WOMEN4BUSINESS DARING CIRCLE: WHY ENGAGING DIRECT AND INDIRECT SUPPLIERS IS CRITICAL FOR SUSTAINABLE AND INCLUSIVE VALUE CHAINS

Companies and organisations have an imperative to transform their supply chains to meet the needs of our rapidly changing world. While many are taking action to transform their supply chains by strengthening their transparency policies, exploring tech solutions to enhance traceability, and diversifying their suppliers, they cannot fully optimise their value chains without engaging their suppliers around inclusive and sustainable procurement.

Inclusive sourcing seeks to reduce diversity gaps in business and entrepreneurship, and to increase diverse groups’ empowerment and equality of opportunity through procurement.

Collaborating with and engaging diverse suppliers can lead to greater long term economic growth ,[1] strengthen communities across the value chain ,[2] and accelerate progress to net-zero ,[3] while also improving organisations’ resilience when faced with intersecting crises [4] – from the impacts of COVID-19 to the effects of climate change, geopolitical conflict, or other economic shocks. Without an inclusive and strategic approach to supply chain management, companies will navigate these challenges with one hand tied behind their back.

Despite the many positive effects of supplier diversity & inclusion (SD&I), few companies have embraced the opportunity to extend diversity and inclusion (D&I) principles in their supply chains beyond Tier 1 suppliers. By confining SD&I programmes to Tier 1, companies can limit their understanding of the outcomes based on suppliers closest to the customer. This could lead, for example, to a misalignment of D&I objectives with upstream suppliers, or to missing or inaccurate or data, such as carbon emission disclosures from suppliers higher up the value chain.

What is tier 2 engagement and how can it transform supply chains?

N.B. Tier 1 suppliers directly supply products to their end customer; Tier 2 suppliers provide products to suppliers or subcontractors of Tier 1 suppliers.

Engaging suppliers beyond Tier 1 enables organisations to scale impact-driven initiatives and transform their supply chains for positive environmental, economic, and social impact.

To reach sustainability targets and lower their total carbon footprint, companies will need to look beyond direct operations and include indirect suppliers. For example, nearly two-thirds of upstream Scope 3 emissions in supply chains globally come from suppliers that companies don’t deal with directly.[5] By strategically engaging tier 2 suppliers – and eventually other tiers – organisations can improve traceability and visibility of their total impact to set more ambitious commitments, while creating coordination at each tier of the supply chain; this is true for both social and environmental sustainability initiatives.

Diverse suppliers bring critical innovation. Diverse suppliers often demonstrate innovation because of their varying perspectives and experiences. This innovation can help buyer companies achieve sustainability and performance goals and pivot to address emerging challenges. As research shows, businesses with diverse leadership report innovation revenue at 19 percentage points higher than companies without diverse leadership[6] and women-led SMEs are actively engaged in innovation activities including process innovation, product innovation, and investment in research and development.[7] Women’s leadership has been found to improve climate and environmental governance outcomes, including more sustainable resource governance and conservation[8] and increased transparency around climate impacts.[9]

Engaging tier 2 is also critical for managing risk and building resilience. As recent supply chain disruption has made clear, companies are only as resilient as their supply chains. Diverse suppliers are more agile and quicker to adapt to shifting demands.[10] More than 1 in 5  companies surveyed by The Women’s Forum cite cost-effectiveness and risk diversification as incentives for advancing supplier diversity.[11] Engaging suppliers around the benefits of SD&I can help them diversify their own supplier base, thereby enhancing the resilience of multiple supply chains and amplifying benefits. Working with suppliers to engage their own suppliers can provide transparency of data for better tracking. This data can help companies anticipate disruption by accessing key information and shifting data that can otherwise be missed. These insights from Tier 2 and above suppliers can allow companies to respond to changes proactively rather than engage in reactive strategies, as well as accurately report data to enhance their compliance with environmental and social regulatory frameworks. 

Companies who do not have visibility over their environmental and ethical practices across the supply chain risk negatively impacting communities. As our economy shifts to respond and adapt to climate challenges and opportunities, it is critical that transformation plans intentionally support a Just Transition so that workers’ rights and livelihoods are secured in the shift to a green economy. Embedding inclusive principles in supply chain management is not just an opportunity to expand economic opportunity to marginalised groups. It is also necessary to ensure companies have visibility of equitable and ethical labour practices. These practices should be in alignment with universal human rights, mitigating reputational risk associated with unsustainable and exploitative supply chain practices. Research has found that 25% of individuals who were aware of a specific brand’s supplier diversity initiatives were more likely to think favourably about it, and 49% were more likely to use its products.[10]

Engaging suppliers through the Women’s Forum Inclusive Sourcing Journey.

The Women4Business Daring Circle is a community committed to promoting and accelerating women’s economic empowerment in business and supply chains. It highlights the crucial role of women’s entrepreneurship and leadership for an inclusive economic recovery, with a focus on accelerating uptake of inclusive sourcing and SD&I. The group’s collective insight and collaborative efforts led to the creation of the Toolkit for Action, which includes holistic tools and knowledge resources to help companies make supply chains diverse and gender inclusive. One such tool to achieve this objective is the Inclusive Sourcing Journey.

In November 2022, the Women4Business Daring Circle community realised its long-term ambition of cascading knowledge and tools to our partners’ suppliers, thereby targeting tier 2 suppliers. This workshop took place alongside the Women’s Forum Global Meeting, where participants engaged with a dynamic programme of top business leaders, lawmakers, and agents of change.[13] This workshop brought together suppliers to engage in a practical and collaborative dialogue using findings and recommendations from the Women’s Forum’s Inclusive Sourcing Journey. This workshop enabled these suppliers to initiate or accelerate their own SD&I programmes and enable their suppliers to do the same.

Key insights and best practices on SD&I from this workshop, as well as from our Daring Circle partner workshops hosted throughout 2022 include the following:

• Develop a compelling business case for investing in SD&I and know it will continue to be enhanced in the long term. Leadership buy-in to get the programme off the ground and supported throughout the journey is necessary for companies to adopt D&I programmes.

• Align KPIs and metrics with your suppliers. Setting shared KPIs enables long-term collaboration with mutual benefits that reflect the values of both parties. Tracking and sharing data internally and externally on suppliers’ SD&I initiatives can help build the business case for the broader initiative.

• Share best practices, resources and improve capacity building to reduce administrative burdens and costs for suppliers. A phased approach to training, alongside coaching or mentorship, can improve accessibility of the wider programme, particularly for smaller suppliers who may have limited resources.

• Strategically include different departments to create a cross-functional business strategy. Ensure that supplier engagement initiatives include the right people within each supplier company. Best practice can include leadership, D&I teams, and sustainability departments, as well as procurement.

Supply chain transformation is a business imperative: the world needs sustainable, resilient, and inclusive supply chains – and fast. Inclusive supplier engagement is the next frontier for companies looking to optimise performance and cascade positive change throughout their value chains.

[1] McKinsey & Company. 2022. Expand diversity among your suppliers—and add value to your organization.


[2] IFC & Goldman Sachs. 2019. 10,000 Women: Investing in Women’s Business Growth: Progress Report 2019 — WEOF at the Five Year Mark.


[3] Accenture. 2022. Thought you knew the Scope 3 issues in your supply chain? Think again.


[4] Sustainable Procurement Barometer. 2021. From Resilience to Opportunity: Sustainability Pays Off Through the Crisis and Beyond. Ecovadis & Stanford Business Value Chain Innovation Institute.


[5]Accenture. 2022. Thought you knew the Scope 3 issues in your supply chain? Think again.


[6] Lorenzo, R., Voigt, N., Tsusaka, M., Krentz, M., and Abouzahr, K. 2018. How Diverse Leadership Teams Boost Innovation.


[7] Owalla, B., Nyanzu, E. and Vorley, T., 2020. Intersections of gender, ethnicity, place and innovation: mapping the diversity of women–led SMEs in the UK. International Small Business Journal.


[8] UN High Commissioner for Human Rights. 2019. Analytical study on gender-responsive climate action for the full and effective enjoyment of the rights of women


[9] UN Secretary General. 2022. Achieving gender equality and the empowerment of all women and girls in the context of climate change, environmental and disaster risk reduction policies and programmes.


[10] Bateman A, Barrington A, Date K. 2020. Why You Need A Supplier Diversity Program.


[11] The Women’s Forum for the Economy & Society. 2020. Inclusive sourcing and women’s entrepreneurship: Accelerating recovery for business, economy and society.


[12] This year, the Global Meeting brought together 2300+ participants in person and 30,000 virtual participants to elevate conversations around women’s empowerment related to climate, health, and peace.