Procurement teams that fail to place diverse suppliers at the heart of their supply strategy are “hindering growth”, it has been claimed.
Incorporating diversity into tender criteria creates “better sources, better performance, better partnerships, and achieving some of your own corporate goals,” Dawn Andre, chief product officer at procurement technology firm JAGGAER, told Supply Management.
She said diversity components in tenders “level the playing field” and help “smaller companies, middle-sized companies get access to opportunities to do business with other companies that they would have never had before”.
Her comments come as figures show diverse businesses contribute €570bn to the EU economy but minority entrepreneurs “still do not enjoy equal treatment”.
Andre continued: “I think [diversity is] going to help the global economy overall, it's going to lend itself to companies getting better, bigger, stronger, and more competitive.
“It's going to bring more competition into a space that previously, in many industries, is dominated by a handful of customers or a handful of companies. I think that gives us an opportunity for higher resilience.”
A report commissioned by Minority Supplier Development UK (MSDUK) and the European Supplier Diversity Project said inclusive procurement and diverse suppliers were a “huge opportunity” for growth.
The report, Minority Businesses Matter, said: “Promoting diversity in supply chains is not just about wanting to do good. It’s also good for business. Enhancing equal opportunities for all suppliers would enable buyers to benefit from more diversified supply chains that are more resilient, lower cost and of higher quality.”
Fostering greater diversity within supply chains help buyers to develop new products, encourage innovation and reach additional markets. “Being seen as good corporate citizens would broaden their appeal to customers, employees, policymakers, investors and other stakeholders,” it said.
Procurement departments that stick to large suppliers they have established relationships with “hinder the growth of minority companies [which] deprives large buyers of the benefits that diverse companies provide”.
“Inclusive procurement policies would thus benefit not just minority entrepreneurs but also the public bodies and corporates that bought from them.”
Mayank Shah, CEO and founder of the MSDUK told SM: “Procurement hubs help ethnic minority-owned businesses bring innovative ideas to market and develop future business leaders. In addition, many corporates now realise the positive impact of a diverse supply chain on their business.
“As a result, they are driving forward to deliver diverse supply chains in their organisation, and minority businesses are achieving sustained growth through access to corporate supply chains.”
The report, compiled by think thank the Open Political Economy Network (OPEN), collected data from eight countries – Germany, France, Italy, Spain, the Netherlands, Sweden, Belgium and Ireland – and calculated minority-led businesses have a combined turnover of €570bn. Such firms account for at least 4.7% of all businesses (800,000 businesses) and employ at least 2.7 million people.
Of the top 50 minority businesses by turnover, just three are founded or owned by women.
The report said: “Both public authorities and large corporates ought to pursue inclusive procurement policies that provide equality of opportunity for diverse suppliers.
“This would address the disconnection from mainstream business networks that many minority entrepreneurs in Europe face, and thus help them obtain more contacts, contracts and capital.”
The report noted despite the EU’s Racial Equality Directive, most EU countries – with the exception of Ireland – do not collect data on the ethnicity of their residents, “let alone that of entrepreneurs”.
Philippe Legrain, founder of OPEN and lead author of the report, said: “Ethnic minority entrepreneurs still do not enjoy equal treatment in Europe, an issue obscured by the lack of transparency around data and reporting on ethnicity in Europe. It is both smart business and a moral imperative to tackle this challenge and ensure minority businesses thrive across Europe.”
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