The Undeniable Benefits of a Supplier Diversity Program
Diversity in the workforce and supplier base has numerous benefits, but unlocking those benefits can be challenging.
Employee diversity has proven benefits. As Forbes reports, “companies with a diverse workforce are 35% more likely to experience greater financial returns” and “companies with greater diversity are 70% more likely to capture more markets”. The Harvard Business Review sums it up perfectly, writing that “diversity unlocks innovation and drives market growth”.
There is less research on supplier diversity; however, initial findings by market research firm Hootology show that supplier diversity is just as important as diversity in the workplace. Hootology’s Supplier Diversity Impact Indicator (SDII) found that supplier diversity has a significant—and positive—impact on brand perception and a consumer’s willingness to purchase from a brand.
The ROI of supplier diversity programs
Consumer preference isn’t the only advantage that a commitment to supplier diversity has to offer. Supplier diversity efforts can strengthen the supply chain and provide significant economic opportunities to trade partners, including lower costs and higher product quality. A diverse supplier base can help shape your business strategy when it comes to navigating downturns and shortages while shortening time-to-market.
The Billion Dollar Roundtable (BDR) was founded in 2001 to “recognize and celebrate corporations that achieved spending of at least $1 billion with minority and woman-owned suppliers”. JPMorgan Chase, Apple, Google, Microsoft, Walmart, Boeing, CVS Health, General Motors, Johnson & Johnson, Verizon, and Meta are some of the BDR’s current members.
A recent Global Impact Report released by the BDR underscores the impact of a supplier diversity program, concluding that “for every dollar spent with diverse suppliers, $2.1 dollars in total economic impact are generated (i.e., direct, indirect, and induced).”
The report also highlights how engagement with underrepresented suppliers and their communities “creates value for shareholders, expands markets for products and services, and drives new innovative processes to support business operations”.
Defining and finding diverse suppliers
A diversely owned supplier is a business that’s owned and operated at least 51% by people who belong to marginalized groups: women, BIPOC, veterans, LGBTQ+ individuals, and persons with disabilities, or other minorities.
While your organization may not (yet) have the BDR’s target of spending at least $1 billion with minority and woman-owned suppliers, you can set other targets to achieve greater supplier diversity. For example, a target could be ‘X amount of total spend to be with diverse suppliers’, or ‘X percentage of all suppliers should be diverse’, or ‘achieve an X percent increase in women-owned suppliers’.
Once you’ve determined your targets, create a policy or mission statement defining your goals to share internally—and specifically, with your purchasing and procurement teams so that they understand what criteria to look for in a company profile when sourcing new suppliers.
How to ensure the success of your supplier diversity program
Diversifying your supply chain relies on the support of key stakeholders, including anyone responsible for corporate purchasing within your organization.
Be proactive in tracking data on your suppliers. Ask them if they self-identify as diverse or if they are a certified diverse-owned business—most will opt to be certified by agencies such as the National Minority Supplier Development Council and the Women’s Business Enterprise National Council.
Diverse suppliers are typically smaller in scale, so they may not be as familiar with the RFP/RFQ process. Offer support and resources to help them understand how you do business—and how they can do business with you.
Increasing awareness of your supplier diversity program
As we've seen, consumers support companies who support diversity and have a thriving company culture. By highlighting your supplier diversity initiatives—and your diverse suppliers—you create more opportunities for your own organization and any marginalized trade partners. Ways you can highlight your supplier diversity program include dedicated space on your website, case studies with your diverse suppliers, press releases, and advertisements.
Hootology, the market research firm behind the Supplier Diversity Impact Indicator (SDII) and the Corporate Diversity Index, found that an increase of just 1% in awareness of a brand’s supplier diversity program means “an additional 800,000 U.S. consumers using the brand’s products/services”.
Additionally, Hootology reports that “consumers who perceive a brand as committed to diversity are 3 times more likely to consider the brand's products/services [and] 3.5 times more likely to purchase the brand's products/services compared to those who do not.” Understanding consumer insights can help improve your business opportunities.