Consumers are increasingly more discerning about the products they purchase. From clothing to skin care, shoppers are asking deeper questions about the products they buy and the businesses they support: Are workers treated fairly and provided safe conditions? Does the company commit to diversity, equity, and inclusion? Do the company’s values align with mine?A notable 41% of shoppers have shifted at least 10% of their business away from retailers that do not align with their inclusion and diversity values.
You can strengthen brand loyalty by aligning with consumers’ growing demand for inclusive and ethical practices—all while driving innovation, resilience, and positive social impact for your business.
What is supplier diversity?
Supplier diversity is a proactive business strategy in which you source goods and services from companies that are at least 51% owned by traditionally underrepresented groups—such as women, minorities, LGBTQ+ individuals, or people with disabilities.
Benefits of supplier diversity
- Increased innovation and creativity
- Expanded market reach and customer loyalty
- Improved supply chain resilience and competitiveness
- Talent acquisition and retention
- Positive social and economic impact
Supplier diversity offers benefits that go beyond meeting consumer expectations. By partnering with businesses owned by minorities, women, and other underrepresented groups, companies often see the following benefits:
Increased innovation and creativity
Partnering with minority-owned business enterprises catalyzes innovation. By leveraging the fresh perspectives of diverse business owners, you gain access to creative ideas and novel problem-solving approaches. According to the latest data from the National Center for Science and Engineering Statistics and Census Bureau, 11.8% of minority-owned companies were product innovators, compared to 8.7% of non minority-owned companies.
For instance, a food manufacturer partnering with a minority-owned supplier specializing in regional spice blends may be able to create a product line that showcases the unique flavors of the supplier’s community more easily than a manufacturer who doesn’t have access to those spices or the know-how to create the blends.
Expanded market reach and customer loyalty
Aligning your supply chain with businesses with diverse ownership can help you better understand and cater to different customer segments and build a more diverse customer base. These suppliers offer invaluable insights into the preferences and nuances of their communities, allowing you to optimize your products, services, and marketing strategies.
Improved supply chain resilience and competitiveness
A diverse supplier base is a key component of a robust and resilient supply chain. By diversifying your sourcing, you build a stronger supply chain strategy that lowers the risks of disruptions from events like economic downturns and natural disasters.
Working with diverse business enterprises also fosters healthy competition, incentivizing suppliers to improve cost-effectiveness, quality, and service delivery. This ensures your business can access the best solutions to maintain a competitive edge.
Talent acquisition and retention
Embracing supplier diversity can give you an advantage in the battle for top talent. Demonstrating a genuine commitment to diversity, equity, and inclusion (DEI) principles throughout your business operations—including in your supply chain—can boost your reputation as an inclusive and socially responsible employer.
This might resonate with candidates who prioritize companies aligned with their values. It can make existing employees from diverse backgrounds feel valued and represented, fostering a sense of belonging and increasing employee retention.
Positive social and economic impact
Supplier diversity initiatives promote economic empowerment and opportunities for historically underrepresented businesses. Actively seeking out and providing business opportunities to minority-owned enterprises fosters job creation, wealth generation, and the overall development of diverse communities.
This may align with your company’s corporate social responsibility goals and can demonstrate your business’s commitment to creating positive and lasting change.
What is a supplier diversity program?
Supplier diversity programs are business initiatives that organizations undertake to seek out and award contracts to diverse suppliers. These programs often rely on third-party certification organizations to verify ownership status.
By implementing supplier diversity programs, companies can tap into a wider pool of suppliers and promote economic inclusion in their supply chains.
Tips for fostering supplier diversity
- Secure executive buy-in and support
- Set clear and measurable goals
- Establish a dedicated supplier diversity team
- Engage with diverse supplier certification organizations
- Develop a comprehensive diverse supplier database
- Promote your program to attract diverse suppliers
To capitalize on the benefits of supplier diversity, approach it as an ongoing commitment rather than a one-time initiative. Here are tips for building a successful supplier diversity program:
Secure executive buy-in and support
A successful supplier diversity program needs executive buy-in and support right from the beginning. When pitching the importance of supplier diversity to your C-suite, investors, and other stakeholders, focus on the tangible benefits such as increased innovation, access to new markets, and improved brand reputation that come with a diverse supplier base.
Emphasize how supplier diversity aligns with your company’s overall mission statement, core values, and commitment to DEI.
Set clear and measurable goals
When establishing your supplier diversity program, set specific, measurable goals for partnering with diverse suppliers. Consider targets like:
- Increase spending with certified diverse suppliers by 20% within the next 12 months
- Expand the number of diverse suppliers in our database by 50% by the end of the fiscal year
- Have at least 30% of our Tier 1 suppliers be diverse businesses within the next 24 months
- Initiate supplier outreach with at least 15 women-owned business enterprises during Q3
Establish a dedicated supplier diversity team
Assemble a dedicated team to drive your supplier diversity initiatives, ensuring it reflects the diversity you seek in your suppliers. Include individuals from various departments, such as procurement, finance, and marketing.
Give your team the necessary resources, like a budget, training, and access to supplier databases. Responsibilities should include building relationships with diverse suppliers, attending supplier diversity events, and education on best practices.
Engage with diverse supplier certification organizations
Partnering with diverse supplier certification organizations can help you identify and connect with verified diverse-owned businesses. These organizations provide valuable resources, support, and networking opportunities to help grow and maintain your supplier diversity program.
Here are some organizations to explore:
- National Minority Supplier Development Council (NMSDC)
- Women’s Business Enterprise National Council (WBENC)
- National LGBT Chamber of Commerce (NGLCC)
- Disability:IN
- National Veteran BusinessDevelopment Council (NVBDC)
- US Pan Asian American Chamber of Commerce (USPAACC)
- Canadian Aboriginal and Minority Supplier Council (CAMSC)
- Minority Supplier Development UK (MSDUK)
- WEConnect International
- National Veteran-OwnedBusiness Association (NaVOBA)
Develop a comprehensive diverse supplier database
To streamline the procurement process and engage with qualified businesses, create a list of the diverse suppliers you may want to work with and share it with others. Create your own database with key capabilities, certifications, and contact information.
Spirited Away, founded by Douglas Watters, is one of New York City’s innovative booze-free bottle shops. Douglas’s fascination with non-alcoholic beverages inspired him to create Dry Atlas, which functions as a supplier database showcasing diverse alcohol-alternative businesses.
“By creating a directory on Dry Atlas, we hope to normalize and demystify this space for consumers worldwide. The site is a directory of about 1,100 non-alcoholic liquids. It’s most of the world’s non-alcoholic spirits, wines, beers, cocktails, and a lot of content, articles, and interviews that we hope will educate consumers,” Douglas says on an episode of the Shopify Masters podcast.
“We just left Hong Kong and tried some really amazing sparkling teas that are created for social occasions. It was really interesting to see how the tea culture in those places had crept into cocktail culture as well.”
Promote your program to attract diverse suppliers
To attract diverse suppliers, actively promote your supplier diversity program through targeted outreach. Showcase success stories and case studies detailing how your company benefited from working with diverse suppliers, highlighting their unique capabilities, innovations, and contributions to your success.
Focus on highlighting the potential of diverse businesses rather than simply promoting your own initiatives. Use social media platforms, industry publications, and diversity-focused media outlets to share these stories and demonstrate your commitment to supplier diversity. Encourage diverse suppliers to register on your company’s supplier portal, and actively use this database to identify potential partners for upcoming procurement opportunities.
Supplier diversity FAQ
Why is supplier diversification important?
Supplier diversification fosters innovation, boosts supply chain resilience, and supports economic inclusion by providing opportunities to diverse businesses.
How do you tell if a company has diverse suppliers?
Determine if a company has diverse suppliers by looking on its website for information about supplier diversity initiatives, searching for case studies or press releases highlighting partnerships with diverse businesses, or directly inquiring with the company’s procurement or diversity and inclusion departments.
How do you start a supplier diversity program?
To start a supplier diversity program, secure executive support, set clear goals, establish a dedicated team, and develop processes for identifying, engaging, and supporting diverse suppliers.
