Supplier Diversity: Do not Confuse Supplier Diversity With Corporate Social Responsibility

This article was contributed by Conor Godfrey, SAIBL Associate

In the 1990s Nike, Gap, Shell, DeBeers and dozens of other multi-nationals were crucified in a series of media exposés for the abhorrent conditions in which their overseas employees labored. These excesses eventually fostered a global corporate social responsibility (CSR) movement that multi-nationals currently pursue with varying amounts of vigor.

The push for supplier diversity must not be confused with the corporate social responsibility movement. CSR conjures up images of schools in mining towns, and power production for villages surrounding company compounds - in other words, extraneous acts of good will that offer few material benefit to the business.

Pursuing supplier diversity and minority procurement on the other hand is proven to lower costs, increase sales, and foster innovation. Patricia Richards, the manager of Shell Oil Company’s corporate supplier diversity division, points out that, “typically, diverse suppliers will maintain a higher level of performance in most areas of contract requirements compared to their larger competitors. Product or service delivery performance, quality performance, administration, and overall delivery of value may be better ...”

Shell is not unique.

IBM, Lockheed Martin, HP, JP Morgan Chase, Bank of America and AT&T represent some of the major Fortune 500 Companies that aggressively pursue supplier diversity.

The arguments that convinced these companies to devote significant resources to realigning their supply chains have even more force in the South African context.

As consumer demographics change, so should procurement practices. Black men and women now account for about one-third of South Africa’s middle-class, and that number grows by more than 10,000 every month.

These historically disadvantaged families not only run many world class businesses capable of supplying all manner of goods and services, they also represent a massive and expanding consumer market with new needs and new preferences. Taking advantage of suppliers from this community will lower costs by increasing competition and create a feedback mechanism whereby black suppliers in direct contact with black costumers can tailor products and services to meet the specific needs of 2010’s consumers.

IBM recognizes the strength of this argument in their company policy regarding supplier diversity - “Building and maintaining a community of diverse suppliers increases IBM's opportunity to hear new ideas, apply different approaches, and gain access to additional solutions that respond to customer needs. Such collaboration helps IBM deliver innovation, quality products, and world-class service to a growing global marketplace”.

IBM and others do not do this to be responsible, they do this stay relevant.