Diverse supplier programs are essential because federal regulations require increased attention to the issue of diversity in U.S. organizations. But we believe one of the best reasons to incorporate diverse supplier programs into your organizations is because it’s simply the right thing to do. Perhaps surprising, some of the benefits of supplier diversity programs included increased innovation as well as supply chain resilience. But what is a diverse supplier, exactly? What are the best practices for supplier diversity programs? Here’s what you need to know about diverse supplier programs and how they can help your business.
What is Supplier Diversity?
Over the past two years, the media spotlight shone brightly on the systemic racism that many say still permeates some of this country’s major institutions. For many companies, it reinforced a growing awareness that we still have a long way to go to create diversity, equity, and inclusion (DEI). Many companies joined the handful of socially conscious organizations that long sought to improve the world through their DEI work. Diverse supplier programs have traditionally been one way these companies sought to increase awareness and representation at the corporate table. But what is a supplier diversity program? As you might imagine, the idea of what is a diverse supplier differs by company. The general definition of a supplier diversity program is one that actively seeks out vendors that include diverse groups in their staffing makeup. One best practice for a supplier diversity program is to find businesses for your supply chain that hire or are owned by a traditionally underserved or underrepresented group. These programs could include suppliers who are or have:
- A women-owned business
- Offer a service-disabled veteran program
- LGBTQ focused
- An older workforce
- Disabled workers
- And more
From the perspective of the federal government, a diverse business must be at least 51% owned by the disabled, minorities, women, or veterans. Organizations who are certified in this area, are excellent targets for your supply chain. We should note that far from limiting your resource pool of suppliers, focusing on vendor relationships for your diverse supplier program actually increases the odds of finding a qualified business partner. For example, the National Association of Women Business Owners says more than 11 million U.S. companies are owned by women.
But why so much emphasis all of the sudden on diverse supplier programs? What are the reasons to incorporate diverse supplier programs?
Why is Supplier Diversity Important for Your Business?
The reasons to develop a supplier diversity program vary, from the bottom line to social responsibility. Today, more than 60% of companies say they have a supplier diversity program in place. There are four key reasons why they say supplier diversity is so important to their businesses:
- For better economic opportunity
- To promote innovative thinking and approaches
- To show your ethical commitment to doing the right thing
- To attract and retain top talent
Create Economic Opportunities With Supplier Diversity
Adopting a diversity supplier program creates economic opportunities for you and for disadvantaged communities. Not only does supporting DEI suppliers help the communities where they reside, you also reach new customers. Studies show supplier diversity programs help companies penetrate new markets and reach new customers. The reality is that the population is changing. By 2050, the U.S. will increase to 374 million people, and 90% of that growth is in minority populations. For your organization to be a success, you must stay at the forefront of this market growth. Creating a supplier diversity program is one way to achieve this goal. One executive put it this way, “If you don’t have a multicultural strategy today with your brand in 2020, chances are, you’re not going to be around in 2030.”
Supplier Diversity Programs Promote Innovation
Innovation is what sets companies apart and creates a competitive advantage. One of the benefits of supplier diversity programs is that they allow companies to infuse new perspectives and ideas into an existing structure. The Wall Street Journal studied this issue and found that the most innovative companies practiced demonstrable diversity and inclusion strategies. Another study showed:
- Companies with less-than-average diversity on their management teams were considered 26% less innovative than their more diverse competitors.
- Businesses with higher diverse representation on their management teams scored 45% more innovative than their less diverse competitors.
- Companies that are more diverse make more money; EBIT margins for these companies was 9% higher.
The study concluded, “Relatively small changes in the makeup of management can have a significant impact.”
Shows an Ethical Commitment
Forbes says, “Unlike any other time in history, consumers are truly demanding more from the companies with which they do business. Today’s shoppers are looking for ethical, eco-friendly brands that put people and the planet ahead of profits.” With millennials at the forefront of consumer spending these days, companies should pay close attention to the statistics that show 81% of this population want companies to be good corporate citizens. Think this number doesn’t matter to your business? U.S. millennials by themselves will spend $1.4 trillion this year on goods and services. A diverse supply chain means you will appeal to a more diverse customer base, widening your reach and potentially broadening your profits.
The economic impact of millennials alone should be reason enough for even the most profit-driven company to incorporate diverse supplier programs. Establishing requirements for diversity in your supply chain shows your company’s ethical commitment to doing the right thing. You can’t discount the impact of public perception of your brand. Consumers want to support the companies that support the causes they believe in. Having a diverse supply chain shows your customers you care. But it also helps you attract talent to your organization.
Attract and Retain Top Talent
Diversity remains a top hiring priority for most companies in 2022. However, one study found that there is a gap between what employers perceive as diversity in hiring and what employees say they experience. The study showed 69% of employers say they have an effective DEI program, but only 49% of employees agree. Accenture implies that these numbers can move closer together if employers adopt diverse supplier programs. They state, “A Supplier Diversity Program is a key element of a broader corporate responsibility program that helps a company attract talent.” Harvard Business Review reports that 52% of job applicants prefer working for a company with a supplier diversity program in place.
How to Access Diverse IT Staffing Suppliers
One of the best practices for supplier diversity programs is to engage with staffing agencies known for their DEI commitment and results. The American Staffing Association (ASA) has a strong DEI commitment for its member organizations to follow. They state, “As employers of millions of workers across the nation, staffing agencies uniquely embrace America’s diversity. Our workforce includes every race, gender, age, religion, ethnicity, and identity. We celebrate diversity because it helps make our companies, our employees, and the clients we serve stronger and more successful.”
While you might think that finding diverse suppliers in the IT staffing space is hard, there are several indicators that the organization you’re considering has a strong commitment. You can search the Staffing Industry Analysts 2022 Diversity-Owned Staffing Firms List. What you’re looking for are MBE-certified businesses. As a best practice for your diversity supplier program, consider organizations that only go through the National Minority Supplier Development Council (NMSDC) to receive the Minority Business Enterprise (MBE) certification. This certification remains the gold standard for organizations who call themselves committed to DEI.
MBE is awarded to business owners who come from underrepresented groups, such as women, LGBTQ, minorities, or others. Companies can certify through the U.S. Small Business Administration that features several programs to help these vendors achieve “diversity status.” The National Minority Supplier Development Council also has a program for MBE certification. These organizations can help you access diverse IT staffing companies to help you fulfill the requirements of your diversity staffing program.
Partner with Prosum – A Certified Minority Owned Enterprise
Prosum understands the benefits of supplier diversity programs because we live in this world every day. We are a certified MBE business through the Southern California Minority Supplier Development Council (NMSDC). Our team emphasizes and implements diversity best practices in our efforts to find to IT talent for our clients. We meet all of the requirements of most supplier diversity programs, including being minority owned, managed and controlled. In addition, we have several initiatives to engage candidates from diverse populations in the technology field. These hidden pockets of talent are often hard to find for general service staffing organizations without the extensive tech networks of the Prosum team.
With more than 25-years’ experience, Prosum is well-versed in delivering tech talent in El Segundo, Los Angeles and Southern California, as well as the Denver and Phoenix regional markets. If you’re looking for an MBE-certified staffing supplier with a track record of DEI placements, Prosum can help your company succeed.