Insurers to suppliers: Time to get with the DEI program

What happens in the field most definitely does not stay in the field. 

Recoiling from the national humiliation of a tiny rural Maine insurance agency that mocked Juneteenth, the new federal holiday celebrating Black Americans’ emancipation from slavery, major companies are redoubling efforts to ensure that their corporate diversity values are carried through by the advisers and agencies that represent them to consumers.

Small firms and agencies might not have considered themselves as bearing the messages of their corporate partners’ diversity values — until now, said Rhae-Ann Booker, vice president of diversity, equity and inclusion at the University of Michigan Health-West. As corporations strengthen efforts to diversify their cultures, employee population, recruiting, and community service, suppliers must realize that they are part of that values alignment, too.

“It’s a fundamental expectation for any organization that claims a commitment to diversity, equity and inclusion that your supplier commitment is who you do business with and how they go about their operations as a reflection of your commitment to your values,” Booker said.

RAISING EXPECTATIONS

American Family Insurance has been ratcheting up expectations for suppliers’ compliance with its corporate and supply chain diversity goals, said supplier diversity manager Anisha Jackson. This spring, the company introduced a supplier code of conduct and “we expect suppliers to uphold our values in that code,” said Jackson. “Our suppliers acknowledge that. They sign that document. We don’t tell companies how to do business, but we share what that expectation is.”

American Family tracks how its major suppliers, in turn, spend with diverse contractors and subcontractors. Internally, the company is working with various departments to help managers find fresh sources of diverse talent for contracts. “Supplier diversity is everybody’s responsibility,” she said. “It’s not just on the shoulders of supplier diversity managers.”  To that end, American Family and other large financial services companies are working on industrywide initiatives through the Financial Services Roundtable for Supplier Diversity.

ALIGNING VALUES

Pressure to align values throughout the supply chain is rising in anticipation of regulatory changes in the works in California, Jackson explained, that are expected to require more transparency and reporting about supplier diversity. Government contracting and related regulations tends to set standards for all contracts, she said. 

Principal Financial Group expects its suppliers to adhere to its global code of conduct, which “includes obligations in the categories of legal and regulatory compliance, privacy, employment practices, environmental sustainability and more,” according to a statement furnished to InvestmentNews by Akash Gupta, chief procurement officer. While Principal has not released a supplier on the grounds of violating the code, “It’s the responsibility of suppliers to understand and comply with the supplier code. Suppliers are expected to self-monitor their compliance through their own administrative processes and notify Principal when a violation occurs,” Gupta said.

It’s a fundamental expectation ... that your supplier commitment is ... a reflection of your commitment to your values.”

Rhae-Ann Booker, VP, diversity, equity and inclusion, University of Michigan Health-West

And Mass Mutual requires that suppliers be “accountable for DEI within their operations, including monitoring their DEI performance and continuous improvements” with the intention of creating a “ripple effect,” said Jackson Davis, head of diversity, equity and inclusion, in a written response to an InvestmentNews request for comment.  The company is “reframing supplier diversity  more accurately in terms of business inclusion,” he added, which means “not only holding suppliers to high standards but helping them reach and maintain those standards.”

Randal Kenworthy, a senior partner with West Monroe, a management and digital strategy consulting firm, said that companies are starting to realize that supplier values alignment is one way to execute on their ESG goals. “We definitely are seeing S&P 500 companies who have to accomplish these ESG commitments and pushing them down to their supplier base,” he said.

‘A LEARNING MOMENT’

But there’s a huge disconnect between top-tier companies and Main Street companies, he added. Incidents like the one touched off by the Maine agency’s misfire prove the point that big companies need to take the lead in defining and then driving values alignment. One motivation: collecting information for measuring ESG efforts and results and then reporting to stakeholders, he said.

The case of the Maine insurance agency’s missteps is “a learning moment” for financial services firms, Booker said. Small companies often are oblivious to exactly how their corporate partners’ diversity missions apply to them. But as American Family and other companies clarify their expectations, small agencies and firms will better understand what they need to do to align with corporate partners’ diversity goals, if that fits with their own business goals. 

“A smaller organization might say, ‘we don’t align,’ or an organization might say, ‘we only look to do business with those who align with our values,’ and they might require smaller organizations to demonstrate how they align in the application process,” she said. 

Meanwhile, back in Millinocket, Maine, a spokesperson for the Harry E. Reed Agency, said she had “no comment whatsoever” on the agency’s travails, which were touched off by an ill-conceived comment it posted on its door notifying customers that it was closed on Juneteenth. The note went viral on social media, resulting in a crescendo of digital commentary and harassment; the agency’s apology; and at least two national insurers it represented dropping the agency.

In response to an InvestmentNews request for comment on the situation, a spokesperson from Allstate — one of the insurers dragged into the incident — responded with an affirmation of the company’s diversity priorities and cited as evidence the $308 million it spent in 2021 with diverse suppliers, a 31% increase from 2020.