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These are the supply chain dialogues. And my name is Daniel Helmig. Thanks for tuning in. After the last episode, which was mainly about procurement, we've got a lot of feedback with regard to ESG related topics. Well, we'll focus in most of the series on the topic of greenhouse gas emissions. There were a couple of questions with regards to diversity and inclusion. We'll look back at some of the episodes that we have done in season one and figured out that there was one that you probably will like. If you're not already heard that.

Today's episode is called Diversity and Inclusion. In Short, D&I Simply Human.

In many companies generating revenues in the United States, United Kingdom, South Africa, or India, there is an awareness of the concept and regulatory requirements of diversity and inclusion. , specifically the sourcing part.

However, except for some clear leaders in this [00:01:00] field and most other fields, while they're at it as well, over the years I've observed that many companies make little to no strides to significantly change the status quo regarding D&I unless governmental contracts or public opinions are at stake, and when I say companies, I mean leaders in companies, people, it is therefore not surprising how many leaders in corporations underestimate the societal needs and regulatory requirements for DI sourcing while overestimating by far the efforts to establish a processes in their own company. And many people outside of the countries that I mentioned before believe that DI is more an Anglo-American phenomenon, and they should not really be bothered with that when they're outside of these countries.

And then there are those that just struggle with the whole concept as such. [00:02:00] So allow me to take a step back. First, I will do that with a very personal reflection, and then we will go more in the societal and governmental aspects of, , diversity and , inclusion sourcing, .

Now, suppose you struggle with diversity and inclusion concepts overall since you were brought up differently. In that case, you can either turn off this podcast but please don't, or follow me on a short reflection, if you don't mind.

Andrew Solomon, a great writer in the US brought up the concept of vertical and horizontal identity in one of his books. A vertical identity is when attributes and values are passed down from parents to child, not only through dna, but also through shared cultural norms. While a horizontal identity is when someone has an inherent or acquired trait that can be foreign even to his or her current environment.

For most of us, the [00:03:00] vertical identity is very strong. Clearly, since we are all brought up that, especially our culture and our values, the ones that we all believe to be right, I say believe rather than know for a reason. We do not normally question these values and identities since they came from our mothers and fathers, our friends and neighbors.

And that can't be wrong, right? So if I struggle with the notion of diversity and inclusion, I struggled because, as well, probably my environment. My parents struggled with that. Now, let me get a bit more personal.

I'm German, born and raised, 18 years after the end of the Second World War, near Cologne in the Rhineland in Germany. It's a beautiful piece of land and has very friendly and outgoing people. but this piece of land is as well situated in a country that started two of the most atrocious wars in human history. . Clearly I and [00:04:00] my fellow German boomers have been raised differently. Than you would normally expect in a country. We abhorred what has been done by our grandfathers and grandmother's generation. Suddenly due to this horrible history, this very normal imprint of what we have as vertical identity, did not apply. It makes us to some extent, allergic to anything that people just believe because it has been always that way. We have seen in our history where this can lead to this terrible lesson we learned in Germany Helps. as a stark reminder that not all values that come through the ages or through my environment are righteous or true.

It shows that the identity defined by my parents, neighbors, friends, religion, gender abilities, and even the color of my skin can and must be questioned, when it hurts [00:05:00] discriminates or disadvantages other fellow humans .

So if you struggle with D N I take a step back and look at your beliefs. Are they potentially hurting, discriminating? Disadvantaging other people.

And if they do, give yourself the permission to recalibrate, and then utilize this, for example, in the concept of sourcing to do something about it, because you can make a big difference. You have a lot of opportunity at your hands.

Now, let's as well step back and take a look at the societal background and the regulatory settings of d n. and challenge as well the perception that this is all just an Anglo-American thing and has nothing to do with the rest of the world.

US Supplier diversity has its origin in the American Civil Rights legislation of the 1960s. In 61, president John F. Kennedy, amended a federal [00:06:00] order to consider affirmative actions for federal contracting. The results of that initiative were to be reported against pre-identified goals around the same time companies like IBM, General Motors, Ford and many others launched their first supplier diversity programs as we know them today

On a global level, since the United Nations Earth Summit in Rio de Janeiro in 92, most countries collaborated to reduce inequality and drive sustainable development globally. Finally, in 2013, the General Assembly set up a 30 member open work group to develop a proposal for the 2030 sustainability development goals

Two years later, we got the 2030 agenda for sustainable development with 17 U N Global goals at its core. It was approved by the General Assembly in 2015 and since then, diversity and inclusion, together with the other important goals like water, energy, climate, ocean, urbanization, transport, science, and technology are tracked by the UN and reported in the so-called S D G report, the gold standard for sustainable reporting.

I really recommend to check out the 17 [00:07:00] goals. It's very well done and a great blueprint for anyone who likes to get active or any company that likes to get active. So part of the notes that we have, you can as well just click on the 17 UN Global goals, but you'll find it as one when you Google or ChatGPT it.

Now, what we can learn is fairly simple. If you look in the D&I history as such,, it just takes three things to see change happening. Clear goal setting, governance and reporting. Relentless reporting, and hello. This is nothing special or different from any other change we introduce in our corporate or family life day in and day out.

Many companies lived this change today or since years. And you can find conveniently in the links some of the companies that I mentioned. And their respective diversity and inclusion websites if you're interested. [00:08:00] So you have Cisco, Nestle, sap, Unilever, Procter and Gamble, Johnson and Johnson and ibm, and I'm selecting all those because they have been. Seen as excellent via the un. Smaller firms in the US such as PagerDuty, Rackspace Technologies, supplies, or companies in South Africa like Nando's and European smaller companies like Atomical in the uk, Typeform in Spain, and Unbabel in Portugal. They demonstrate that when integrative company policies are written and lived, all stakeholders feel positive impact on the bottom line , . employee satisfaction and market perception. And again, how did they do it? Goal setting, governance, reporting. It's that easy.

It may be possible that you not have thought about D N I in the context of your company. And the whole topic of 17 global goals was not on [00:09:00] your radar, even in universities the global goals are seldomly covered in the business courses today, which. I think it disgrace, but still, if you review the global goals and you can see the rationale behind them and most members of the human race will be able to see that you took the first step already on the journey to define a path towards your company and supply chain change, because awareness, and that's like the anonymous alcoholics is the first step towards better.

Now as always, let's calibrate where we are with some of the questions or statements to help establish the DNI spectrum in your company or enterprise. The focus of my blog is on the supply chain, and while there are massive additional DNI opportunities within your organization and towards your customers, I leave these to your imagination and we'll just [00:10:00] focus on the supply. Which has a massive impact on the lives of many people if we do it right and introduce the concept of DNI in the selection of suppliers.

. So how many of the following eight statements can you answer with a resounding fact-based Yes.

Statement one:. We understand the regulatory DNI requirements in the countries we sell to and act accordingly with a focus on the supply base.

You will be amazed how many c. Believe the fulfillment of the DNI requirements belong in departments like governmental affairs or legal, or the sustainability team , rather than in the hands of the operations team that can actually do something about it.

It's great to have these departments involved, but at the end of the day, it needs to be handled via the operations. To change suppliers, to select suppliers and work with the rest of the organization to do that.

[00:11:00] Statement two, we have set targets and measure the status quo and trend of DNI sourcing over the years

From my perspective, another fail in many, many companies. There is very little tracking that is being done unless they are located in, as I mentioned before, uk, US, .

But in most other countries or companies, you will see a less, much less. to do the reporting, right? And again, that's the one of the problems on all the three topics, right? You need to set the goals, you need to get the governance , and you need to do the reporting. If you miss the reporting, it's all nice, but no one can check whether your company is doing the right thing overall.

three. Our track record is consistently improving and reported quarterly in- and outside of our company.

Yeah, that's another one, right? Again, have seen it in many companies and when I talk about the companies, I don't mean necessarily the companies that I've worked for, but all the [00:12:00] suppliers that I've dealt with over the years, and.

Goes into the thousands. What you often find is that what is being reported is the average hospital temperature, and with that you do not see which patient is doing well and which patient eventually has a fever. So in our context of dni, a more granular reporting gives you the ability to see, are we doing good overall?

What area are we not focusing on and what can we do about, and that then increases overall the focus on diversity and inclusive topics as such in the supply base that deals with you and that you select

So let's go to statement five.

Beyond regulatory reporting requirements, we can calibrate our E S G objectives against the 17 U N global goals and have adequate resources and projects linked to these that are ring fenced against annual budget cuts.

I start with the second part of the sentence.

So what [00:13:00] I've seen many times is that great goals. Wonderfully defined in shiny little

um,

brochures, but unfortunately, there's only one person that is actually working on that who never will be able to accomplish the objectives because they're not empowered. They are just not man up enough. So it's, it's very difficult to do.

And what I've as well have seen several times that there are good intentions set, two, three years ago. And then there are one or two budget cuts coming. And what is being cut first? Oh, the guys. The ladies from the sustainability or from the ESG department? Yeah, so it's 3, 2, 1. And then at some point in time there is no one left and it's all being integrated in the organization because ah, we've already been doing well, not.

So that's the [00:14:00] first part. The second part is with regard to the overall global goals. So depending on what your company is doing, there are many opportunities beside the typical diversity and inclusion topics. Where you can work on. And I think for today's leadership it is kind of like a driver's license that you have to maintain to understand what it takes to actually do something about sustainability and goals in your day-to-day life.

What is in the sustainability brochures of the company? The sustainability report, the information that is being transferred inside of the company should be something that is actually being done.

So the say do ratio should be high. And the higher this overall is, the more you slam dunk, statement five. Now let's look at statement six.

Economies of skill or scale are not the main criteria we use to find DNI suppliers, and we understand DNI requires a hands-on approach by the whole internal team, not just procurement. [00:15:00]

Again, there are two aspects in this. The first is, . Very often I've seen companies telling us that, well, it is impossible to find diversity or inclusive supplier in that category. I'd say 95, 90 7% of the cases that's wrong. It's just based on the fact that the way that the company looks at suppliers need to change.

So I'll give you an. . If you, look in the area of real estate or real estate facility management, and you have in medium size or even large companies, you have a global contract and then you look for a DNI supplier, you will fail very often because DNI suppliers tend to be regional. Now, if you then have a sourcing strategy, which is global or continental you will not find a supplier.

The point is that you have to add to your sourcing strategy as [00:16:00] well, certain other aspects that allows you to as well look at other suppliers that normally you would not touch because you have economies of scale approach on this.

The other side is then that there is a little bit more hands-on approach. for the whole internal team, not just procurement. And that is as well, very important. It is not procurement that has to basically knock in each door from each customer inside of the company to say, Hey, would you be willing to work with that diverse supplier.

No, the training needs to happen as well inside of the company little videos or presentations being done in the senior management leadership teams and as well with the people inside of the organization talking about the fact, what are the benefits that they are with regard to diversity inclusion and again, not only focusing on the regulatory aspects, then we get a pull.

And if we have a [00:17:00] pull, then things change more easily than procurement knocking on the doors and saying, would you please, would you please?

Now, statement seven is

We promote d and i suppliers internally and cover them regularly in our internal company media.

That's as well something where I've seen a lot of gaps with many companies.

You know, there is a lot of reporting of Joe and Jill who broke the sales record or launched a new app. But we should as well look at Sven and Gudrun sourced to a company where 500 employees now have an opportunity to earn a living

now let's look at the last statement at statement eight.

We are active members of DNI associations like the National Minority Supplier Development Council in the USA. and other associations in Europe and elswhere, which match diverse suppliers with potential customers.

And while every of these [00:18:00] organization it's astonishingly protective with the data

um,

it does make sense to become a member so that you have access to those. So you might want to check that out.

If you look at the eight statements and most of them statements you have answered with the resounding yes. Great. You are a leader in DNI sourcing and no need to listen further.

If you, however, answered most of the questions with a no, or you just didn't know, you have an excellent opportunity to update your ESG performance in the interest of your company stakeholders.

In the last piece, we talked then about what it takes to close a gap with regard to diversity inclusion processes in your supply chain.

Let's talk first timeline. How long will it take Based on my experience, I would say 18 months. And that depends on your current lack of focus can be as well, 24, but it's between one and a half to [00:19:00] two years that you can set that up and you wonder why it's so short. Well, it's not that complicated.

I'm a firm believer that if you do things, do them right and do them quick., Everything that takes too long in a corporate environment frizzles out and is not being done. So 18 months to two years. Good objective in terms of getting DNI in your supply chain.

Second board sponsors either the head of HR or the ceo, him or herself should lead this effort. It's, very rewarding overall, that you not only do diversity and inclusion inside of your company, but you multiply that manyfold in the companies that you deal with.

There is a lot that you can be accomplished there when you look at the project. . It's a weekly task force with clear objectives that are set by the board or the CEO . We need definition of targets overall, [00:20:00] how much by when, in which category and by the main span categories clearly.

We have to set up the systems and reporting with clear metrics. Cause again, 1, 2, 3, right? We said we need clear goals, we need governance and we need a reporting mechanism so that we can see where we are and have a feedback loop. So at the start from metrics, I would go with percentage of spent, covered number of suppliers by d and i category.

Percent of buyers internally or internal customers trained just to start with it. And later on you get smarter and you will have much better KPIs on that. The sustainability team of the company should support not lead. Uh, The procurement leadership has to lead because they are in charge of the suppliers and they should as well have personal objectives . From a change management perspective. Communicate the targets and the process and the why.

Why are we doing. and [00:21:00] be open with the status quo. It earns you the respect of your employees and all the stakeholders report progress regularly through the organization and celebrate success and promote internal interest personnel in and out of diversity and . Inclusion. That says, well, very often, that you have people that are staying in , the small amount of jobs that you actually have there for way too long, , rather than spreading the word and becoming an DNI network in the organization

then invite leaders from D N I associations. We talked about all leading D N I companies to speak at board and leadership meetings. Just make sure that you interview them first, you need good speakers. If that all is done, how do you sustain the success?

Clearly with quarterly reporting to the executive board and as well outside of the company, communicate the progress [00:22:00] and establish as well consequence management. When targets are not met this is not a nice to have setup

on the digital and automation of sides. There isn't that much. Beside the fact that you clearly would like to have the DNI KPIs of a supplier inside of your supply based management, so that a buyer who is looking for a new supplier for whatever, for consulting in the area of Chicago or in the area of Birmingham, that they can find directly a supplier .

From a cost perspective, it's marginal. There isn't that much in terms of additional costs that we have to look at. Mostly I suppliers are as well, not higher in pricing than anyone else they need to fulfill as well the requirements and have to compete .

And even if there are small datas um, this can be compensated in the same category usually. So the, the [00:23:00] discussion in terms of all, we cannot use DNI suppliers because they're expensive. I find completely and utterly wrong.

Now what are the watch outs?

So first watch out clearly is lip service, but all parts of the organization without real action. Yeah, yeah, yeah. We are completely with you. Yeah. Makes sense. And then it dies out because whenever a new supplier is being suggested and I know we can't take this supplier, we can't take that supplier. Then

blaming, missing progress. On the unavailability of quality of D Nni suppliers, which is primarily completely inaccurate and having blind spots about finding the nni suppliers, they can be found in all walks of corporate life, including, but not limited to law firms, accounting firms, insurance firms everywhere.

So in summary, The journey towards diversity and inclusion [00:24:00] in the supply chain requires a commitment from all levels of the organization. But first of all, a clear goal setting by the board or the ceo. O. By setting clear targets, measuring process, and communicating regularly, companies can make a real differe.

To promote diversity in the supply chain, not just to satisfy regulatory requirements, but being simply human. As a result, they enhance the reputation in the company, create a more inclusive working environment for all, and with that, improve their bottom line. It's really not that difficult, it just needs focus.

And with that, we come to an end. . All the best. Bye.

All the best as well from me. Stay safe. Stay bold, and why not start by subscribing. Cherio until the next time.