Supplier diversity refers to the use of minority-owned businesses as suppliers, and a supplier diversity program is a proactive business program which encourages such use within an organisation's supply chain. Minority-owned includes black and minority ethnic business ownership, women owned, veteran owned, LGBT-owned, service disabled veteran owned, historically underutilized business, and Small Business Administration (SBA)-defined small business concerns. The Hackett Group refers to "approximately 16 categories" covering various aspects of supplier diversity. It is not directly correlated with supply chain diversification, although utilizing more vendors may enhance supply chain diversification. Supplier diversity programs recognize that sourcing products and services from previously under-used suppliers helps to sustain and progressively transform a company's supply chain, thus quantitatively reflecting the demographics of the community in which it operates by recording transactions with diverse suppliers.
United States
Paul D. Larson links the establishment of supplier diversity concerns to the American civil rights movement in the 1960s.
Diverse- and women-owned business enterprises are among the fastest-growing segments of the U.S. economy. Diverse-owned businesses generated an estimated $495 billion in annual revenue in 1997 and employed nearly 4 million workers, while women-owned firms employed about 19 million people and generated $2.5 trillion in annual sales.
Alongside the Women-Owned Small Business Program, the US Small Business Administration also operates an Economically Disadvantaged Women Owned Small Business (EDWOSBs) program for preferential award of federal contracts in certain industries. A wider categorization including women, minority, disabled veteran, and/or LGBT business enterprises (WMDVLGBTBE) is referenced in Californian supplier diversity requirements.
The Hackett Group, in their 2019 study of supplier diversity, found that US companies increasingly adopt supplier diversity programmes to achieve objectives associated with reputation management, their own corporate diversity culture and investment in their local communities, rather than reasons connected with legal compliance, and there are a growing number of companies who aim to extend supplier diversity within their tier 1 supply chain but also set expectations for tier 2 supply chain engagement activities to include supplier diversity language.
Public contract bidding
Certain states within the United States, as a part of their bidding process, incentivize Minority Business Enterprises (MBEs) and women-owned business enterprises (WBEs) to bid for publicly awarded construction or service contracts. They may also declare that a percentage of the work performed on a contract be awarded to an MBE or WBE.
In New York State, a goal was set in 2014 for the award of public contracts to women and minority businesses to increase from 20% in 2014 to 30% by 2019. When the target was increased, the Association of General Contractors (AGC) sued the state for failing to release documents via New York's Freedom of Information Law (FOIL). The AGC was concerned that the state had not conducted a proper contract analysis before declaring the increase of the MWBE goal to 30%. The AGC stated that the 30% goal did not reflect the availability of MWBEs statewide. The AGC also questioned a later study - performed by Mason Tillman Associates Ltd. of Oakland, California - which was paid for by the state in consideration of its employment goals for state contracts.
In 2018, the state was also considering establishing goals for the workforce of contractors awarded public contracts, but insisted these goals were not quotas. If contractors could not make a "good faith" effort to reach the goals, contractors might not be eligible for future public contracts for a length determined by the state.
There have been cases where contractors have been charged with crimes for impersonating MBEs. In New York in 2018, Eastern Building & Restoration was charged for fraudulently receiving over $1 million from public construction contracts by representing itself as an MBE during the years 2012 - 2014.
Canada
In Canada, supplier diversity is supported and facilitated by five councils:
- Canadian Aboriginal and Minority Supplier Council
- Canadian Council for Aboriginal Business
- Canadian Gay and Lesbian Chamber of Commerce
- Inclusive Workplace and Supply Council of Canada
- Women Business Enterprises Canada Council
The Supplier Diversity Alliance Canada, formed in 2016, draws together the work of these councils (although the Canadian Council for Aboriginal Business is not directly involved in the alliance).
New Zealand
Supplier diversity initiatives in New Zealand are aimed in particular at engaging with Pasifika businesses.
Europe
A "Handbook on Supplier Diversity" published by the European Commission in 2009 made "a strong case for supplier diversity" in the European Union, acknowledging that "Europe is still at the beginning of its journey towards supplier diversity". The handbook was supported by Supplier Diversity Europe, a business-led initiative which at that time operated in the UK, France and Germany, along with the Migration Policy Group and the Economic and Social Research Council. The slower pace in adopting supplier diversity programmes in Europe, compared to the United States, was also acknowledged at the World Economic Forum in 2020.
See also
- Procurement outsourcing
- Procurement
- Strategic sourcing
- Supplier relationship management
- U.S. Women's Chamber of Commerce
- National LGBT Chamber of Commerce
- Disadvantaged business enterprise
- Black Economic Empowerment - policy in post-apartheid South Africa aiming to strengthen economic participation among non-white people, including through government procurement
References
- Locke, G., Remarks at Gay and Lesbian Chamber of Commerce Annual Business and Leadership Conference, 19 November 2010, archived 26 November 2010, accessed 16 December 2023
- Small Business Administration, Small Business Size Regulations, accessed 31 March 2016
- ^ Hackett Group, Supplier Diversity: Moving Beyond Compliance Drive Meaningful Value, presentation by Fong, A. and Peters, G., published April 2019, accessed 4 March 2021
- ^ Larson, P. et al, The State of Supplier Diversity Programs in Canada: the Buyer's Perspective, published September 2021, accessed 8 June 2022
- "SBA's Office of Advocacy" (PDF).
- "Center for Women's Business Research: Publication Details". Archived from the original on 2008-01-05. Retrieved 2008-02-03.
- Small Business Act, 15 USC 637(m)
- California Public Utilities Commission, Supplier Diversity Program, accessed 26 January 2024
- California Tax Credit Allocation Committee, Housing Supplier Diversity Compliance Guidelines: Completing the Housing Supplier Diversity Annual Report, accessed 26 January 2024
- "New York State Contract System". ny.newnycontracts.com. Retrieved December 7, 2018.
- "MWBE Certification Eligibility Requirements (NYS Empire State Development)". esd.ny.gov. 4 April 2017. Retrieved December 7, 2018.
- "Minority and Women Owned Business Enterprises Program (NYS Dept. of Transportation)". www.dot.ny.gov. Retrieved December 7, 2018.
- ^ Gavin, R., "Colonie contractor faces prison in minority-ownership scam". www.timesunion.com. December 7, 2018. Retrieved December 7, 2018.
- Karlin, Rick (June 1, 2017). "Contractors sue state over FOILS and MWBE goals". www.timesunion.com. Retrieved December 7, 2018.
- ^ DeMasi, Michael (February 5, 2018). "Cuomo wants sweeping changes to New York's MWBE law". www.bizjournals.com. Retrieved December 7, 2018.
- Sharma, A., Increasing supplier diversity in our region, Gisborne Herald, published 7 December 2021, accessed 8 June 2022
- European Commission, Handbook on Supplier Diversity in Europe, European Website on Integration, published 17 December 2009, accessed 16 December 2023
- Mallinckrodt, V., How to move towards more inclusive procurement in Europe, World Economic Forum, published 6 October 2022, accessed 16 December 2023