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4 FAQs on Starting a Supplier Diversity Program in Your Organization

Across the workforce, conversations are shifting toward advancing diversity within every organization. As companies evolve and transform how they manage their processes, priorities such as compliance, technology, and scalability demonstrate new value, especially in focusing on innovation, diversity, and growth.

Operating within diverse markets promotes cutting-edge development through products, services, and solutions. This ultimately eliminates traditional supplier dependency, driving price, and competition. By establishing a supplier diversity program, organizations differentiate themselves by supporting the economic success of the community as well as underrepresented groups.

A supplier diversity program allows your organization to partner with suppliers of different demographic backgrounds, including minority-owned, veteran-owned, or women-owned businesses, among others. By tracking and reporting your spend with these suppliers, your organization can impact more meaningful change in the marketplace and community.

When implementing a supplier diversity program, you may run into questions and uncertainties. In this blog, we review actual FAQs surrounding supplier diversity to provide context and use cases for the unique challenges you may encounter.

Are certificates required to count as a minority-certified company?

When developing a program, supplier diversity leaders must decide how to handle this question. Generally, it’s always better to require or acknowledge only certified-diverse supplier spend.

Additionally, it’s best to use a third party to verify the ownership and certification status of the diverse supply base with whom your corporation is working.

Is there an acceptable protocol for reporting on a company’s supplier diversity to the public?

Because each corporation has different regulatory and compliance requirements, there is no true standard for reporting supplier diversity spend data to the public.

Learn what your industry’s requirements are and work with your company’s investor relations, public relations, and external communications teams to understand the company’s position on reporting public-facing information.

What is a normal ratio of small businesses to other diversity categories within a portfolio?

Because every corporation is different, it’s challenging to set a benchmark ratio of small businesses to other diversity segments. Generally, it’s preferred to have a balanced scorecard and metrics across all diverse supplier segments.

If the corporation is a commercial contractor to the U.S. federal government, then small business targets are set by the contracting officer, and efforts to achieve those spend targets with various small business segments are required. You can apply this model in the commercial sector as well, specifying multiple diverse segments under the small business designation.

Even if your corporation doesn’t have federal contracts, you may find it helpful to set spend targets. Doing so promotes a diverse and inclusive supply chain and provides a metric to track annual growth of the program.

Some companies can be considered small or large, depending on the contract NAICS identifier. How is this handled in the private sector?
NAICS codes can be used in the private sector to align supplier capabilities to the company’s procurement categories. However, this may only provide a general match. The best criteria is the diverse supplier’s capabilities within those procurement categories.

From a designation perspective, using a third-party service to verify that the size of the supplier can be beneficial removes the guesswork from the process of identifying accurate diverse supplier segments.

When creating a supplier diversity program, is the majority of emphasis placed on procurement spend or total company spend?

Focus on procurement spend first. This is where most systems, tools, and processes exist to support the tracking and reporting of diverse spend.

Non-procurement spend resides outside procurement, so there may be a separate spend-tracking mechanism. Start where the data resides and is readily available.

How do you handle second-tier spending from businesses that are not minority-owned companies?

Initially, establish a sustainable process for reporting tier 1 diverse spend. Once that’s in place and you have the resources to effectively manage additional reporting, consider requesting tier 2 spend from businesses that are not minority-owned.

A third-party hosting portal that systematically manages requests, submittals, tracking, and reporting may be beneficial. In the case of third-party staffing vendors, a VMS platform can assist with spend tracking across your supplier pool for temporary workers.

There are also several companies that provide this service. Research to find out which companies will work best for your program while considering size, scope, and available funding. Tier 2 spend is a nice addition to any supplier diversity program, but dollars spent directly on diverse suppliers should always be the priority.

To learn more about launching your own program for supplier diversity within your organization, check out our eBook, Keys to a Successful Supplier Diversity Program.

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