Every year for over a decade, a supplier of personal protective equipment tried desperately to secure contracts with a number of large companies in his area. He was only mildly successful. Until this spring, that is, when those very same companies that had ignored him urgently reached out to arrange in-person meetings to negotiate deals.
Why the sudden change? The run on PPE during the early days of the pandemic played a part for sure. But there was also another reason—the supplier was a Black-owned business.
“Because of the racial injustice uprising this year, Black suppliers are suddenly hearing from folks that they never heard from in the past,” says Shelley Stewart, former chief procurement officer at DuPont and current chairman of the Billion Dollar Roundtable, an advocacy organization consisting of corporations that have spent at least $1 billion with businesses owned by women or people of color. Stewart, in recounting the PPE supplier’s story in an interview with Korn Ferry, added a caveat: “The question is if the outreach is genuine or are the phones going to stop ringing again when this moment goes away?”
To be sure, supplier diversity programs are nothing new—corporations have had them in place for more than 30 years. While progress has been made, it has been slow in coming, and achieving true racial diversity in the supply chain is still an uphill battle. For instance, companies in the Billion Dollar Roundtable spend about 11.4% of their procurement dollars with businesses owned by women or people of color, a figure that has remained relatively steady since 2014. For companies that aren’t in the Billion Dollar Roundtable, the percentage of procurement dollars spent with such suppliers is, on average, much less.
Cheryl D’Cruz-Young, a Korn Ferry senior client partner who leads the firm’s Chief Procurement Officers practice, says racial unrest is one, but by no means the only, reason now is the time for organizations to prioritize supply chain diversity. And she says it is a growing concern not just for procurement leaders but also for CEOs and boards. She cites government regulations mandating a minimum level of supplier diversity, investment firms requiring diversity data for funding, and pressure from employees and customers as other factors contributing to the need for leaders to take action.
“Organizations have to start taking supplier diversity programs to the next level and be held accountable for driving more economic impact into diverse communities,” D’Cruz-Young says. Driving economic impact is particularly important when viewing the issue through the lens of COVID-19. While the pandemic has created opportunities for businesses owned by people of color that happen to have the right product at the right time in the right place, it has also proven to be devastating to those that don’t. A report in August by the Federal Reserve Bank of New York found that 41% of Black-owned businesses closed because of the pandemic, more than twice the rate of White-owned businesses (32% of Latinx-owned businesses and 26% of Asian-owned businesses also closed).
Those figures underscore the impact supplier diversity programs can have on communities through a virtuous circle of revenue generation and job creation. For example, for every $1 million Microsoft spends with diverse suppliers, 75% is retained by the local community and more than 17 jobs are created.
Fernando Hernandez, Microsoft’s global director of sustainability and supplier diversity, says chief procurement officers play a significant role in diversity and inclusion because they control where an organization spends a large amount of its money. “CPOs vote with their currency, and they need to be held accountable for making sure their investment dollars translate into impact and jobs for diverse communities,” he says.