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Sustainability & Social Responsibility

Supplier Diversity Goes Global and Green

Author(s):

Joan Kerr, J.D., M.S.W.


March/April 2012, eSide Supply Management Vol. 5, No. 2

In an increasingly globalized and environmentally conscious world, organizations such as Pacific Gas & Electric Co. (PG&E) are maximizing these opportunities in an effort to stay competitive.

In today's supply chain, successful suppliers have developed global and green initiatives to strengthen their competitiveness. Many diverse companies have successfully adopted these types of differentiating strategies. There is an increasing amount of education and support available from companies and community organizations for those interested in exploring these initiatives.

Think Globally

Large, mature corporations have leveraged the global market to drive down costs and increase market share. Diverse suppliers must do the same. Pacific Gas and Electric Co. (PG&E), headquartered in San Francisco, has devoted programs to train diverse suppliers on how to go global and green.

Supply chain. While there are no absolute barriers precluding diverse suppliers from accessing the same global supply base used by their corporate customers to lower the costs of their operations, smaller companies often can benefit from increased knowledge about best practices and critical risk factors. To compete with companies whose operations leverage a global supply chain, diverse suppliers must be willing to explore this business model and determine if it makes sense for them.

Market share. Thinking globally also includes a thorough evaluation of accessing new global markets for diverse suppliers' products and services. The same offshore companies and contacts that are considered for outsourcing services or materials can be among those companies considered for strategic alliances that support expansion into a global market. In today's competitive environment, diverse suppliers must develop strategies to expand their customer base and reduce dependence on domestic opportunities. These types of derived values help to increase the stability of company operations. This, of course, is in addition to the more visible potential of increased sales and revenue. Corporations promoting a stable diverse supply base with a broad customer base will want to support diverse suppliers in seeking a broader global market.

Graphic of a green colored chain.
Adopt an Environmental Policy

Regardless of the size of a company, developing and embracing an environmental policy is a competitive advantage and, at some point, will become a necessity to compete in an increasingly environmentally conscientious business climate. In a world where companies have rationalized their supply base and have multiple sources of supply that are of comparable quality and cost, suppliers that have developed a commitment to environmental leadership have differentiated themselves from their competition. In addition, adopting environmentally friendly measures can reduce costs and open doors to a growing market segment.

Alignment with customer values. Recent trends show that both corporate and retail customers are making purchasing decisions based on a product or service's environmental impact. According to a 2007 survey conducted by A.T. Kearney, 70 percent of CEOs from Fortune 500 companies will deselect a supplier for failing to meet sustainability criteria. The A.T. Kearney findings show that being "green and ethical" will no longer be an option; it will be a necessity for all participants in the supply chain.

Operational savings. Implementation of green practices can help a company reduce its carbon footprint, operate more efficiently, reduce operating costs and enable the sharing of those savings with customers. Something as simple as replacing lighting fixtures or printing less paper can deliver real cost savings.

Green business opportunities. According to research from Verdantix — an independent analyst firm focused on energy, environment and sustainability issues for business — the U.S. sustainable business market is forecasted to grow from US$28 billion in 2010 to $60 billion in 2013. With many state and federal policymakers allocating funds to spur clean energy generation and energy efficiency businesses, jobs and investments, entrepreneurs can find new growth opportunities by identifying the business and technology trends in the expanding green economy.

Technical Assistance

Any company committed to a diverse supply chain must be willing to provide support and guidance to suppliers that have not yet explored global and green initiatives. Many diverse companies already have a sophisticated international business model and an environmental policy. For those that don't, PG&E is a company whose commitment to ensuring the success of diverse suppliers is embodied by its robust Technical Assistance Program. This includes outreach and training programs designed to position diverse suppliers to succeed and remain competitive in today's business world. The program provides resources and training to support supplier development and mutual success between PG&E and its suppliers.

Diverse suppliers go green. The Diverse Suppliers Go Green (DSGG) initiative is part of PG&E's commitment to the environment and to the success of diverse businesses in the community. Environmental stewardship is playing an increasingly important role in the procurement decisions of both large corporations and small businesses. Launched in 2010, the DSGG program is an example of the technical assistance workshops that PG&E provides to diverse suppliers and is frequently presented in collaboration with community-based organizations.

In 2011, PG&E provided eight trainings to different audiences by partnering with organizations such as the American Indian Chamber of Commerce, California Hispanic Chamber of Commerce, Elite SDVOB Network and U.S. Pan-Asian American Coalition.

Diverse suppliers go global. In concert with PG&E's environmental leadership training, the company is also educating diverse suppliers on the strategic benefits of participating in the global marketplace. The Diverse Suppliers Go Global initiative educates diverse suppliers about the potential advantages to leveraging an international market for their supply chain and as a potential market to compete in.

Going Green. Going Global.

Supply chains are complex and incorporate facets of many different business drivers. Traditional evaluation criteria of cost, quality, service and assurance of supply no longer constitute the full picture of what companies look for when integrating a supplier into its operations. Leveraging the global economy and environmental leadership can elevate a company's competitiveness through reduced costs and a stronger business model while aligning with customer values and increasing market opportunities.

It is necessary to explore these opportunities to stay in business in an increasingly globalized and environmentally conscious world.



Joan Kerr, J.D., M.S.W.

Joan Kerr, J.D., M.S.W. is the director of supplier diversity and development for PG&E in San Francisco. To contact this author, please send an email to author@ism.ws.

For more supplier diversity resources, visit the ISM articles database.

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