Supplier diversity and the positive impact on the economy

Mayank Shah, CEO and founder of MSDUK, outlines the challenges that ethnic minority businesses face in accessing the supply chain and shares his thoughts on why levelling the playing field will have a positive impact on the economy

The last two years have been a challenge for all businesses, and their employees have been a challenge. Still, according to the recent Minority Business Matters report, ethnic minority businesses (EMBs) have been impacted the most. So, I thought it was time to answer a few questions around diversity and inclusion in the supply chain; the hope is that many larger corporates will understand more and try to make inclusion part of their organisation’s culture.

1. What is supplier diversity?

As a concept, supplier diversity can be defined as purchasing goods or services from traditionally excluded or under-represented groups, including minority, women, and LGBT suppliers. It focuses on creating a diverse supply chain that aims to increase the inclusion of underrepresented groups in the procurement processes of public and private sector organisations. Sourcing products and services from previously underrepresented suppliers enhance supply chain diversification. It also leads organisations to reflect the demographics of the community in which they operate. Research has shown that supplier diversity positively affects an organisation’s long-term growth. In addition, a successful supplier diversity programme leads to long-term relationships that provide superior value in the supply chain. Ultimately, supplier diversity aims to create an equal marketplace where opportunities are open to all participants regardless of their gender, race, ethnicity, and sexual orientation.

2. Can you explain economic inclusion?

In a world where we see growing socioeconomic inequality, a real commitment to supplier diversity enables companies to encourage entrepreneurship in underserved, underrepresented communities, creating jobs, wealth, better health, and education in those disadvantaged communities. And a more diverse supply chain impacts the bottom line through innovation, competitiveness, and sustainability. So let supplier diversity take centre stage in driving economic inclusion.

3. You talk about ethnic minority businesses (EMBs), but what impact do they have on the UK economy?

Our society is more diverse and globalised than ever. The Black Lives Matter movement has shone a light in today’s society and the need to address them.

The recent publication of the Minority Businesses Matter report commissioned by MSDUK shows that despite the challenges minority entrepreneurs face, over 1million ethnic minority businesses in the UK contribute £74 billion pounds per year to create 3 million jobs.

The report also reveals that 8 of the UK’s 23 tech unicorns – private start-ups valued at $1 billion (£740 million) or more – were co-founded by minority entrepreneurs. In addition, 23 of the UK’s top 100 fastest-growing companies in 2019 were co-founded by minority entrepreneurs, including the No1, Bulb Energy.

4. What challenges do EMBs entrepreneurs face in the UK?

The Minority Businesses Matter report found that minority entrepreneurs succeed against the odds, identifying consistent challenges when establishing and scaling up their businesses. These include direct and indirect discrimination, disconnection from key financial, business and political networks, and disproportionate levels of doubt.

5. What characteristics define the majority of minority entrepreneurs?

While the challenges hold many minority businesses back, minority entrepreneurs also have particular strengths, notably their drive to succeed, determination to overcome challenges and diversity of skills, perspectives, experiences and contacts.

Furthermore, the report identifies many contributions made by minority businesses. These include:

• Combatting the coronavirus crisis: Minority businesses have developed rapid, accurate, low-cost Covid tests, sourced life-saving personal protective equipment, kept older people safe in care homes, enabled the NHS to provide online GP consultations, delivered meals to families during the lockdown and developed a virtual events platform.
• Tech progress: Minority-founded businesses in tech include DeepMind, the world’s leading AI company now owned by Alphabet, and other unicorns that are leaders in video games technology, small-business finance, data-privacy compliance and cybersecurity.
• Innovation: Overall, 20.8% of minority-led SMEs – and 24.3% of black-led ones – engaged in process innovation in 2018, compared with 14.8% of white-led ones. Minority SMEs are also more likely to engage in product or service innovation (30.3%) than others (18.5%).
• Exports: Minority businesses can play a crucial role in boosting exports in a post-Brexit environment. The Top 100 had £18.5 billion in foreign sales in 2019–20, more than UK exports to Japan (£14.7 billion) in 2019 – and much more than exports to Australia (£12 billion) or Canada (£11.5 billion). In addition, minority SMEs in every UK region are more likely to export than others. In 2018, 15% of minority SMEs exported, compared with 13.9% of other SMEs.
• Levelling up: Minority businesses can help the government achieve its top post-Covid priority of “levelling up” deprived areas outside London, notably because 21 of the 39 Top 100 businesses in England located outside London are based in deprived areas, as are four of the five Scottish businesses in the Top 100 and one of the two Welsh ones.

6. As a corporate, where do we start to build a thriving ecosystem for supplier diversity?

Our integrated ecosystem of innovation, knowledge and procurement hubs help ethnic minority-owned businesses (EMBs) bring innovative ideas to market, develop future business leaders, and achieve sustained growth through access to corporate supply chains.

We have over 70 corporate members and over 400 certified EMBs. We have been pioneering supplier diversity in the UK for over a decade. Our ecosystem includes corporates, policymakers, universities, accelerators, investors, and EMBs.

References

Minority Businesses Matter Report https://www.msduk.org.uk/wp-content/uploads/2021/02/Minority-Businesses-Matter-FINAL.pdf

CIPS Supplier Diversity, unlocking innovation, driving competitiveness and enhancing reputation https://www.msduk.org.uk/wp-content/uploads/2019/04/CIPS-Supplier_Diversity_16pp_A4_0319_WEB.pdf