Forward-thinking companies are increasingly recognizing the power of supplier diversity. Major players like Google, IBM, Coca-Cola, Walmart, and Procter & Gamble have launched successful programs that drive social and business impact. In 2020, Google set an ambitious goal to spend $1 billion with minority-owned suppliers; then they surpassed their goal. By 2022, they expanded the goal to $2.5 billion globally. They actually spent $2.8 billion.
As Google’s Chief Procurement Officer, Jennifer Moceri, noted in a blog post, "True progress means historically underrepresented businesses have increased access to equitable opportunities that grow their businesses."
To Google, supplier diversity is a smart business strategy. And they're not alone. A 2024 report from Supplier.io revealed that 60% of companies view their supplier diversity programs as adding value. Many are planning to expand globally in the coming years.
For business leaders, these initiatives show that using diverse suppliers can drive innovation, boost a brand, and support growth. Supplier diversity is about more than just meeting ESG targets. It's about creating lasting partnerships that benefit your company and the community.
This article will explain supplier diversity. It will highlight its benefits for customers and suppliers. It will also explore key trends driving these initiatives. To truly appreciate its importance, let's start by breaking down what supplier diversity is all about.
What is Supplier Diversity?
Supplier diversity is a business strategy that prioritizes working with businesses that are at least 51% owned and operated by historically underrepresented groups. Diverse suppliers include businesses run by ethnic minorities, women, veterans, and those with disabilities or in the LGBTQ+ community. For instance, a diverse supplier could be a tech startup founded by a woman. It could also be a construction company owned by a veteran or a recruiting agency led by a member of the LGBTQ+ community. Supplier diversity programs allow these businesses to compete for medium to large contracts previously unavailable to them.
Minority Business Enterprises (MBE)
An MBE is a specific type of diverse supplier. These companies are owned (51% or more) by individuals from a recognized ethnic minority group, such as African Americans, Hispanic Americans, Native Americans, Asian-Indian Americans, or Asian-Pacific Americans.
Local, state, or federal agencies can certify MBEs. The certification process includes a review of the business's owners, leaders, and operations to ensure it meets the MBE criteria. The certification can enhance credibility and open doors to new business prospects. Approximately 10,000 certified diverse businesses earn $10 million or more annually.
Supplier diversity benefits both your business and the economy. Let’s explore those benefits next.
The Benefits of Supplier Diversity
Working with diverse suppliers benefits companies of all sizes and in many ways. According to the leaders responding to Supplier.io's 2024 State of Supplier Diversity Report, the key drivers of their program are:
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Alignment with corporate culture & workforce inclusiveness (75%)
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Improve supply chain competitiveness (65%)
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Win new business (48%)
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Enhance brand image (48%)
Many of these drivers help both diverse suppliers and their customers including these critical benefits.
Impacting a Company Culture
Embracing supplier diversity can impact your company's internal culture. Prioritizing supplier diversity shows a commitment to inclusivity and equity. It can affect many areas of your business, including hiring, leadership, and innovation.
Employees see your company's supplier diversity actions as a reflection of your values and can make your company more attractive to diverse talent. A culture of inclusion can lead to better employee satisfaction and retention because employees feel seen and valued.
Supporting diverse suppliers also encourages diversity in leadership roles. Engaging with businesses led by underrepresented groups can spark new ideas and leadership approaches within your organization. Leaders who champion diversity outside are more likely to promote inclusion within.
An inclusive culture that embraces a range of perspectives leads to more creative problem-solving and out-of-the-box thinking. Companies that work with diverse suppliers can inspire similar approaches within their teams.
Impacting Overall Competitiveness
Strong supplier diversity programs can help companies stand out in the market. This is important when competing for contracts that focus on diversity. Partnering with diverse suppliers opens your business to new opportunities. It increases your chances of winning contracts that competitors might have gotten in the past.
Diverse suppliers can foster creativity and innovation within your operations. These fresh perspectives can help your teams solve problems in new ways. They might help you develop more innovative products and better serve your customers. This agility is vital to outpacing your top rivals in a fast-changing market.
Beyond innovation, a supplier diversity program can improve your company's resilience to market changes. A broader supplier network helps you manage disruptions and adapt to changing consumer demands.
Supplier diversity is a strategic advantage. It can help you innovate, stay agile, and meet the expectations of both your customers and leaders. Even better, you’ll stand out, even in a crowded marketplace.
Win New Business
Many corporations and government agencies now require suppliers to meet diversity standards in their procurement processes. In some industries, this has become a key factor in contract decisions. Embracing supplier diversity opens your business to new markets and audiences.
Beyond meeting procurement requirements, working with diverse suppliers can also help your company attract new clients and customers who value corporate social responsibility. Large companies like Norfolk Southern and The Home Depot are looking for partners who show a commitment to diversity. You'll appeal to a broader range of collaborators, customers, vendors, partners, and investors who value ethics and social impact in purchasing decisions.
Enhance Brand Image
A diverse supplier program shows you want to invest in underrepresented communities. This can boost your brand's reputation. It can also foster loyalty among customers who appreciate and support companies that take meaningful steps toward social responsibility. Brands promoting diversity can better connect with diverse audiences, especially younger ones.
In addition, aligning with diverse suppliers provides unique marketing opportunities. Share success stories about your partnerships with minority- or women-owned businesses. Highlight their positive impact on local communities. These narratives enrich your brand's story and cultivate a deeper connection with your brand for your customers.
A Strategic Approach to Supplier Diversity
To ensure your supplier diversity initiatives add real value, take a strategic approach. Supplier diversity is a long-term commitment rather than a short-term initiative. Integrate your supplier diversity initiatives into your broader ESG (Environmental, Social, and Governance) strategies. Sustainable procurement practices are essential for building a responsible and ethical business. This long-term focus encourages continuous improvement and helps embed supplier diversity into your organizational culture.
Measuring Success in Supplier Diversity
Setting specific, measurable goals is crucial. They help track progress and assess your supplier diversity efforts. Set clear goals. For example, you may set a goal to increase your marketing spend with diverse suppliers. Or expand your supplier base to include more underrepresented groups.
Then, set KPIs to check your performance against these goals. Adjust, iterate, and improve as needed. Common KPIs include the number of MBEs or another specific type of diverse supplier in your supplier base or the increase in spending with these MBEs. In addition, the Supplier.io's 2024 State of Supplier Diversity Report mentioned that leaders are tracking RFP wins, cost savings, and even economic impact.
Trends in Supplier Diversity
Supplier diversity is becoming increasingly important for mid- to large-sized corporations, especially as they want to grow globally. A more data-driven approach is emerging, emphasizing ESG initiatives. This trend positions supplier diversity as a key factor in navigating future market challenges and disruptions. Companies prioritizing supplier diversity can tap into a broader, diverse customer base, enhancing scalability and resilience for whatever the future holds. With a better grasp of supplier diversity and its benefits, let's examine Phase 3’s commitment to this vital initiative.
Phase 3 is a Certified Minority-Owned Business
Phase 3 is certified as an MBE by the Georgia Minority Supplier Development Council. The National Minority Supplier Development Council also recognizes us as a Corporate Plus® member. This recognition demonstrates our capacity to fulfill national contracts for enterprise corporations. We also have our own Supplier Diversity Program. Supplier diversity makes us stronger and more agile. We proudly help small, like-minded businesses grow with us.
If you want to work with a diverse supplier, we can help. We use a data-driven strategy to activate brands from ideation to execution. Reach out to schedule a discovery call today.