Making supplier diversity part of your business strategy - in five steps

Supplier diversity programmes are proactive procurement strategies that encourage organisations to purchase goods or services from traditionally underrepresented communities and include minority-owned businesses in their supply chain. 

Minority-owned (or ‘diverse-owned’) businesses are at least 51% owned and operated by an underrepresented group and can include ethnically diverse, women, disabled, neurodiverse and LGBTQ+ owned suppliers. 

In 2023, we launched our own diversity supplier strategy to promote to promote inclusive practices across our supply chain, and creating more opportunity for minority-owned businesses, maximising spend with these where possible. 

AMS focuses our efforts on creating diverse and SME supplier eco-systems specific to a client’s needs. Our current supply partners include a range of certified minority or women-owned businesses who deliver certain aspects of a client’s solution such as sourcing or tech enablement. We also have proactive programmes in place to drive DEIB and Social Value through our partners and suppliers, such as our DEI Alliance. 

In this article we explore our learnings and some best practices we have learnt along the way to optimise societal, environmental and economic impacts. 

The business case

The UK’s Social Value Act encourages public sector bodies to consider Social Value alongside cost and quality in any tender process, one of its five key themes includes Tackling Economic Inequality with increasing supply chain resilience as a policy outcome. 

Outside this, and current US regulation on minority-owned suppliers, there is little legislation which stipulates that organisations must implement a supplier diversity strategy. So what’s the value in making it a strategic business priority? 

• Growth and Market Expansion – Improved diversity in the supply chain allows an organisation to easily tap into new markets and customer bases with diverse demographics, driving growth, expanding reach and encouraging new entrepreneurs. It also aligns with the growing consumer and employee demand for ethical business practices, and can enhance brand loyalty. 
• Economic Contributions and Community Impact – Through diversity supplier programmes, organisations can significantly boost local economies, create jobs, and enhance purchasing power in underrepresented communities. According to the National Minority Supplier Development Council (NMSDC), certified minority-owned businesses generate more than $400 billion in annual revenue and economic output that leads to the creation and preservation of 2.2 million jobs. In the UK, ethnic minority businesses (EMBs) contribute more than £25 billion annually to the economy, which could rise to £100 billion with the right support according to the Natwest Business Growth Report. This economic empowerment translates into a stronger, more resilient market for everyone.
• Innovation and Competitive Advantage – Engaging diverse suppliers fosters innovation and enhances competition, bringing in different perspectives and leading to better products and services. Additionally, a diverse supplier base can reduce dependency on a limited number of suppliers, increasing business resilience and agility, and decreasing supply costs via supplier competition. 
• Promoting Equity and Fairness of Opportunity – In redirecting supplier spend to minority-owned businesses, supplier diversity programmes are a powerful tool to combat systemic racism and promote social justice. Adopting a fair and inclusive procurement process and including often overlooked suppliers who may have exceptional capability ensures that all businesses – regardless of size, location, background – have the same opportunities to compete for the supply of goods and services. 

Suppler diversity isn’t about positive discrimination – but providing greater opportunities through our procurement processes, underpinned by the need to acquire goods and services that meet an organisation’s service, quality, cost, innovation, risk, sustainability and compliance standards. 

From a supplier perspective, a report by Aston University found that improving practices in procurement could help tackle the multiple barriers faced by ethnically diverse owned businesses, particularly in accessing finance, markets and quality business support, increasing their Gross Valued Added (GVA) contribution from the current £25 billion a year to an estimated £100 billion. Top barriers for small business growth include access to skilled employees (15%), cash flow challenges (15%) and lack of confidence (14%). 

Five steps to creating an impactful strategy

As AMS continue to develop our own strategy in this space, below are some steps we have learnt to create, embed and measure a successful diversity supplier strategy.

1 - Clearly define your objectives

According to Business In The Community (BITC), 52% of employees working in procurement in large businesses have objectives to increase diversity and inclusion in the supply chain, and 32% do not. We firstly established a Supplier Working Group formed with representatives from Supplier Management & Procurement, Compliance and the Diversity, Equity, Inclusion & Belonging (DEIB) Centre of Excellence to drive activity, securing senior level buy-in. We established clear objectives and policy statements regarding our supplier diversity approach, agreed a governance framework and roles and responsibilities as a team to embed our strategy and continuously evolve.  

2 - Track diverse suppliers and spend 

Only 30% of large businesses track spend with diverse suppliers. Another key step early on is getting visibility of current supplier data. Technology makes this easier – Cloud-based spend analysis solutions offer ways to identify and categorise diverse suppliers. AMS tracks Supplier Diversity spend across the UK and the US, leveraging our partnership with Supplier.io. It's then important to monitor and track spend in each diverse supplier category on an ongoing basis, with a clear reporting mechanism; many of our clients have contractual requirements on diverse supplier spend reporting.

Taking this a step further, our Public Sector Resourcing (PSR) business have invested in Thrive Social Value software, which coverts Social Value activity into indicative financial proxy values. PSR are proud to have built a diverse and resilient supply chain of approximately 350 suppliers, and over FY23-24 generated £57.1 million worth of Social Value through their diversity supplier strategy. 

3 - Expand your network

You won’t reach new suppliers by communicating with the same or existing networks. Not only can intermediaries help you tackle the barriers mentioned above, but they can give you access to suppliers who might otherwise not come into contact with your organisation. We keep abreast of diverse suppliers leveraging our internal and external networks – engaging our colleagues, clients and professional contacts to build a comprehensive knowledge of supplier landscapes. 

4 - Strategise with diverse suppliers 

52% of large business procurement employees don't actively make diverse suppliers aware of opportunities. It’s important to proactively involve your diverse suppliers in the procurement process, creating collaborative forums to strategise and co-create products and solutions. An innovative example of this is our AMS DEI Alliance (see case study below).  Some organisations also offer mentoring programmes to help minority-owned business owners navigate the supplier qualification or procurement process. 

This year, PSR launched the Social Value Supplier Connect, designed to maximise social impact by fostering collaboration between PSR and our suppliers. Led by the PSR Social Value and Supplier Management teams, the Connect forum brings together our key suppliers three times a year to discuss best practice, share success stories and identify partnership opportunities. The group comprises a mix of both large and small organisations, ensuring diverse experiences and perspectives that can be shared. Suppliers in the forum also benefit from a ‘resource catalogue’ developed by PSR providing additional materials such as Accessibility Training delivered by the AMS DEIB COE and our Disability Employee Resource Group (ERG). 

5 - Share guidance for your colleagues

The next step on our journey is to provide practical and relevant guidance for our business on responsible, fair and inclusive procurement processes. This includes Bias & Conscious Inclusion training for colleagues with a focus on supplier outreach and selection to help maximise opportunities for diverse businesses, as well as an education programme on proactive supplier engagement and collaboration. 

Case Study: AMS DEI Alliance

In 2022 AMS formed a Diversity & Inclusion Alliance, a market-leading collaboration hub of DEIB focused partners to improve diverse representation across our clients’ total workforces and bring market leading DEIB expertise and insight to inform talent strategies. 

Many of ​our partners are voluntary, community and social enterprises (VCSEs) or minority-owned businesses, and include 55/ Redefined (female founded), Evenbreak (disabled owned and operated) BYP Network (Black owned and operated), Recruit for Spouses (female founded), myGwork (LGBTQ+ owned) and auticon (largest majority autistic company in the world). 

We firstly developed a robust strategy for identifying diverse suppliers – continuously engaging our colleagues, clients and external contacts to build a deep knowledge of the DEIB supplier landscape – both suppliers currently partnered with AMS, or who we were not currently signed. The DEIB COE and Procurement teams developed an RFI process to onboard new Alliance partners against consistent criteria.  

We’re proud to have developed a collaborative forum to share client opportunities, co-develop inclusive strategies, share learnings and best practices. We advocate for our Alliance partners with our clients; to introduce our partners to our clients across the UK, we held an ‘Alliance roadshow’ in autumn 2024, taking our Alliance on an in-person tour across the UK holding networking events across key locations of London, Birmingham, Manchester and Edinburgh with a total of nearly 100 attendees. 

As a result, we have generated significant interest from public and private sector clients, facilitating introductions to customers such as the HM Land Registry who are working with myGwork to access LGBTQ+ talent.

Conclusion

Incorporating a diversity supplier programme into your business strategy is a win-win. It’s a meaningful strategy for sustainable procurement, driving innovation, enhancing competitiveness, and creating significant Social Value, while also increasing business resilience and agility. 

By actively engaging with diverse suppliers, your organisation can build a resilient and agile supply chain, demonstrate commitment to Social Value to your stakeholders, and unlock new market opportunities. 

If you’d like to learn more about maximising your work with diverse and minority-owned suppliers, do reach out.