Supplier Diversity: Looking Beyond the Media Cycles

Harley Davidson, John Deere, and Lowe’s: three companies among many that have publicly pulled back on their diversity, equity and inclusion (DEI) initiatives this year, particularly their commitments to supplier diversity. In today’s fast-moving and saturated business landscape, it’s easy for companies to get caught in the tide of passing trends and polarizing media cycles. Many companies react quickly to external pressures, from political pushback to customer sentiment. We’ve seen a wave of companies retreat from DEI initiatives due to social media negativity and brand perception. 

Decisions are made to quickly appease public outcry and improve brand perceptions, only to be reversed when companies realize that the changes were either performative, misaligned with long-term goals, harmful to their key performance indicators, or all of the above. Supplier diversity has recently come under similar scrutiny.

However, when evaluating the value of a supplier diversity program, companies need to think in five to ten-year horizons. The real impact isn’t seen in a quarter or even a year —it’s the long-term relationships, cost savings, innovation, and competitive advantage that a diverse vendor network brings. Over time, businesses that avoid frequent strategy pivots will benefit from a more adaptable, agile supply chain that supports continuous growth and changes.

What Is Supplier Diversity? 

A diverse supplier is a business at least 51% owned, operated and controlled by individuals from traditionally underrepresented and underserved groups. These groups often include racial or ethnic minorities, women, veterans, LGBTQ+ identifying individuals and disability-owned businesses. 

Despite controversy, supplier diversity has been proven time and time again to drive measurable business value. A 2022 study from Hackett Group revealed that 100% of top-performing companies in North America have a supplier diversity program. Research from McKinsey in 2023 shows that diversity matters even more now: companies in the top quartile for gender diversity are now 39% more likely to outperform financially, a notable increase from 15% in 2015. Similarly, companies with high racial and ethnic diversity show a 36% higher likelihood of financial outperformance, up slightly from the 35% observed in previous years.

Why Diversity Matters for Procurement

Businesses are always striving for competitive advantage. By working with diverse suppliers, they introduce competition into the supply chain, which opens up opportunities for better pricing, innovation and higher-quality offerings. Supplier diversity never means sacrificing quality, or feeling like you’ve run out of options.

Since COVID-19, companies haven’t forgotten the harsh consequences of a weak, inflexible supply chain. Recently, natural disasters like Hurricane Milton and El Nino-induced droughts have exposed deep vulnerabilities in many companies’ procurement strategies, such as shortages of materials with no backup plans and significant delays in shipping and production. As a result, many businesses learned the hard way that a resilient procurement strategy isn’t optional — it’s essential. Michael Ruiz, director of supplier diversity at Fannie Mae and former National Minority Supply Development Council (NMSDC) affiliate president knows that creating a diverse and resilient supply chain doesn’t happen by accident.

“One common facet of every successful supplier diversity program I have seen over the past 20 years is ‘intentionality,’” said Ruiz. “Being intentional in ensuring that procurement practices are deliberately inclusive leads to successful outcomes. Success can be measured by spend, contracts, or the ability for diverse suppliers to effectively compete for business opportunities.”

A diverse supply chain is inherently a strong supply chain, because it offers flexibility and innovation. By diversifying its supplier base, a company reduces its reliance on a single supplier or market, allowing it to quickly pivot when disruptions arise — whether due to natural disasters, geopolitical events or individualized crises.

Different suppliers also use other technologies and methodologies to enhance efficiency and competitiveness. This increased competition can lead to better pricing, higher quality products and faster delivery times. Diverse supply chains are also more resilient because they reduce the risk of single points of failure. With a broader network, as a company, you can adapt.

Stick With What Works

Rather than getting swept up in the latest headlines or trends, companies should stick to data-backed strategies that drive business outcomes. Supplier diversity programs have proven to make a measurable difference, and long-term benefits far outweigh any short-term pressure to step away from them. For sustained success, businesses should focus on the following principles: 

• Measure what matters. Set clear key performance indicators (KPIs) that track performance, innovation and risk mitigation. Use this data to guide your procurement decisions rationally, ensuring that they align with your company’s predetermined long-term goals. Some key KPIs to consider include total procurement spend, supplier retention rate and innovation metric, measuring the number of new products or services introduced by diverse suppliers. 
• Prioritize agility. Build flexibility into your procurement process from the get-go. You can implement this through modular and scalable technology and risk-management tool integration to evaluate supplier reliability. 
• Emphasize team education. A successful supplier diversity program starts with internal alignment. Build a business case for supplier diversity and get your team on board. This internal buy-in is critical for sustaining momentum and outlasting media cycles. 
• Take care of your program. Continuously nurture the program. How will you continue to develop the relationships and contacts? How can you scale? 

What Success Looks Like In 5-10 Years

As mentioned, the true value of supplier diversity unfolds over the long term. Success lies in lengthy supplier relationships whose achievements can be measured by KPIs such as capabilities over time and retention rate. It can also look like new market opportunities, as partnerships bring insights into local needs and demographic trends that your business may not have realized otherwise.

Supplier diversity isn’t just a buzzword; it's a strategy. Companies may have retreated from their efforts, but I wouldn’t be surprised if we see them return. The trend of backing away from DEI commitments underestimates the long-term business advantages that a diverse supplier strategy brings.

As you move forward, focus on what works: data-driven strategies, KPIs that truly matter, and an agile supply chain. By embracing supplier diversity with a long-term perspective, companies can build a future-proof procurement strategy that’s capable of adapting to inevitable disruptions, changing public opinions, and market opportunities. 

Anders Lillevik is chief executive officer of Focal Point.