The Importance of Diverse Spend

The world is maturing into an age that values the right to equality. Governments and proactive organizations have introduced programs and policies to foster a culture of acceptance and help uplift communities and minority groups that have been historically marginalized. Workplaces today are diversely populated, and we are overcoming the damage done by our forefathers with sympathy and understanding. Supplier diversity programs extend the scope of this initiative and apply them to the supply chain.  

If you are an organization still considering a policy to support diversity or are already taking steps and want to know how you can do more, here’s everything to get you started. 

What Is Diverse Spend? 

Diverse spend or diverse supplier spend is the portion of a company’s expenses spent with one of eight commonly recognized categories used to designate a diverse supplier. It’s possible for a business to fall into more than one category.

1. Minority-Owned Business
2. Woman-Owned Business
3. LGBT-Owned Business
4. Disabled-Owned Business
5. Veteran-Owned Business
6. Service-Disabled Veteran-Owned Business
7. Historically Underutilized Business Zones (HUBZone)
8. Small Business Enterprise

In order to support diversity, many enterprises have adopted supplier diversity programs that define yearly goals for contractual work with diverse companies.

A Brief History Of Diversity Programs 

Diversity programs are policies companies adopt to improve outcomes for target group members, including women, racial minorities, or any historically marginalized group. Non-discrimination policies originated in the 1950s and 1960s with the civil rights movement that demanded justice and equality for Black Americans. Since then, many groups struggling for inclusion have joined. 

The Small Business Act of 1953 led to the establishment of the Small Business Administration to “aid, counsel, assist, and protect, the interests of small business concerns.” Five years later, the Small Business Act of 1958 provided further aid through investment programs. 

Over half a century later, supplier diversity programs are going strong worldwide as enterprises realize the benefits of engaging diverse suppliers. 

Why We Need More Diversity Programs Today 

After decades of working in diverse environments, we have data-backed studies on their impact. It is changing our world in more than just a cultural sense. There are three major areas of impact of having a diverse supplier: 

• Social Responsibility Companies have a corporate social responsibility to support diversity programs and diverse spend in particular. MWEs face many challenges in finding business partners, which opens up a possible way for enterprises to give back to society. Here, enterprises are in a unique position, as only they can provide employment or award contracts to MWBEs. 
• Benefits To The Economy Working with diverse spend can be more than a part of corporate social responsibility and can have many economic benefits. Small, diverse businesses aid in economic recovery and sustainability. Working with underrepresented businesses improves the economy through job creation, better wages, and tax revenue. MWBEs are proven to have a healthy impact on the economy. They offer corporate partners an 8.5% year-over-year cost savings, which is significantly more than they currently have. 
• Global Impact When multinational companies adopt diversity programs or have an overseas supplier, they encourage the local governments to take an interest in diversity by showing the tremendous scope of business it presents. 

Incentives To Help You Get Started 

US companies have committed more than $50 billion to diverse spend. Companies can find value in working with diverse suppliers by promoting diversity across their ecosystems. Not only does it help support targeted groups, but it also impacts the company’s performance across different areas. Some of the direct benefits of having supplier diversity include: 

• Perception Of Impact Consumers expect companies to take a stance on social and political issues. Backing this stance with Supplier Diversity Programs raises the perception of impact. For example, Coca-Cola spends more than $800 million on diverse suppliers annually. As a result of this and many other initiatives, individuals were found to be 45% more likely to view coca cola as a brand that values diversity. 
• Government Incentives The opportunity to win government contracts is important in adopting supplier diversity programs. Many of these contracts now mandate a certain percentage of diverse spend. This also extends to many state and federal tax incentives for companies contracting diverse suppliers. 
• Vendor Competition Having diverse suppliers broadens the sourcing pool and introduces competition that can improve quality and cut costs. Moreover, having sourcing options helps establish a more resilient supply chain. For example, If supply from one source is stuck due to any possible reason in today’s volatile times, you can shift to alternate sources. 

The Right Thing To Do 

Any company can benefit from allocating a portion of their business to diverse spend. However, it is more than just material benefits that you stand to gain from having a supplier diversity program. It is a proven fact that diversity leads to a more motivated workforce. Having an MWBE as a supplier will not only be a profitable move or place you in a favorable light. It is the right thing to do. 

GoDgtl is a Certified Minority and Woman Owned Business Enterprise (MWBE) that provides digital solutions to clients who want to create modern digital experiences through transforming data, cloud, and digital strategy. Are you looking for a Minority or Women Owned business to partner with? You can join us online at the Grace Hopper Conference on September 20 – 23rd in Orlando, FL, a premier event for women technologists worldwide. We have a lifelong commitment to diversity, and it transcends throughout our company’s culture. 

If you are putting diversity, equity, and inclusion at the forefront, we would like to see you there.