How to move towards more inclusive procurement in Europe

Engaging with suppliers and entrepreneurs from traditionally under-represented and marginalized groups supports equal opportunity and brings many social and economic benefits to all involved.

Benefits include more resilient supply chains, innovation, cost competitiveness and supporting the corporate social responsibility (CSR) and environmental social and governance (ESG) agenda.

While practices and programmes to support diverse suppliers are well-established in the US, where 82% of Fortune 200 companies have formal supplier diversity programmes, to date, Europe has been slow to adopt inclusive procurement practices.

In Europe in 2022 there is a heightened sense of urgency and opportunity with regard to inclusive procurement: the COVID-19 pandemic highlighted social and racial inequalities, younger generations increasingly want to work for companies that focus on CSR, and investors are prioritizing companies with positive diversity, equity and inclusion (DEI) track records.

In addition, large corporate organizations headquartered in the US are gradually expanding their supplier diversity programmes into Europe, for example by requiring their European suppliers to report on their diverse supply base.

However, as a recent report on Equality in Procurement in Europe aptly describes: Europe is not the US and Europe is not alike. Procurement teams based in Europe must overcome several unique legal, cultural and business challenges, creatively and with an open mind, when introducing supplier diversity initiatives on the continent.

So, how can Europe’s unique challenges be overcome?

Pan-European supplier diversity advocacy organizations and networks are invaluable in raising awareness and educating, building communities, and advancing opportunities by connecting buyers with suppliers.

Leading organizations include Minority Supplier Development UK (MSDUK), WeConnect International and European Gay and Lesbian Chamber of Commerce (EGLCC), which support minority-owned, women-owned and LGBTIQ-owned businesses respectively.

In summer 2022, MSDUK launched the European Supplier Diversity Project (ESDP) with the goal to improving the economic and social integration of minority groups in Europe. Their efforts will initially focus on six European countries with promising environments for establishing inclusive procurement programmes and practices.

The project is supported by 12 founding corporate members, each with impressive inclusive procurement initiatives and targets. They are committed to collaborate in order to lead the way and drive supplier diversity in Europe. The six pilot countries include Germany, Sweden, Ireland, France, the Netherlands and Belgium.

While ESDP primarily serves minority groups, they are focussed on collaborating with other advocacy organizations to create joint awareness campaigns in Europe.

Inclusive procurement has a long history in the US, emerging from the civil rights movement and strongly supported by federal mandates to engage suppliers from a clearly defined set of underrepresented or marginalized groups.

Meta realized how far Europe had to go when they learned that some of the concepts in their supplier diversity survey did not translate into all European languages they needed.

According to Seemab Malik from the European Supplier Diversity Project, “setting definitions for minority groups is the largest challenge so far – data on ethnic minority businesses in Europe is lacking, legal nuances need to be understood and tightened”. With the help of law firm Taylor Wessing, creating definitions of minority business owners is one of their top priorities.

For businesses starting out, access to tools such as definitions is another benefit of joining advocacy organizations. Another way is to start small and focus on more easily identifiable businesses such as women-owned or small businesses.

Procurement teams must work closely with their legal teams from the beginning to manage legal risks relating to inclusive procurement practices. One risk relates to the fine, and often confusing, line between positive discrimination and positive action in Europe.

Discrimination of suppliers, even if positive, based on gender, ethnicity and other characteristics is illegal. Positive action allows for measures to realize equality for past or present disadvantaged groups. What this means in practice is that it is acceptable to factor diversity considerations into procurement policies and practices, as long as they are not the main factor.

Another legal hurdle is the collection of what constitutes “equality data” in Europe, and the rules relating to the collection, storage and usage of sensitive data in line with Europe’s General Data Protection Requlation (GDPR) requirements.

It might be acceptable for buyers to ask potential suppliers to provide this data, and businesses must have the right safeguards in place to manage the data to mitigate compliance risks.

The EU is poised to adopt the Corporate Sustainability Reporting Directive in October 2022, which imposes sustainability reporting standards for a large set of organizations operating in the EU. While sustainability is often understood in terms of environmental impact, this directive is a great opportunity to also accelerate supplier diversity initiatives and for companies to report on “impact spend”.

What applies to environmental sustainability initiatives can often also be applied to supplier diversity, such as integrating inclusive metrics into procurement standards and partnering with suppliers to identify opportunities.

Accenture’s four pillars of responsible buying underpin all of its procurement activities.

A fundamental prerequisite for successful supplier diversity initiatives in Europe and elsewhere is a leadership that sets the right organizational tone.

As a co-founder of WEConnect International, Accenture believes inclusive, sustainable procurement creates long-term value for companies and communities.

The top down mandate will clearly be easier, if the business case for inclusive procurement is able to be made. Is your business ready to meet this challenge?