Photo Credit: “Go Blue,” suprekar, Creative Commons License 2.0

Meeting in a Box: Supplier Diversity

In this Meeting in a Box, we give you information for all of your employees on what supplier diversity is, best practices on how to start a supplier diversity program and what metrics are best to access success. It’s important that everyone in your company understands the value of supplier diversity and how it builds company growth and loyalty.

We include

  • A supplier diversity primer
  • Tips on how to start a supplier diversity program
  • Metrics to assess supplier diversity success
  • Tips on how to maintain supplier diversity success
  • A historic timeline
  • Facts & figures
  • And a best practices sheet, with tips from DiversityInc’s Head of Strategic Partnerships, Lissiah Hundley

Click HERE to download a PDF version of the Supplier Diversity Meeting in a Box, our diversity-management professional development and educational tool available only to Benchmarking customers and DiversityInc Best Practices subscribers.

1. Supplier Diversity Primer

Former President Richard Nixon began supplier diversity in 1969 through an executive order. Its goal, a branch of the civil rights movement, was to encourage the use of vendors that underrepresented populations owned. Initially, those groups were known as minority-owned business enterprises (MBEs), which consisted of companies owned by Black, Latinx, Asian and indigenous people. Women-owned business enterprises (WBEs), which consisted of companies owned by women, were included later.

Today, supplier diversity also includes businesses that are owned by LGBTQ people, people with disabilities and veterans. The U.S. Small Business Administration includes small businesses as diverse suppliers.

The biggest issues involving supplier diversity have included certification and making the business case for supplier diversity. To confirm that MBEs were actually at least 51% owned by Black, Latinx, Asian or indigenous people, both government agencies and private organizations, like the National Minority Supplier Development Council (NMSDC), formed in 1972, took an active role. The Women’s Business Enterprise National Council (WBENC) came to fruition in 1997. In recent years, the LGBT Chamber of Commerce (NGLCC) and the U.S. Business Leadership Network (USBLN) have certified vendors owned by LGBTQ people and people with disabilities, respectively.

Early industries that were supplier diversity leaders were those with significant government contracts, such as telecoms or auto companies. But increasingly, companies have seen the business benefits of supplier diversity — whether government mandated or not. Companies cite the main benefits as increased innovation and different solutions (also commonly cited as a benefit of more diversity in the workforce), as well as building a reputation in diverse communities. For many companies, their suppliers are also their customers, and building community wealth enhances customer relationships.

We assess supplier diversity in two ways: Tier I suppliers are direct contractors, whose services are purchased by the company. Tier II suppliers are subcontractors. Companies that are supplier diversity leaders usually require their contractors to have diversity in their own vendor relationships.

Discussion questions for employees

  • How is a need to mandate supplier diversity related to the civil rights struggle? In what ways is it just as crucial today as it was in 1969? In what ways have minority-owned companies been marginalized?
  • What types of companies are usually diverse suppliers? Are you seeing a change at your own company in the types of vendors you hire from underrepresented groups, such as attorneys or those offering professional services? Why is diversity in these areas important, and where can you improve?
  • How do you think supplier diversity benefits your company? What is its reputation in underrepresented communities? Does your company publicize supplier diversity efforts? How can you get the word out?

2. How to Start a Supplier Diversity Program

Based on data and successful best practices, we’ve compiled a list for your company to follow. Here are some of the best practices your employees should know:

  • Your company should operate supplier diversity out of the procurement department, with one person responsible for it. The diversity department should be in frequent communication with this person.
  • Supplier diversity should exist within the context of your company’s business goals, supply chain and competitive-market climate.
  • It’s important to measure your success against other organizations and industry norms.
  • It’s critical to assess Tier II (subcontractor) supplier diversity as well as Tier I, and to train your prime suppliers to find and mentor diverse suppliers.

Discussion questions for employees

  • Does your company have a supplier diversity program? If so, how well are its goals and successes communicated to employees?What do you know about supplier diversity at your company? How can you get the word out about its importance?
  • How does supplier diversity help your company reach its business goals? Use this teachable moment to honestly discuss different styles, including confrontation/criticism, self promotion/branding and decision-making. What works best?
  • Is your company helping diverse suppliers grow? Does your company offer educational opportunities and mentoring for suppliers, many of whom are small-business owners? This can include financial and technical education. Does your company make a significant effort to help its prime contractors find and nurture diverse suppliers, and does it stack Tier II supplier diversity?

3. Metrics to Assess Supplier Diversity Success

The metric most often indicative of supplier diversity success is the percentage of procurement budget allocated to Tier I and Tier II diverse suppliers. Some organizations also measure their success by how much they spend with these suppliers, but it’s important to understand that larger companies have more money to spend, so not all companies have huge procurement budgets.

Companies also look for accountability: Is supplier diversity success tied to the compensation of procurement and other executives?

Other metrics include the number of diverse suppliers, third-party recognitions and savings as a result of contracting with diverse suppliers.

DiversityInc’s 2019 Top Companies for Supplier Diversity include

1. CVS Health

2. Accenture

3. AT&T

4. Comcast NBC Universal

5. Cox Communications

6. EY

7. PwC

8. ADP

9. Eli Lilly and Company

10. Marriott International, Inc.

11. Hilton

12. Kaiser Permanente

Discussion questions for employees

  • If your company has a supplier diversity program, why is it important to assess success? Is your organization metrics-driven? If so, why is showing supplier diversity progress important? How relevant are supplier diversity metrics to other business goals, such as increasing market share?
  • How can your organization increase the number of diverse suppliers it has? How can you help your company recognize the value of supplier diversity and get the word out to potential suppliers?

4. Maintaining Supplier Diversity Success

Once you’ve established your supplier diversity program, it must be maintained. Support from the top can be key, not only in building your company’s program, but also in ensuring the program runs smoothly.

Additionally, an approach that looks at supplier diversity’s impact in the community will benefit your company, as well.

“We look at supplier diversity holistically,” David Casey, Vice President and Chief Diversity Officer at CVS Health (no. 27 on DiversityInc’s 2019 Top Companies for Diversity) said. “It primarily is about being able to get the support, the goods and services we need to do business, but it’s also about if we can strengthen the communities, it’s going to strengthen our talent base and our customer base.”

Additional tips on achieving and maintaining supplier diversity success come from Keith Hines of PwC (No. 7 on DiversityInc’s 2019 specialty list, “Top Companies for Supplier Diversity”).

• Make a company-wide commitment to supplier diversity: “Procurement departments should work to ensure the program has visibility across the entire organization,” Hines said.

• The procurement team must drive knowledgeable “transparency, communication and strategy.”

• Train and educate your teams: “Do not assume everyone in your company understands how to drive supplier diversity,” Hines said.

• Work with people and companies you already know: “People do business with firms and individuals they like to work with,” Hines said. “Encourage your staff to invite diverse suppliers into the conversation around your supply chain.”

• Don’t look at supplier diversity as an extra task: “It should be viewed as an opportunity to include new ideas and points of view,” Hines said.

Discussion questions for employees

  • If your company has a supplier diversity program, why is it important to assess success? Is your organization metrics-driven? If so, why is showing supplier diversity progress important? How relevant are supplier diversity metrics to other business goals, such as increasing market share?
  • How can your organization increase the number of diverse suppliers it has? How can you help your company recognize the value of supplier diversity and get the word out to potential suppliers?
  • How does supplier diversity benefit entire communities, and, in turn, your organization?

5. Timeline

After discussing the background on supplier diversity and how to achieve success, understanding the history of supplier diversity in the U.S. can help put it all into context. This timeline highlights strides made in supporting diverse employers and establishing networks of diverse businesses.

Discussion questions for employees

  • How do you see progress made in society toward diversity and inclusion reflected in the creation of these various groups and policies that benefit diverse suppliers?
  • Where does our company fit into this timeline in establishing supplier diversity
  • How can we progress more?
  • Where do you think the future of supplier diversity is headed? How can our company take part?

Download a copy of the timeline HERE.

6. Facts and Figures

These statistics and facts will help you to understand the prevalence of supplier diversity in various industries. They outline supplier spending data, insights from DiversityInc’s 2019 data and other research insights.

Discussion questions for employees

  • Where does our company fit into these figures? What are our goals moving forward with supplier diversity?
  • In what ways does working with diverse suppliers make a company more successful, both financially and otherwise?
  • What are some of the most pressing challenges diverse suppliers face?
  • How can we help organizations overcome them?

Download a copy of the facts & figures HERE.

7. Best Practices Tip Sheet

These tips on best practices for supplier diversity will help you achieve success with a network of diverse suppliers and compile much of the information in this packet.

Discussion questions for employees

  • What opportunities do we have to incorporate more diverse suppliers? How can we expand them?
  • What organizations that cater to diverse businesses can we leverage and work with?
  • How can we make supplier diversity a norm for our company?

Download a copy of the tip sheet HERE.

Latest Best Practices

Michelle Jordan headshot

CDO Interview: Michelle Jordan, AT&T

For Chief Diversity Officers, the last few years have been a tumultuous time. Some have sought new roles as former employers failed to deliver on promises and others chased new challenges where they felt they…

Career Advice: Sloane Drake

In this week’s installment of our Career Advice video series, Sloane Drake, Chief HR Officer at Southern Company shares tips  with DiversityInc Senior Business Writer Linda Bell on balancing dual roles.