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What Is a Supplier Diversity Program and Why Is It Important?

Have you heard the term “supplier diversity” but aren’t sure what it really means or how to get started? While the definition and program can vary depending on the companies, we’ll share the basics of supplier diversity and why they’re important.

What is a diverse supplier?

A diverse supplier is a business that is at least 51% owned by a diverse group (minority, woman, veteran, etc.). In the United States, there are 16 categories used to identify diverse businesses. Common classifications are minority-owned business enterprises (MBE) and woman-owned enterprises (WBE).

Organizations such as the Women’s Business Enterprise National Council (WBENC), the National Minority Supplier Diversity Council (NMSDC), the National LGBT Chamber of Commerce (NGLCC), and the U.S. Department of Veterans Affairs Vets First Verification Program offer nationally recognized third-party certification for diverse suppliers.

Why is supplier diversity important?

The obvious reason is that supplier diversity is important to the bottom line. Whether you have a corporate social responsibility mandate or a diversity, equity and inclusion initiative, supplier diversity programs can positively impact both.

Supplier diversity is also good for local and national economies. By investing in supplier diversity, you are encouraging and helping diverse small businesses grow and thrive. According to the 2021 U.S Census Bureau, 19.9% of businesses were minority-owned, 5.6% were veteran-owned, and 21.4% were woman-owned. Not only do these businesses help stimulate the economy, and they employ a diverse and significant workforce. Diverse businesses face many challenges that threaten the longevity of their companies, such as access to networking opportunities, supply chain connections, capital investment and more. Supplier diversity programs help break down some barriers for diverse business owners.

Measuring the impact of your supplier diversity program is becoming increasingly common to understand how it affects the community and economy. For example, Amazon reported that in 2020 they helped support over 23,000 jobs and contributed $2.4 billion (37.6% of total spending) to the economy through supplier diversity programs. The supplier diversity space is growing, according to research done by The Hackett Group “83% of organizations already have or plan to dedicate funds for supplier development activities.”

Diverse businesses continue to be a driving force in the economy. A 2000 U.S. Department of Commerce study has projected that the growing minority population will account for as much as 70% of the total increase in purchasing power from 2000 to 2045. In 2020 minority purchasing power was over $4.9 trillion an increase of over $4 trillion in 20 years, according to the University of Georgia’s Selig Center for Economic Growth. Businesses must be ahead of the curve by partnering with diverse businesses to reach these growing markets.

Creating and implementing a supplier diversity program can seem like a task designed for the Hulk himself, but it doesn’t have to be. Reach out to one of our consultants today to learn how we can help you create an effective supplier diversity program.


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