A growing number of enterprises in the United States and internationally are making a proactive effort to incorporate Diversity, Equity, and Inclusion (DEI) within their values and cultures. Beyond hiring practices, one very important element of inclusion is ensuring that a significant percentage of vendors with whom you do business are diversity-owned.
What is the state of your company’s procurement supply base diversity?
Have you been utilizing the same vendors for products and services year after year without investigating other options?
Among your current suppliers, are there any businesses that you know for certain are operated by diverse ownership?
Most companies that are concerned with corporate social responsibility (CSR) will find it valuable to establish or expand a dedicated supplier diversity program. This will not only support DEI initiatives and boost Environmental, Social, and Governance (ESG) scores, but may also increase performance in numerous areas—including bottom-line revenues.
What is supplier diversity?
Supplier diversity is a procurement program within an organization that promotes the sourcing of supplies and services from traditionally underrepresented vendors. This business practice evolved from the civil rights movement of the 1960s as a way to level the playing field for the minority business community. Today, maintaining an active and proactive supplier diversity program demonstrates a company’s commitment to equitable business practices, which can have a tremendous positive impact on internal culture, external stakeholders, socially responsible investors, and even financial performance.
A diverse supplier is a business that has been certified by a reliable third-party agency to have at least 51% ownership by one or more individuals who belong to a marginalized community. Diversity supplier categories include:
- Minority-owned enterprises (MBEs)
- Woman-Owned Enterprises (WBEs)
- LGBT-Owned Business Enterprises (LGBTBE®s)
- Veteran (VOSB) and Service-Disabled Veteran-Owned Small Businesses (SDVOSBs)
- Disability-Owned Business Enterprises (DOBE®s)
- SBA-defined small-businesses
Inclusive procurement practices directly result in economic opportunity for each of these disadvantaged communities. As an example, according to The National Minority Supplier Diversity Council, certified MBEs annually generate $400 billion in the economy, which is tied to 2.2 million jobs and $49 billion in local, state, and federal tax revenue. As supplier diversity gains increasing momentum, those figures will likely continue to rise.
Who needs a supplier diversity program?
Many organizations that work with Federal or State government agencies, or other public-sector entities, are typically required by law to meet minimum established supplier diversity quotas. Even in such instances, there is still an opportunity to review your current supplier base and find areas for improvement. Are your diverse suppliers mostly in one or two categories? In the future, look for ways to select vendors that fall under other diversity classifications.
Additionally, as commitments to DEI and ESG strategies become more mainstream in the corporate world, any private enterprise that values inclusiveness and community engagement may establish and actively maintain a strong Supplier Diversity program. This includes small and medium businesses in most sectors of the economy, as well as not-for-profit entities.
If your organization procures goods or services from third-party vendors, you can choose to do business with firms that are owned and operated by people with diverse leadership. The more companies in the United States and internationally commit to prioritizing inclusiveness in their hiring practices and supply chains, the more level and fair the playing field becomes for all contenders.
Not only is it the right thing to do morally and ethically, but there is also a strong business case for diversity supplier programs.
The business benefits of supplier diversity
Developing a successful, dedicated procurement diversity program may require an investment of time and effort, as well as money, especially at the start. However, prioritizing supplier diversity has proven to yield a compelling array of benefits for those companies that make such a commitment, including:
- Meet and exceed diversity goals
- Strengthen supply chain resiliency
- Provide multiple procurement channels
- Gain access to a much wider network
- Widen supplier competition to drive down costs
- Enhance brand image through CSR commitment
- Improve services and product quality due to greater vendor competition
- Stimulate innovation and collaboration
- Demonstrate community leadership
- Make a positive social and economic impact
- Increase return on investment (ROI)
How big of an impact does supplier diversity have on a company’s bottom line?
In 2020, enterprise consultancy the Hackett Group conducted a landmark study of more than 100 large global and U.S. corporations in a range of industries with a median global revenue of $11.8 billion. As reported in “ROI-related Supplier Diversity,” their research found that firms with long-term supplier diversity programs experienced on average a 133% greater ROI than companies who continued to rely on traditional suppliers.
What’s more, for every $1 million spent in procurement operating costs, the companies with diverse supply chains added $3.6 million to their bottom line. These organizations also decreased their operating costs and saved 20% on procurement expenditures.
While the global corporations in this study currently allocate 7.2% of their procurement budget to diverse-owned business, they anticipate increasing their diversity spend goals more than 50% over the next three years (by 2025), with 13% dedicated to hiring suppliers that are minority-owned, women-owned, veteran-owned, service-disabled veteran-owned, historically underutilized business-zone located businesses, LGBTQ-owned businesses, indigenous businesses, and other under-represented diversity groups.
Supplier diversity program best practices
Spotlight on Disability-Owned Business Enterprises®
One underrepresented category often overlooked by diversity and inclusion procurement programs is businesses owned by people with disabilities (PWD). An estimated 20% of Americans and 25% of adults in the U.S. have one or more disability. Self-employment of people with disabilities is 50% higher than those without.
Up until relatively recently, there was a void for businesses owned by people with disabilities who were not necessarily U.S. military veterans. In 2010, a new advocacy organization stepped forward to address that gap with a reliable, gold-standard-level certification program.
The Disability:IN® Supplier Diversity Program is Disability:IN’s flagship program offering corporations and government agencies a reliable, national source for identifying potential suppliers that are certified disability-owned businesses (DOBE®) and service-disabled veteran-owned businesses (SDV-DOBE™). Through national membership in this organization, enterprise partners have access to a growing pool of qualified, certified suppliers nationwide to meet their operational needs and requirements.
Allyable is proud to be among those companies that are DOBE-certified—in the middle of his successful career, our CEO and co-founder, David Adi, was diagnosed with a severe genetic hearing loss. In fact, we are the only major digital accessibility provider with that distinction, which is why our entire culture is built upon the mission of making digital assets equally accessible for all.
We also actively prioritize the recruitment and hiring of employees based on diversity, including candidates with disabilities, women, minorities, and LGBTQI+A. For these reasons, selecting Allyable as your digital accessibility solution can help boost your DEI initiatives, ESG rating, SEO ranking, and bottom line.
What is supplier diversity?
Supplier diversity is an equitable business practice that is being increasingly adopted by organizational procurement programs, to source supplies and services from traditionally underrepresented vendors, such as minority-owned enterprises (MBEs), woman-owned enterprises (WBEs), LGBT-owned business enterprises (LGBTBE®s), disability-owned business enterprises (DOBE®s), veteran-owned businesses (VOSBs/SDVOSBs), and SBA-defined small businesses.
Who is a diverse supplier?
A diverse supplier is a business that has been certified by a reliable third-party agency to have at least 51% ownership by one or more individuals who belong to a traditionally underrepresented community (minority, woman, LGBTQI+A, disabled, veteran, SBA small business).
Does supplier diversity benefit businesses?
Absolutely! An inclusive procurement strategy involves bringing new, diversity-owned suppliers into the supply chain. Widening the potential vendor pool promotes competition, which drives up quality, drives down costs, stimulates innovation, strengthens resiliency, and enhances agility. This in turn supports companies to meet and exceed their diversity and ESG goals while making a positive social and economic impact and burnishing their brand image. Supplier diversity can also provide a significant boost to a corporation’s bottom line through revenue growth and higher returns on investment (ROI) for socially responsible investors.
How to develop a supplier diversity program?
A supplier diversity program requires that an enterprise re-evaluate its current vendor roster and prioritize seeking out and contracting with new suppliers that represent traditionally underutilized communities. It’s important to start with your company’s culture and core values, then create an actionable strategic plan, define goals, establish clear KPIs, determine measurements, and regularly evaluate progress, adjusting as necessary. There are a wide range of diversity advocacy organizations that provide resources to search, connect, and match with qualified diverse suppliers in every industry and any aspect of business.
Supplier diversity is now at the forefront of DEI, ESG, and other corporate inclusiveness initiatives. Whether your company is launching a new supplier diversity program or expanding its procurement pool, Allyable can help meet your diverse supplier needs. We not only offer the premier digital accessibility solution to make websites and all digital assets fully accessible for people with disabilities, but we are also proud to be a disability-owned business enterprise.
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