It's Time to Take Supplier Diversity Seriously
It not only the right thing to do, it's the smart thing to do.
As the cannabis industry matures, those in the industry must expand the conversation about supplier diversity. By this, I mean the intentional effort to buy products and services from a business that is owned by individuals from traditionally underrepresented or underserved groups of people.
This concept has long been part of corporate efforts to make a positive impact on society, but the scale of the current growth in our industry provides a unique opportunity for economic empowerment for vendors and suppliers who partner with cannabis companies.
A longing for justice permeates the cannabis and hemp space, especially since the U.S. government has criminalized and demonized the plant for the past 90 years. As we know, minority communities have absorbed the hardest blows from these harmful policies.
Accordingly, many cannabis and hemp enterprises have framed their mission and approach around a broader environmental, social, and governance (ESG) mission, taking corporate social responsibility to heart. They have engaged in sustainable farming, developed social equity programs to create economic development in communities most affected by the criminalization of cannabis, and conducted business in a manner that gives confidence to investors and capital markets.
I’m proud my company, Flourish Software, is committed to the same goals. Adding supplier diversity is an appropriate next step for the company, as well as all of us who are creating economic opportunity through the burgeoning cannabis industry.
It makes business sense
A 2020 Harvard Business Review article makes a compelling argument that diversifying your suppliers is not only the right thing to do, but it’s also smart business.
“An inclusive procurement strategy widens the pool of potential suppliers and promotes competition in the supply base, which can improve product quality and drive down costs,” the authors write. “And by providing more sourcing options, inclusiveness can make supply chains more resilient and agile—an increasingly important advantage in these uncertain times.”
In the article, an executive at the Coca-Cola Co. gushes, “Diverse suppliers can turn on a dime and are now considered for contracts that they would not have been otherwise due to the imperative for flexibility.”
Still not convinced? Consider this: As cannabis becomes a larger force in society, people are looking to industry leaders to reflect the diversity of the communities we serve. Big, successful companies attract attention from advocacy groups and, when internal initiatives and operations fall short, they attract widely covered lawsuits over discrimination. Developing a diverse supplier ecosystem—along with your labor pool and executive suites—makes those problems less likely to occur.
Cannabis’ unique role
Many states that have legalized or decriminalized cannabis products have also implemented social equity and justice programs that help individuals disproportionately impacted by arrest and incarceration from the “war on drugs.” The programs offer technical assistance and training in skills to work in the cannabis industry, from entry-level jobs to owning a business.
In doing so, these programs have helped identify and develop potential suppliers for the cannabis industry. James Jackson, III, senior director of social equity at Parallel, shared that as a commitment to create opportunities for equal access and economic empowerment throughout the cannabis industry, the company recently started purchasing materials and partnering with three Black-owned social equity operators in Massachusetts. In that state, people of Black, African American, Hispanic or Latino descent, among others, are eligible to participate in the social equity program.
“Social equity is one of the many things we are currently focusing on, especially when it comes to building our supplier and vendor portfolio with diverse companies. We are looking for ways to partner with diverse vendors in all aspects of our business, not just within the plant-touching aspect of the cannabis space. For example, we have a large number of capital projects in the works, and we are working to find diverse construction, engineering, etc. firms to partner with,” said Jackson.
Other diverse suppliers can come from the LGBTQ, disabled and veterans’ communities, among others.
LGBTQ-owned businesses especially should be considered in the cannabis industry’s supplier diversity efforts. As Forbes magazine reported in 2019, “The ties between marijuana legalization and LGBTQ rights go back decades to the AIDS epidemic of the 80s and 90s.” That was when patients with AIDS, cancer and other illnesses began using medical marijuana—then illegal—to alleviate their symptoms.
We also shouldn’t forget the people who came before us—the legacy cannabis business owners and operators who built the first infrastructures before the legalization movement—and include them as we look to diversify our supplier pool.
The Harvard Business Review authors note that some diversity programs are, “created reactively as distinct entities that are treated as nonessential.” To be effective, supplier diversity efforts need to be a main part of the procurement process—perhaps with spending allocations or commitments that a certified diverse supplier be considered for every major contract (similar to the Rooney rule in the National Football League or the Mansfield Rule in the legal profession).
As I noted, my company’s supplier diversity program is still in its infancy, and as a software company, we don’t require many suppliers for considerations such as the raw material suppliers, packaging vendors, or contractors that cannabis growers, processors, distributors, and retailers depend on.
However, we do use Poston Communications, which is certified by the National Gay and Lesbian Chamber of Commerce (NGLCC) as a diverse supplier, for our company’s public relations and content efforts. Because I self-identify as gay, I am especially proud of this partnership for the company I founded. We are publicly committed to increasing the diversity of our suppliers from underrepresented groups of all types.
Advocacy groups for diverse suppliers are doing all they can to make sure businesses in their communities are easily-identifiable. Click on the links for the following groups to find more information about potential suppliers and partners among their members. They include: the Women’s Business Enterprise National Council; the National Minority Supplier Development Council, which certifies businesses that are at least 51%-owned by people of Asian-Indian, Asian-Pacific, Black, Hispanic and Native American descent; the National Gay and Lesbian Chamber of Commerce, Disability: IN; and the National Veterans Business Development Council. I’d also encourage operators who qualify to get certified by these national organizations.
Doing good, doing well
The cannabis industry is rooted in environmental and social justice, priming us to fight for these ideals. I sense investors are asking for us to do good while making healthy profits.
Accomplishing our goal of empowering underserved communities requires real intention and accountability. Once we aim for diversifying our suppliers, we need to be accountable and measure regularly whether we are achieving what we set out to do.
Colton Griffin is CEO of Flourish Software, a technology provider of enterprise supply chain and inventory management software built for cannabis, CBD and hemp operations. He may be reached at firstname.lastname@example.org.