Unlocking the power of a diverse and inclusive supply chain

Beyond ethical considerations, a diverse and inclusive supply chain is an essential aspect of any business.

Yet, over the past 12 months, there has been a significant increase in the number of companies that have improved their DEI dimensions, according to Gartner's research. In fact, 21% of companies had no diversity, equity and inclusion (DEI) focus in 2021, compared to 11% that had no focus in 2022. 

Consequently, three-quarters of supply chain organisations now report on some dimension of diversity, yet only 40% are working on specific DEI initiatives. This represents a slight increase from last year, as only 36% of supply chain organisations had target initiatives for DEI.

What is supply chain DEI?

Supply chain DEI can be defined as the deliberate efforts undertaken by a company to incorporate a variety of suppliers, partners and stakeholders from different backgrounds and underrepresented groups. This includes considering factors such as race, gender, ethnicity and socioeconomic background.

“In the context of sustainability, supply chain diversity and inclusion play a pivotal role,” says Andrea Hendrickx, Country Head – Germany, Infosys. “By embracing a diverse and inclusive supply chain, organisations foster innovation, creativity and resilience. It brings with it a multitude of perspectives, ideas and solutions that can go towards addressing complex sustainability challenges.”

The concept promotes social equity and economic development, Hendrickx explains, by creating job opportunities for marginalised communities and promoting fair and ethical practices throughout the supply chain. “By implementing diversity and inclusion into their supply chain strategies, companies can contribute to building a more sustainable and equitable future,” she says. “In doing so, they must address the UN Sustainable Development Goals, not only one by one, but by combining and embedding them into their strategies across all focus areas.”

Benefits of a diverse supply chain

Integrating DEI practices fosters resilience within supply chains. By diversifying supplier networks and engaging with businesses owned by underrepresented groups, organisations reduce their dependence on a limited pool of suppliers. 

This poses major benefits for businesses, as it strengthens the organisation's capacity to respond to unforeseen disruptions, such as natural calamities or geopolitical conflicts like the Russia-Ukraine war, ensuring continuity of operations.

Hendrickx explains that supply chain diversity and inclusion also promote ethical and responsible practices. She adds: “By engaging with a range of suppliers, companies can better ensure adherence to labour rights, environmental sustainability and ethical sourcing standards. This leads to a more responsible and transparent supply chain, mitigating the risk of human rights violations, environmental damage and unethical practices.”

Additionally, integrating diversity and inclusion practices in sustainable supply chains enhances brand reputation and stakeholder trust. Customers, investors and other stakeholders value organisations prioritising DEI. By demonstrating a commitment to these principles, companies can strengthen their reputation as an employer, attract and retain top talent and build long-term relationships with stakeholders.

Overcoming the numerous challenges 

Although more than half of supply chain leaders have been found to formal DEI targets, a number of barriers arise when trying to implement them into action. Gartner research shows that many businesses struggle with identifying which DEI initiatives to invest in and deciphering which ones will have the most impact. 

Recruitment, learning and development, and employee engagement are the types of objectives most commonly implemented in supply chain organisations. The report suggests: “Recruitment initiatives might focus on diverse interview panels or diversity referral programmes; learning and development initiatives could focus on diversity mentorship programmes or inclusive leader training; and employee engagement initiatives often centre around employee resource groups (ERGs) or DEI newsletters.”

Another significant challenge organisations may face is the limited availability of diverse suppliers, particularly in industries or regions where underrepresented groups are marginalised. 

This scarcity can be due to numerous factors, including systemic inequalities and limited access to resources and opportunities. Proactive measures can be implemented by suppliers, such as supplier development programmes, targeted outreach and partnerships with diverse business networks to address this challenge.

“Communication barriers arising from cultural and language differences can also hinder effective collaboration with diverse suppliers,” Hendrickx comments. “Firms can overcome these barriers by investing in employee cultural competency training, providing language support and fostering cross-cultural relationships. This facilitates a better understanding of different cultural norms, communication styles and business practices, facilitating smoother interactions and collaboration.

“Speaking of investments, resource constraints and cost considerations are often cited as significant barriers to integrating diversity and inclusion practices within supply chains. However, it is imperative to recognise that investing in supplier diversity can result in longer-term benefits.” 

Organisations can secure the necessary resources and overcome cost concerns by showcasing the business case for diversity, including improved innovation, enhanced resilience and a positive reputation. Demonstrating the tangible value and long-term impact of supplier diversity can help garner support from key organisational stakeholders and decision-makers.

The role of governance 

In terms of ESG, many firms tend to focus on the environmental frameworks, many times overlooking a business’s governance strategies. For example, businesses will often focus on reducing greenhouse gas emissions or setting net zero targets.

Infosys research found that companies can remain profitable if they combine all three ESG initiatives, such as improving board diversity, meaning it’s within a companies’ interest to ensure DEI efforts are reflected in wider sustainability goals. 

By failing to do so, Hendrickx states that businesses could be missing out on profits. “Data plays a key role in ensuring these goals align,” she says. “Many supply chain leaders will need the buy-in of others across the business in order to influence sustainability strategies, so any data demonstrating the positive impact that implementing greater diversity and inclusion efforts could go far in making that case. 

“Ideally, DEI efforts should be baked into wider sustainability strategies from the outset. If they’re not, then data will be a key weapon in gaining support.”

The future of supply chain DEI

Over the past few years, supply chain DEI has become a much more pressing topic for businesses around the world. Yet key research highlights there need to be an increased level of focus on achieving the goals and strategies, rather than just setting them as guidelines. 

Integrating DEI practices has been shown to bring a number of benefits, including resilience, ethical practices, enhanced brand reputation, and of course, profitability. Although obstacles will naturally occur, businesses need to adopt proactive measures and to ensure their journey of implementing supply chain DEI leads to a sustainable and equitable future for all.