A guide to the mission, importance and history of a proactive business program that supports and encourages an inclusive supply chain.

What is Supplier Diversity?

Supplier diversity is a procurement practice used by large corporations, federal government entities and municipalities to incorporate businesses owned by groups historically left out of the supply chain. These groups include minorities, women, veterans, service-disabled veterans, LGBTQ individuals and people with disabilities. According to the Annual Business Survey from the United States Census Bureau, there are more than 2.1 million minority- and women-owned businesses that employ more than one worker. While this is a large sector of the economy, it does not always have equal access to the opportunities in the marketplace.

Companies with supplier diversity initiatives encourage buyers throughout the organization to include diverse suppliers in bidding opportunities because they bring innovation, agility and other advantages that benefit corporate bottom lines. These suppliers also improve their communities by providing jobs and training and driving investment.

Diverse businesses must be at least 51% owned by women, minorities, veterans or the disabled. While it is possible to win business from large corporations without being certified as a diverse supplier, certification provides many benefits.

Who are Diverse Suppliers?

Broadly speaking, a diverse supplier is a business that is at least 51% owned and operated by a one or more historically underserved individuals such as a person who is a minority/minorities, LGBTQ+, has a disability, veteran, or woman. To read more about what qualifies someone as a minority supplier, please click here.

Why Supplier Diversity is Important?

Supplier diversity is key to the advancement of true equality and inclusion. By maintaining diverse supply chains, corporations not only improve their own profitability but support the growth of the overall exonomy. In fact, US minority-owned businesses alone generate more than $400 billion in economic output and contribute $49 billion in revenue to local, state, and federal tax authorities yearly. This accounts for the creation and/or preservation of 2.2 million jobs a year*.

Why Certification as a Diverse Supplier is Important?

Certification, which is a process completed by certifying organizations, opens doors to opportunities by providing corporate buyers assurance that a business has been confirmed as owned by a member of a diverse group. Once certified, a business owner can take advantage of many programs and benefits ― including mentoring, networking, strategic pathways, access to capital and training ― often provided by the corporations themselves.

Corporations, however, do not offer a route to certification. There are several organizations that verify a business’s diverse status.

Where Can I Start the Certification Process?

Several organizations were created out of a need to level the playing field for businesses too often left out of the procurement process. They provide certification to qualifying businesses that provide required documentation and fees, which differ with each group.

How did supplier diversity become a business initiative?

The origins of supplier diversity go back to the 1950s and 1960s when the civil rights movement called for an end to the struggle for justice and equality for African Americans. Those protests ultimately paved the way for many groups to participate in the marketplace.

1950s

• With the Small Business Act of 1953, Congress established the Small Business Administration to "aid, counsel, assist and protect, the interests of small business concerns” and ensure that small businesses received a fair portion of government contracts.
• The Small Business Investment Act of 1958 provided programs for investment, such as small business investment companies and certified development companies.

• Neither of the Acts established in the 1950s required that small businesses be owned by a member of a minority group. That directive was authorized by the Civil Rights Act of 1964, which called for an end of discrimination that gave greater opportunities to majority-owned companies.
• Another boost to antidiscrimination initiatives came in 1969 when the Office of Minority Business Enterprise was established. Two years later, the scope of the OMBE was expanded to provide grants so that business groups could provide technical and operational guidance to diverse suppliers.

1970s

• The OMBE expansion gave rise to the founding of the National Minority Purchasing Council, now known as the National Minority Supplier Development Council, in 1972. The group has a vast network that supports and facilitates minority-owned businesses into corporate- and public-sector supply chains.
• The Small Business Act of 1978 redefined minority firms as socially and economically disadvantaged small businesses and required federal agencies to establish contracting goals for major federal contracts. The act also established the Office of Small and Disadvantaged Business Utilization to heighten awareness among small and diverse businesses of federal contracting opportunities available within the federal government.
• In 1979, the United States Hispanic Chamber of Commerce to promote the economic growth of Hispanic-owned businesses.

1980s




• The U.S. Pacific Asian American Chamber of Commerce was created to represent the interests of the diverse pan Asian business and professional community.
• In 1987, the National Defense Authorization Act called for a 5% contracting goal for SDBs.

1990s

• The Federal Acquisition Streamlining Act of 1994 created a 5% contracting goal for women—owned small businesses.
• In 1997, two important events impacted supplier diversity: The launch of theWomen’s Business Enterprise National Council was launched in 1997 to foster the success and advancement of certified women-owned firms and
• The HUBZone Empowerment Act was passed in 1997 with a goal of awarding at least 3% of federal contract dollars to small businesses located in Historically Underutilized Business Zones.
• The Veterans Entrepreneurship and Small Business Development Act of 1999 established spending goals for Veteran-owned Small Businesses and Service-Disabled Veteran-Owned Small Businesses.

The 2000s & Beyond

• The National Veteran Owned Business Association was founded in 2001 to create corporate contracting opportunities for America’s Veteran’s and Service-Disabled Veterans business enterprises.
• The National LGBT Chamber of Commerce was founded in 2002 to ensure the implementation of pro-business LGBTQ-inclusive policies at corporations of public entities.
• In 2010, the Small Business Jobs Act expanded access to capital for small businesses, increased exporting initiatives and strengthened contracting opportunities.
• Supplier diversity continues to gain momentum in the U.S. and around the world as more companies realize the benefits of an inclusive supply chain. Challenges likely lay ahead for corporations and entrepreneurs, but the path to a stronger economy and marketplace is paved with the benefits of engaging diverse suppliers.

Sources

* https://www.nmsdc.org/Facts-and-Figures.pdf