As public dialogue and policy increasingly reflect the importance of diversity, inclusion and representation, more and more businesses are considering how they can make their purchasing and supply chain processes more equitable and transparent.
About 85 percent of U.S. companies have a supplier diversity program. These initiatives are proactive programs that promote the use of diverse businesses as contractors and suppliers.
To qualify as diverse suppliers, businesses (or sole proprietors) need to be 51% or more owned, managed, and controlled by qualifying diverse individuals or traditionally underrepresented groups.
By implementing diversity throughout the entire supply chain, businesses can do their part to address systemic economic injustices and promote fair and equitable sourcing practices and representation across the board.
Here are five important things to know about supplier diversity programs in the United States:
- Supplier diversity isn’t just about race. The term “diversity” is often used synonymously with racial or ethnic diversity. However, a “diverse supplier” may be a person or entity from a number of underrepresented groups and categories. This includes minorities, women, members of the LGBTQIA+ community, veterans, persons with disabilities, and those who meet the small business criteria as defined by the Small Business Administration (SBA).
- Supplier diversity programs are not new. While they have increased in popularity over recent years, supplier diversity programs have been around for more than fifty years. One of the very first supplier diversity programs was set up by General Motors after the Detroit race riots of the 1960s and caused many other auto manufacturers to follow suit.
- Supplier diversity certifications aren’t mandatory, but they’re important. Certification by a third party will enhance a company’s chance of being reviewed as a diverse supplier and allows them to participate in any targeted efforts that may be underway. While not required, a third-party certification ensures that a supplier meets certain requirements, and opens the door for a wide range of hiring opportunities. There are many types of supplier diversity certifications, including federal, state and local certifications.
- Simply having a supplier diversity program isn’t enough. According to a recent survey, fewer than 60 percent of businesses with a supplier diversity program actually report supplier diversity spend, with the average spend being only about 10 percent. While implementing a supplier diversity program is certainly an admirable first step, there must be follow through if companies hope to see the social and commercial benefits of such programs.
- Telecommunications and healthcare industries lead the charge. Telecommunications companies, healthcare organizations, and pharmaceutical companies reported the highest percentage of diverse supplier spend. This may be partly attributable to the fact that these industries rely heavily on government contracts and international suppliers. The automotive industry also reported a strong diversity spend, according to the report.
Datalou is the only supplier diversity management system with over one million suppliers with specific capabilities in advertising, marketing, communications, and media. Our robust tracking and reporting system helps you document spending and sourcing efforts, manage certifications, and share data with stakeholders.