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Why organisations are implementing supplier diversity

The reasons why organisations decide to diversify who they buy from differs. Some are genuinely struck by the country's inequities and want to make a difference through their work. They recognise that they can achieve this impact through buying from Māori and Pasifika businesses. This gives organisations and their employees such a great sense of purpose in their work.

Some recognise that having diverse businesses can bring diverse perspectives and innovation to their supply chain. Others recognise that there may be a major competitive advantage in being an early adopter and doing supplier diversity well as more and more contracts are requiring this.

With increasing pressure from Clients, Staff, Iwi and other external stakeholders there is a real shift in organisational behaviour to find and engage Māori and Pasifika businesses.

In this article we break down some of the key reasons organisations are seeking to buy from Māori and Pasifika businesses and embed supplier diversity.

  • Driven by policy

International examples show us that government law is the most significant driver of supplier diversity. It not only shifts governments direct spending with diverse suppliers but often sets an expectation on contractors to do so as well. In December 2020, the NZ government set a 5% Māori procurement target for Government agencies. This now requires government agencies to look at their supplier base and report on the number of companies they buy from who are Māori owned. Clearly these organisations now have KPI’s to achieve that they didn't before which is a major driver for behaviour change.

  • The 3 “E’s”: Equity, Economy and Environment

For organisations that have genuine care for people and the planet, supplier diversity will be a no brainer. They see the clear inequities and specifically look to leverage their purchasing power to deliver impact. These organisations look to embed this practice because they want to lift prosperity for Māori and Pasifika people. They know that Maori and Pasifika businesses look at how to care for the environment as a fundamental part of their business.

They also know that what’s good for the Māori and Pasifika economy is good for the New Zealand economy and makes good financial sense. They will support diverse businesses regardless of targets and exceed targets easily because it’s just part of what they do. Māori and Pasifika organisations themselves are particularly good at doing this and looking for ways to support whānau owned businesses to subcontract work to.

Organisations with a social conscious and ethical drive will opt in to embedding supplier diversity because it's good for society, good for the economy and good for the environment.

  • A growing Māori & Pasifika population

Another reason organisations choose to diversify their spend is because they recognise the pressure, growth and competitive advantage of doing so. Labour force and customer base of tomorrow With the growth of the Maori and Pasifika population and economies, there is recognition that these groups will be major market players in the near future.

Statistics NZ projections show that by 2043 Māori will have a population of up to 1.35 million whilst Pasifika will have a population of up to 730,000. Representing up to 34% of Aotearoa’s total population.

Presently, 1 out of every 3 Māori and Pasifika Auckland residents is aged 14 years or younger, these populations are the labour force of the future but also the customer base of the future. In the US. Multicultural consumers represent over 120million people with an explosive population growth projected.

The purchasing power of these communities in the US is expected to be as high as $6.1 trillion by 2045. Businesses there are using supplier diversity to help position themselves to maximise this consumer base. Client base of tomorrow But it's not just individual spending that is of interest.

There is increasing commercial significance of Iwi, Treaty Settlement Entities, Land Trusts and other Māori commercial entities. Companies may wish to position themselves early for this customer segment and have a supply chain that will represent the population of Aotearoa that aligns with them.

  • Pressure from Stakeholders

Top-Down and Bottom Up Stakeholder expectation can come from both sides of the supply chain. There are often very strong targets required from clients which is a top-down approach. The flip side of that is the expectations of your staff, investors and wider community, a bottom up approach. As mentioned above, the pressure from clients can drive supplier diversity when there are targets in contracts to achieve.

Organisations may need to demonstrate their diverse supply chain to win contracts. We also see that there are strong supplier diversity advocates and champions within organisations that are pressuring the organisation to buy from Māori and Pasifika businesses even when there may not be targets in the contract. It’s no surprise that companies with employee diversity are more likely to have supplier diversity as well.

  • Pressure from Iwi

Being Treaty Anchored and valuing your Treaty Partners is vital, particularly in the public sector. Iwi are increasingly looking at their own spend but also recognising the spend influence of the public sector and adding pressure to how this is maximised. If you are in the private sector and do work on sites of significance, or on projects in collaboration with Iwi, you may have added pressure from Iwi to ensure you are implementing supplier diversity.

The pressure and stakeholder expectations can drive supplier diversity in an effort to manage and/or retain these relationships.

There are numerous reasons why organisations choose to embed supplier diversity. It could be because of policy, positioning, politics or people or a combination of all of the above.

No matter the reason, the key in all instances is that supplier diversity efforts are high quality and best practice. The risk of not doing it well may jeopardize your ‘why’ to begin with.

So, what's your reason for implementing supplier diversity?