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Tech & Sourcing @ Morgan Lewis

TECHNOLOGY, OUTSOURCING, AND COMMERCIAL TRANSACTIONS
NEWS FOR LAWYERS AND SOURCING PROFESSIONALS

In the wake of the reinvigorated call for equality and greater diversity and inclusion, many companies—largely through their procurement organizations—are taking the opportunity to revisit their diversity supplier programs, including assessing impact and reevaluating best practices for pursuing supplier diversity and tracking the impact of these programs.

Most major companies include a supplier diversity program or mission statement as part of their procurement guidelines, often highlighting such programs on their external supplier portals. Some companies flow these guidelines down to their vendors in large procurement/services contracts, requiring compliance by such vendors with respect to their subcontractors.

The flow-down practice is common enough that we have a placeholder in our procurement/services contract templates to add our client’s diversity program requirements. Such contractual provisions typically address the use of diverse subcontractors, including minimum goals and reporting. We are starting to see a greater focus on supplier diversity programs generally and, in our practice, on the corresponding flow-down provisions.

A recent article written by Daryl Hammett and Jason Busch, titled “Integrating a Divided World Through Procurement,” provides insight on where companies are today with respect to supplier diversity programs (the old normal) and how they can grow in a meaningful way with substantiated impact (the new normal). Hammett and Busch ask companies seeking to determine the current state of their supplier diversity and sourcing plans to answer some fundamental questions, including the following:

  • Are you measuring the economic impact of your spend and being strategic about where you’re sourcing your diverse suppliers from?
  • Do you rate your suppliers? Are your suppliers rating your inclusion in return?
  • Are the procurement and related team members buying in to treat the diversity supplier program as a high-priority, common goal or are these procedures and contractual provisions viewed as just another compliance checkbox?

Such fundamental questions in establishing where a company’s diversity program is now are intended to aid in developing what each company would like to achieve through its program and the transformative changes that need to be made. A new generation, rather than mere refinements, of programs and initiatives appears to be afoot.

Based on our reading, no one is claiming to have all of the answers. It seems, though, that companies and consultants are starting a new conversation by examining past and current practices and exploring potential enhancements, or even restructuring, for the future. We expect activity and innovation in the area of supplier diversity programs in 2020 and 2021. We’ll be listening, and working with our clients in crafting the next generation of contract provisions.