

While the challenges hold many minority businesses back, minority entrepreneurs also have particular strengths, notably their drive to succeed, determination to overcome challenges and diversity of skills, perspectives, experiences and contacts. 

Furthermore, the report identifies six specific contributions made by minority businesses. These include:

  • Combating the coronavirus crisis: Minority businesses have developed rapid, accurate, low-cost Covid tests, sourced life-saving personal protective equipment, kept older people safe in care homes, enabled the NHS to provide online GP consultations, delivered meals to families during the lockdown and developed a virtual events platform.
  • Tech progress: Minority-founded businesses in tech include DeepMind, the world’s leading AI company now owned by Alphabet, and other unicorns that are leaders in video games technology, small-business finance, data-privacy compliance and cybersecurity.
  • Innovation: Overall, 20.8% of minority-led SMEs – and 24.3% of black-led ones – engaged in process innovation in 2018, compared with 14.8% of white-led ones. Minority SMEs are also much more likely to engage in product or service innovation (30.3%) than others (18.5%).
  • Exports: Minority businesses can play a crucial role in boosting exports in a post-Brexit environment. The Top 100 had £18.5 billion in foreign sales in 2019–20, more than UK exports to Japan (£14.7 billion) in 2019 – and much more than exports to Australia (£12 billion) or Canada (£11.5 billion). Minority SMEs in every UK region are more likely to export than others. In 2018, 15% of minority SMEs exported, compared with 13.9% of other SMEs.
  • Levelling up: Minority businesses can help the government achieve its top post-Covid priority of “levelling up” deprived areas outside London, notably because 21 of the 39 Top 100 businesses in England located outside London are based in deprived areas, as are four of the five Scottish businesses in the Top 100 and one of the two Welsh ones.
  • Environmental sustainability: Britain’s leading retail energy supplier that relies exclusively on renewable energy, Bulb Energy, was co-founded by a minority entrepreneur. Minority start-ups are also helping to provide eco-friendly solutions to issues such as biodegradable wet wipes and waste-water treatment.
  1. How can we start to build a successful ecosystem for supplier diversity?

Our integrated ecosystem of innovation, knowledge and procurement hubs help ethnic minority-owned businesses (EMBs) bring innovative ideas to market, develop business leaders of the future and achieve sustained growth through access to corporate supply chains.

We have over 70 corporate members and over 400 certified EMBs. We have been pioneering supplier diversity in the UK for over a decade. Our ecosystem includes corporates, policymakers, universities, accelerators, investors, and EMBs.

  1. What strategy would you suggest for supplier diversity?

In a digital world driven by relentless technological advancement, innovation needs to take centre stage in every corporate strategy if organisations are not left behind.

There is strong evidence that innovation comes mostly from small businesses and individuals, which makes incorporating such entities within the supply chain a critical factor for organisations seeking to bring new solutions, breakthrough technology and disruptive businesses to market. Diversity within supply chains can bring new ideas and solutions to an organisation and boost competitiveness and market growth. But it goes further than these commercial benefits to encompass social value, the ability to reduce socioeconomic inequality and create more robust, more stable communities. With many global business leaders finally waking up to the enormous potential in supplier diversity, businesses that understand how to use this to their advantage will stand to gain a competitive advantage and genuinely be able to make a positive contribution to a fairer society.

“If these reasons are good enough to have supplier diversity as a core part of procurement strategy, then shouldn’t supplier diversity be considered a good procurement policy and become business as usual? Suppose procurement function in any organisation is aligned and contributes to overall corporate goals. In that case, supplier diversity should be embedded throughout the procurement process and should be part of the performance measure.

However, we are far from reality, and supplier diversity is still considered by procurement as one of those add-ons, a feel-good exercise and something that is driven by compliance resulting in positive discrimination.” Mayank Shah, CEO and Founder MSDUK

References

Minority Businesses Matter Report https://www.msduk.org.uk/static/Minority-Businesses-Matter-FINAL.pdf

CIPS Supplier Diversity, unlocking innovation, driving competitiveness and enhancing reputation https://www.msduk.org.uk/static/CIPS-Supplier-Diversity-1.pdf