Supplier diversity refers to a company policy of sourcing a certain percentage of goods and services from businesses owned by people who have been socially and economically disadvantaged. This includes businesses owned by women, minorities, veterans, disabled people, and the LGBT community. Many large companies, as well as federal, state, and local governments, have supplier diversity programs.
Find out how getting certified as a minority-owned business can open doors for Hispanic enterprises to work with these clients.
Supplier diversity is now considered good business
The concept of supplier diversity was born during the American civil rights movement.
In 1969, President Richard Nixon created what is now known as the Minority Business Development Agency to provide opportunities to ethnic minority entrepreneurs, including Asians, Blacks, Hispanics, and Native Americans. In 1971, in another executive order, he declared that the government would set aside funds for organizations to assist minority-owned businesses.
Now, many Fortune 500 companies, as well as federal, state, and local government agencies, actively aim to spend a certain percentage with businesses owned by members of disadvantaged groups. These supplier diversity programs aim to give minority-owned businesses "the ability to provide goods, services, business solutions on a level playing field," says Adrienne Trimble, President and CEO of the National Minority Supplier Development Council, which certifies businesses as minority-owned and facilitates connections with the private sector. "It really is about economic inclusion for all."
It's also good business, she says. Working with suppliers from diverse communities allow companies access to untapped markets. And by funneling wealth in those communities, supplier diversity creates new customers. "So there's a strong business case that supports supplier diversity and economic inclusion," Trimble explains. "For us, it's about driving an economic engine within our communities."
Supplier diversity "has evolved so much in the last decade, that it's coming to the point where it's a two-way street," agrees Carmen Castillo, chair of the United States Hispanic Chamber of Commerce and President and CEO of SDI International, a procurement services company, which handles $3.5 billion worldwide. Businesses with supplier diversity programs, "want to do business with you too, they want you to buy their products and buy their services," she says. "And it's like, I'll do business with you if you do business with me."
Supplier diversity programs open doors to big contracts
For example, the NMSDC has more than 430 corporate members, all with supplier diversity targets. "So if you're looking to grow your products or your services, and you're looking to have additional customers, we have that captive audience," Trimble says. The NMSDC maintains a database of suppliers and organizes networking events for suppliers and clients on a regional and national level.
"We know that people do businesses with firms that they know, like, and trust," she says. Networking events allow small businesses to get to know their clients' needs, "so that when they have the opportunity to present their goods and services... they're ready."
Castillo's company is a certified minority and woman-owned business. She estimates that 80-85% of her business comes from networking, mostly with clients looking to increase supplier diversity. She finds her clients at supplier diversity trade shows and conferences, and she recommends calling companies' supplier diversity coordinators in advance to book appointments during these events.
"I would not be this successful if it weren't for the supplier diversity program," she says. "It opens tons of doors for you."
Becoming certified for supplier diversity programs
One way of getting certified is through the NMSDC, which has 23 regional offices throughout the country. Businesses are eligible if they are at least 51% minority-owned, operated and controlled, and must go through a series of screenings, interviews, and site visits. The certification process takes 60-90 days, and fees vary based on your business's revenue size, location, and other factors.
Businesses that want to work with the federal government can apply for certification through the 8(a) Business Development Program. Many state and local governments have supplier diversity targets as well. For example, Maryland's Department of Transportation and California's Public Utilities Department have their own certification process. Similar programs exist for city governments, such as the Los Angeles Department of Public Works or New York City.
Castillo got certified a few months after launching her business in 1993. She says it's never too early to think about applying. "It was the best thing I ever did," she says.
If you're a Hispanic business owner, however, chances are that you haven't gotten certified. The Stanford Latino Entrepreneurship Initiative's 2018 State of Latino Entrepreneurship report, a survey of Hispanic-owned businesses throughout the United States and Puerto Rico, found that only 12% of all Hispanic-owned businesses were certified as minority-owned.
"If you want to grow your business [and] if you want to have more opportunities, and you meet the criteria, you are missing the boat by not getting certified," Castillo says.