Sustainability and Economic Impact of Diverse Spend
In recent years, there’s been a growing expectation for firms to act with corporate responsibility and source sustainably.
Many organizations are aware that diverse spend supports sustainability and economic impact, but have not implemented the proper tools to quantify the outcome of an otherwise abstract idea (1). Supplier diversity is a high priority within corporate strategy in the US, but measuring spend with minority-owned businesses should not be the only criteria for success. More attention should be paid to the number of new businesses created and the socio-economic impact business makes on surrounding communities.
Diverse Spend Empowers Communities
MSDUK (Minority Supplier Development UK, a non-profit championing inclusive procurement and supplier diversity) believes the biggest challenge for marginalized communities is economic empowerment. CEO and Founder Mayank Shah states that inclusive procurement taps into underrepresented groups of entrepreneurs, giving them access to innovative ideas and solutions. “Most importantly”, Mayank states, “inclusive procurement practices builds sustainable communities, reduces socio-economic inequalities and brings next-gen entrepreneurs to the forefront.” A previous study revealed that 70% of MSDUK businesses were from geographical areas with lower-than-average unemployment, but created a higher-than-average number of jobs (2). In the US, research by NMSDC (National Minority Supplier Development Council) revealed their certified MBEs (minority business enterprises) totaled $400 billion dollars in output that supported 2.2 million jobs, while generating $49 billion in tax revenue to benefit local, state, and federal governments (3).
You are the Catalyst For Change
The economic impact of MBEs are enabled by procurement professionals in large buying firms. Decision-makers face the challenge of optimizing a changing supply chain. Collaborating with diverse businesses supports innovation and competitive advantage while creating jobs and wealth to sustain local communities. It’s important to involve different stakeholders in a firm’s supplier diversity program, as it sets expectations and creates processes that give insights to a program’s bottom line impact. Quantifiable information helps tell the story of a firm’s supplier diversity program and is useful for public relations in sales, marketing, and government affairs (4).
Starting Your Economic Impact Analysis
Proper economic impact analysis begins with robust data. In general, primary research from the relevant data source is preferred. Suppliers have the most accurate employment data, so are ideal partners for performance analysis. Firms should look at data in new ways to create an internal business case for their supplier diversity programs, measuring the value of vendor spend, brand perception, and diverse community business impact (5). Though this can be an intimidating task to begin, there are many experts and data professionals who can provide assistance. The first step to finding the right tools and methodologies for your firm is to begin having conversations about the economic impact of your supplier diversity program.
At ConnXus, we provide a variety of robust supplier management tools including integration of our Economic Impact Reporting (EIR) display. This intelligent report visualizes your company’s tier 1 and tier 2 diverse spend impacts in various ways. Reporting spend by state, cities, congressional districts and diversity categories, EIR is also able to filter spend with environmentally friendly and charitable businesses, ultimately analyzing the impact your diverse spend has on the US through job creation and sustainable growth.