Why Every Great Company Needs a Supplier Diversity Program

Whether it be software, transportation or janitorial supplies, every company needs products and services to keep its business thriving. The suppliers that companies select for procurement can help draw diversity, equity and inclusion (DEI) into the corporate fold. Just ask Marsha Thornton, who heads supplier diversity at The Hartford.

 

"Companies equipped with a range of voices and perspectives are better able to innovate, take more risks, solve problems creatively and, ultimately, achieve better business outcomes," says Thornton, who brings diverse suppliers into the insurer's supply chain. "Sometimes people think of DEI as being related to the workforce. That's extremely important, but in addition, you have this supplier diversity aspect."

 

Companies dedicated to supplier diversity intentionally eliminate barriers which diverse suppliers have "historically encountered" when contracting, explains Justin Nelson, co-founder and president of the National LGBT Chamber of Commerce (NGLCC). As the business voice of the LGBTQ+ community, the NGLCC describes itself as the exclusive certifying body for LGBTQ+-owned businesses.

 

Nelson says companies that source from diverse vendors help remove barriers to what he calls inclusive contracting.

 

"Through the practice of supplier diversity, which is a hallmark of diversity, equity, and inclusion standards as they relate to supply chains, companies that source directly from diverse-owned vendors are able to interact with and uplift new and innovative perspectives," Nelson says. "Prior to the creation of NGLCC, LGBTQ+-owned businesses were not frequently counted, acknowledged, or included in corporate supplier diversity programs."

 

A diverse supplier is defined as a business that is more than 51% owned or controlled by an individual or group traditionally underrepresented or marginalized.¹

 

These groups include minority-owned enterprises (MBEs), women-owned business enterprises (WBEs), and small-business enterprises (SBEs) as well as those identifying as LGBTQ+, veterans and people with disabilities as defined, in part, by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.²

 

"Diversity in supply chain is critical to bringing economic equity to communities of color," says Pauline Gebon, vice president of member success at the National Minority Supplier Development Council (NMSDC).

 

“Our mission is to be the growth engine for ethnic minority suppliers, and we do that by certifying minority businesses, developing them as needed, connecting them to corporations and opportunities and advocating for them," she says. "It is critical to closing the racial wealth gap because when minority businesses grow, more jobs are created among diverse populations, more taxes are paid in diverse communities, and communities are developed as a result. For many corporations whose products and services are sold to minorities, there are more flexible dollars to buy those products and services."

 

“The reality is, in 2023, I wish it wasn't needed,” says The Hartford’s Thornton. “I wish it was just a part of every company's DNA. But we know that there is still a lot of work to be done in this space."

 

Like The Hartford, a growing number of companies are prioritizing supplier diversity, including software developers, big box stores and e-commerce businesses.

 

"We've created a sustainable DEI culture by taking a whole-company approach and embedded it in all levels of the organization," Thornton says of The Hartford. "Supplier diversity is a strategic business imperative."

 

Nelson agrees: “Companies that truly embrace the principles of DEI must do so both internally and externally through practices like supplier diversity. Companies that do not practice supplier diversity run the risk of alienating both their employees and their supplier base. These organizations miss out on the valuable perspectives, white-glove service, and top-tier products that historically underutilized suppliers bring to the table."

 

According to a 2022 Supply Chain DEI Survey from Gartner and Association for Supply Chain Management (ASCM), only 40% of businesses surveyed are working on specific supply chain DEI initiatives.³ However, Gartner's strategic supply chain predictions showed that by 2024, 70% of global organizations will be tracking metrics on how much their supply chain adheres to corporate diversity, equity and inclusion objectives.

 

Although commitment to supplier diversity and DEI initiatives is growing, it’s still a small percentage of the current market. The NMSDC, citing a 2023 supplier diversity report by Supplier.io, noted that an analysis of 466 companies showed they spent on average 3.6% with certified diverse suppliers and 7.5% with small and diverse suppliers.⁴

 

“Supplier diversity is a business imperative; it’s good for individual companies and better for the U.S. Supplier diversity is an integral part of the overall diversity, equity and inclusion initiatives because of the overall impact it has on the market, workforce and economy," says Gebon.

 

“Supporting and mentoring diverse firms including woman-owned businesses, veterans, Native Americans and many others, keeps the American dream alive," says Roy Anderson, who lectures on supply chain and information management at the Northeastern University D'Amore-McKim School of Business and has served as chief procurement officer at several companies. “Corporate supplier-based spend makes up 30-70% of every revenue dollar and provides an exponential positive impact within the diverse supplier, their diverse employees and the community in which those employees live.”

 

In addition to DEI, diverse suppliers bring other positives to the table, including the potential for cost savings and increased competition.⁵

 

The Hartford’s Thornton believes competition, the cornerstone of business, should be what drives the development of supplier diversity programs – not the fact that it’s the “right thing to do.”

 

“The right thing is subjective,” she explains. “We have to make sure that the supplier diversity program is based on a competitive differentiator in the market. If not, it's not going to be successful.”

 

Metrics are key for Gebon as well at NMSDC.

 

"This work is far from over. We are not there yet and need to be laser focused to get there,” she says. “We need to be intentional in our efforts to be inclusive on all fronts, in our hiring, engagement and purchasing efforts. “We have certainly seen an increase in programs, however, what we have not seen is the reporting of the results against stated goals that can demonstrate the results of the intentions."

 

Supplier diversity doesn’t just reflect a corporation’s value system. It also reflects its workforce: Millennials and Gen Z are the most diverse generations in history, and they are the most vocal in working for – and buying from – companies that support their values. According to the 2023 Future of Benefits study by The Hartford, a focus on DEI is among the top 10 actions employers are focused on to make employees happy at work, aside from salary.

 

A company’s stated values or programs can have "significant ramifications" on how employees and prospective employees view a company's mission and culture, says Anderson.

 

“Companies that truly embrace the principles of DEI must do so both internally and externally through practices like supplier diversity,” Nelson says. "When DEI standards are practiced in a business setting, companies find that their employees are happier, contribute their best work and are more comfortable addressing issues they may encounter in their environment.”

 

Thornton agrees, adding she wants employees to be as empowered as possible, especially if they have decision-making power themselves.

 

“For those who have the opportunity to decide where we outsource products or services, they can ensure diverse suppliers are invited to compete," she says. “I'm looking for opportunities to put diverse suppliers in the game, let them compete, and when they do, many of them will find opportunities to service The Hartford so we can improve ourselves as an organization, better service our customers, our employees and the community.”