The Business Benefits of Implementing a Supplier Diversity Program in Your School or University

Have you considered implementing a supplier diversity program in your organization? What type of impact are your current suppliers making in the community? Are you embracing supplier diversity?

These important questions were asked by Titus Martin and Mike Mast of E&I Cooperative Services at PaymentWorks’ recent live event.

What is Supplier Diversity?

Before we get into the value of implementing a supplier diversity program, let’s define a key term.

Supplier diversity, also known as vendor diversity, is the practice of promoting and utilizing a diverse range of suppliers in the procurement process.

Diverse suppliers, or vendors, are defined as businesses that are owned at least 51% by a disadvantaged or minority group.

In other words, “supplier diversity is about driving value into communities of color,” said Titus. “That includes minority-owned, women-owned, veteran-owned, disabled, etc.”

This means that businesses owned by minorities, women, veterans, and disabled individuals are given an equal opportunity to participate in the procurement process.

When organizations embrace supplier diversity, all parties flourish–including your bottom line, as Titus explains.

Companies That Have Successful Supplier Diversity Programs

The importance of implementing a supplier diversity program has deep roots in American history.

Dating back to the Civil Rights movement, supplier diversity has been an important topic in business, with many companies implementing programs to promote and support the use of diverse suppliers.

Below are two famous examples.

UPS

UPS has been an advocate of supplier diversity for some time, launching their own program in 1992. Today, their annual supplier diversity spend is about $2.6 billion and they partner with about 6,000 diverse vendors

IBM

IBM is known as an early leader in supporting and acting upon supplier diversity, launching their program in the Civil Rights Era of the 1960s. By 2020, the company’s global supplier diversity spend was $2.6 billion. IBM also committed to dedicating 15% of its first-tier spend on black-owned vendors by 2025.

Supplier Diversity in Higher Education

The practice of supplier diversity is not limited to the private sector. Higher education institutions, as Titus and Mike discussed, also have a social and ethical responsibility to implement a supplier diversity program in their vendor management strategy.

By supporting diverse suppliers, higher education institutions can ensure that they support businesses that may otherwise face discrimination in the procurement process.

The Responsibility of Investing in Minority Suppliers

Think about supplier diversity this way. If you’re a higher education institution, you want to promote your school as the organization of choice.

But promoting your school as the organization of choice comes with an important responsibility to the community in which your school resides–especially because your institution is powered by precious community resources.

Namely, you have an obligation to bring economic impact, such as job creation, to that community. What happens when you invest in your community? The local economy flourishes.

For example, certified minority-owned businesses make an immediate, direct impact by hiring at their firms from within the community.

As a result, more workplaces and supply chains become more inclusive and therefore more innovative, thanks to the diversity of thought available.

When the local economy flourishes thanks to more diverse and innovative businesses, your school becomes more attractive to students and faculty seeking professional and social opportunities to go–and stay–there.

The Financial Incentive of Investing in Minority Suppliers

By diversifying your suppliers, you can also benefit from the financial incentive of investing in suppliers from minority markets.

Minority markets are driving business expansion in many areas. According to recent data from the U.S. Census, the largest consumer markets in the country have the highest representation of ethnic minorities.

Additionally, combined buying power of Black, Hispanic, and Native Americans have expanded from $671 billion in 1990 to $4.9 trillion in 2020.

Companies are Waking Up to the Financial Benefits of Implementing a Supplier Diversity Program

Bar graph entitled What Are The Primary Drivers for Supplier Diversity Programs?

Source: Supplier IO 2022 State of Supplier Diversity Report

The reasons for companies investing in diverse vendors are shifting. In 2017, almost 50% of companies implemented supplier diversity programs to comply with government regulations.

In 2022, only about 30% of companies cited government compliance as their primary driver, while 81% of companies were driven by a desire for better workplace culture and more inclusiveness as their main reason for supporting minority vendors.

Many businesses are also recognizing the bottom-line results that diversifying their supply chain can deliver, such as improved competitiveness, achieving Corporate Social Responsibility (CSR) initiatives, and improving brand image.

How to Begin Diversifying Your Suppliers

Implementing a supplier diversity program may seem complex, but it can be done. Below are a few things you can do to begin this work at your institution.

Gather your team and review your suppliers. Do they represent the community in which your organization resides? If not, research diverse suppliers in your area and start having conversations with them.
Establish a supplier diversity policy. Work with your team to develop a clear policy that outlines your goals and objectives for implementing a supplier diversity program. Your policy should include a statement of your commitment to working with diverse vendors and a description of the vendors you’d like to onboard.
Identify performance metrics. Key metrics to measure the success of your supplier diversity program include: supplier diversity spend, number of diverse suppliers, supplier performance, supplier retention, and community impact, such as job creation.
Communicate your policy to internal staff, leadership, and key stakeholders. Share your policy far and wide in your organization–in internal messaging, during meetings, and with your community. Doing this will help you stay accountable to your goals. Additionally, if you’re looking for more support for the vendor desk from your leadership, demonstrating how you’re contributing to the organization’s DEI and ESG initiatives is a great way to get the attention of executives.
Consider using VERVE. This is E&I’s e-Procurement service that makes it easy for you to use more diverse suppliers.

Want More Tips on Implementing a Supplier Diversity Program?

Supplier diversity is a non-negotiable. We want you to have everything you need to start investing in minority vendors. Below are a couple of additional resources.

Vendor Onboarding in 2023: Who are You Doing Business With?

How E&I Can Help You

Want More UVA? Their Vendor Management Tips