In 2021, the Biden administration announced new federal supplier diversity requirements. The mandated diversity spend is part of its efforts, it says, “to remove [economic] barriers faced by underserved individuals and communities.” It aims to increase annual spending on SDB from a 9.8% average over the last five years to 15% by fiscal year 2025.
The federal government isn’t the only organization paying more attention to diversity in its supplier base. More businesses concerned with corporate social responsibility (CSR) are instituting or strengthening a supplier diversity program.
Indeed, 45% of respondents in the 2022 State of Supplier Diversity Report from Supplier.io indicated their companies have formal supplier diversity programs. Another 12% reported implementing a new program. Another 19% said they have no formal program but track their diversity spend.
Do you have questions about supplier diversity programs? We at CenterPoint Group have answers.
A supplier diversity program:
In these programs, procurement managers use objective metrics to ensure supplier diversity compliance.
Diverse suppliers are often, though not always, small businesses—the SDBs targeted by the new federal supplier diversity requirements. SDBs are at least 51% owned and operated by both economically and socially disadvantaged people (that is, “subjected to racial or ethnic prejudice or cultural bias within American society”).
Your company’s diversity spend benefits the suppliers you bring into your vendor pool. When you do business with them, you create economic opportunity and encourage their continued viability and growth.
Many major corporations—UPS, Coca-Cola, and Target, for example—view supplier diversity programs as “the right thing to do,” according to Harvard Business Review (HBR).
And as majority-white, majority-male-owned corporations become more aware of systemic racism and sexism and their accompanying persistent economic inequalities, including more businesses with minority and female owners comes into focus as a morally urgent matter.
HBR also points out a supplier diversity program can bring specific commercial benefits to businesses that implement them. These benefits can include:
Modern supply chains comprise several tiers, or levels, of suppliers.
Tier 1 suppliers are the most direct gauge of supplier diversity. But supplier diversity programs can also take Tier 2 suppliers into account. Dealing with vendors whose own vendor pools are diverse amplifies your own company’s diversity spend.
CenterPoint is a group purchasing organization (GPO) that negotiates and manages contracts with enterprise-level best-in-class terms for products and pricing. Diversity Products, a CenterPoint Group company and Certified Minority Business Enterprise (MBE), can help you get started. We are a Tier 1 diverse supplier, certified by the National Minority Supplier Development Council.
As a leading, regionally recognized minority-owned enterprise, Diversity Products is well-positioned to help your business achieve supplier diversity compliance in your MRO supply chains. Contact us online or call us at (866) 229-6205 to get started.