Supplier Diversity Is Evolving Amid a Challenging Political Environment

Recent court rulings limiting affirmative action and diversity, equity and inclusion (DEI) programs, alongside political polarization, are forcing organizations to reevaluate their supplier diversity strategies for impact and innovation. This report presents the findings of a survey and interviews with senior corporate supplier diversity professionals who shared their views on and strategies for coping with the changing political environment.

Trusted Insights for What’s Ahead™

  • Amid growing political challenges and recent US court rulings on affirmative action, scrutiny of supplier diversity programs will likely intensify. The political and legal landscapes are, in some cases, re-shaping supplier diversity. The Supreme Court’s decision against Harvard University’s affirmative action admission policies opened doors for a potential reversal in supplier diversity programs designed to provide economic opportunity to minorities including Black, Brown, Native American, and Asian citizens. The case has already influenced supplier diversity programs. In March 2024 a federal judge in Texas ruled that the Minority Business Development Agency (MBDA) violated the Equal Protection Clause of the Constitution by presuming racial minorities are socially disadvantaged. Additionally, attorneys general of 13 states have cautioned Fortune 100 CEOs about “serious legal consequences” tied to race-based employment preferences and diversity policies.
  • Most survey respondents say they have not yet felt internal pressure to eliminate or alter their supplier diversity programs. However, many say that they are considering changes to their programs and are increasingly being asked to ensure that their programs are on solid legal footing. As a result, supplier diversity professionals are focused on quantifying the empirical benefits of their programs to all stakeholders and moving away from moral justifications such as “the right thing to do” reasoning. Demonstrating how a viable, sustainable, and diverse small business community drives economic growth and community well-being can mitigate future pressure on supplier diversity programs.
  • With challenges growing, companies and supplier diversity professionals should consider adopting a proactive approach and perform a program reset to insulate their firms from risk. While growing legal and political changes have forced corporations to evaluate their programs, it also represents an opportunity to review and refine strategies, priorities, commitments, and communications. This will likely require adjusting the balance between appeasing external—and in some cases internal—groups that may be opposed to the supplier diversity program and those who are the beneficiaries of these programs.
  • When doing a program reset, companies need to address two major issues. First, there is reputational risk: changes may affect how corporations are viewed by minority or historically under-utilized communities, potentially being seen as unfriendly or opposed to doing business with them. This perception can lead to reduced sales if these communities feel neglected or undervalued. Second, from a programmatic standpoint, there is the risk of diluting the effectiveness of such programs by making changes solely for legal or political compliance, turning their initiatives into symbolic gestures with reduced impact on the community.
  • When asked about their concerns regarding the future of supplier diversity programs, almost 50% of respondents cite multiple factors including vendor quality, scalability, innovation, stakeholder support, social and business shifts, and changing organizational priorities. Just under 10% point to recent Supreme Court affirmative action decisions as the major factor. Other factors affecting the availability and readiness of diverse suppliers include increased consolidation in the business environment leading to fewer opportunities and evolving industry specifications. Regarding internal challenges, respondents cite the need for more active participation by business units, expanded department capacity and budgets, and more active engagement from other internal stakeholders.
  • Some companies are considering rebranding their supplier diversity programs while navigating a complex legal landscape. This may involve renaming their programs to eliminate “trigger” words such as diversity, equity, and minority; and instead use terms such as economic inclusion, supplier inclusion, or supplier relations that better reflect the program’s role in business operations, its alignment with procurement, and the value delivered to local communities. Conversely, some practitioners believe the term “supplier diversity” has brand equity; doubling down on the name could help to unify the industry around the issue. However, it remains uncertain whether renaming programs would shield them from criticism since the perceptions of program beneficiaries are likely to outweigh any semantic changes.
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