Diversity FAQs

What Constitutes a Diverse Supplier?

A diverse supplier is a business primarily owned and operated by individuals from underrepresented groups, such as women, minorities, veterans, people with disabilities, and the LGBTQ+ community. Supplier diversity is a strategic approach to integrate these diverse-owned businesses into a company’s supply chain and practices, promoting economic inclusion.

Why Organizations Should Invest in Supplier Diversity Program?

Diverse suppliers are crucial in procurement for several reasons. They foster competition and innovation, drive economic growth, create job opportunities, boost a company’s reputation, and ensure compliance with regulatory requirements. Incorporating diverse-owned businesses into supply chains leads to a more inclusive and sustainable business environment.

What is Supplier Diversity Spend?

Supplier diversity spend refers to the portion of a company’s procurement budget that is allocated to purchasing goods and services from suppliers that are classified as diverse businesses. Diverse suppliers are typically those that are at least 51% owned, operated, and controlled by individuals who belong to traditionally underrepresented.

What are the Advantages to Businesses Seeking Diverse Suppliers?

One of the most significant advantages of a supplier diversity program is increased market share. Businesses allocating over 20% of their spending to diverse suppliers report 10-15% of annual sales from these programs. In contrast, companies with less than 20% dedicated to diversity suppliers attribute less than 5% of their sales to these programs. A higher diversity spend correlates with increased market share. Diverse supply chains also facilitate expansion into markets with diverse demographics, as the U.S. sees a substantial rise in minority consumers. Additionally, diverse supply increases supply options, fosters supplier competition, provides positive PR, and demonstrates community engagement.

Are There Regulatory Guidelines for Supplier Diversity?

Some states within the US encourage or mandate state agencies to incorporate minority-, women-, and/or veteran-owned businesses in their procurement processes. Furthermore, the Small Business Administration (SBA) extends support and resources to small businesses, including those owned by women, minorities, and veterans, to enhance their ability to compete for government contracts. It’s important to note that while government agencies are subject to SBA regulations, the private sector operates under different guidelines.

What Are Typical Requirements for Supplier Diversity Programs?

Supplier diversity programs may necessitate businesses to obtain certification from an appropriate state, regional, local, or national agency. Additionally, these programs often require businesses to provide data regarding the demographics of their suppliers, including details about gender, race, ethnicity, and veteran status.

Is Certification a Requirement for Diverse Suppliers?

Yes, many supplier diversity programs stipulate that diverse suppliers must possess certification from an authorized agency at the time of bid submission.

What are the Benefits of Diverse Suppliers Certification?

Diverse supplier certification offers numerous advantages for small and mid-sized businesses, including access to new business opportunities, exclusive financing options, participation in supplier diversity programs, and valuable support and networking opportunities. As global companies are increasing their diversity spending goals, becoming certified can be a strategic investment, enabling businesses to tap into a growing market and secure lucrative contracts. This certification provides a pathway to growth, financing, and networking opportunities that can significantly benefit certified diverse suppliers.