In 1972, supplier diversity was a new concept in the United States. With its inception, there were questions about what it meant for organizations looking to implement it and how to measure progress and success. Today, 50-plus years later, we have seen some successes – but in other parts of the globe, supplier diversity is still a novel concept and some of those key questions still apply.
What is Supplier Diversity?
I would like to begin by defining Supplier Diversity (SD). Supplier Diversity, a strategic business practice, aims to increase the participation of those diverse suppliers traditionally underrepresented in procurement processes. By actively seeking out and engaging with diverse suppliers, organizations (inclusive of public, private, and government organizations) work to foster economic growth, drive innovation, and promote social equity. SD programs typically focus on creating opportunities for racialized and/or minority-owned, women-owned, veteran-owned, and LGBTQ+-owned businesses, among others. The design of SD programs begins with the establishment of goals and targets, followed by the design and implementation of inclusive procurement policies and processes. As organizations progress and mature their SD program, they provide targeted support and resources to build the capacity of the diverse suppliers in their specific supply chains.
“By increasing the number of diverse suppliers in the supply chain, organizations can help stimulate job creation, wealth distribution, and community development.”
The Benefits of Supplier Diversity
There are several benefits that come from implementing an SD program. The top three benefits are as follows:
- Economic empowerment for underrepresented groups: By increasing the number of diverse suppliers in the supply chain, organizations can help stimulate job creation, wealth distribution, and community development.
- Innovation and competitiveness: Diverse suppliers bring unique perspectives, ideas, and solutions to the table, enhancing creativity and problem-solving within organizations.
- A culture of inclusion and social responsibility: Implementation of supplier diversity demonstrates a commitment to fairness and equality.
How Has the Canadian Government Supported Diverse Suppliers?
The Canadian government has made some strides in the supplier diversity realm. In consultation with several focused advocacy groups such as the Canadian Aboriginal and Minority Supplier Council, the government has implemented select supportive initiatives that are moving toward a broad-based Supplier Diversity Program.
These initiatives have included such programs as:
- The creation of a 5% target in procurement for Indigenous Businesses. This initiative also includes access to concierge support to assist businesses in navigating the government process
- Introduction of the Women Entrepreneurship Strategy aimed to increase women-owned businesses’ access to the financing, talent, network, and expertise needed to start up, scale up and access new markets
- The rollout of a Black Business Procurement Pilot to expand opportunities for Black Entrepreneurs, which led to the Black Ecosystem Fund and the emergence of FACE to provide loans to Black businesses.
- Investment in the 2SLGBTQI+ Entrepreneurship Program, inclusive of a business scale-up program, an ecosystem, and a knowledge hub.
The introduction of the programs is certainly commendable and a great start. However, the true effectiveness of any government supplier diversity program varies depending on several factors, including the level of commitment, resources allocated, and overall implementation of the program.
The Challenges Faced by Diverse Suppliers
Some government programs have achieved limited success in increasing the number of diverse suppliers listed in their database and improving the participation of diverse suppliers in government contracts, leading to economic empowerment and job creation for underrepresented groups. However, considerable challenges remain. These challenges include limited awareness and access to opportunities and knowledge to maneuver the government system, a lack of capacity-building initiatives, a lack of access to adequate financing on a timely basis, and the need for ongoing support and mentorship for these diverse and/or underrepresented suppliers.
“There is a need for continuous evaluation, tracking of outcomes, and adjustments to policies and strategies for the long-term success of supplier diversity programs.”
Successes do not come easy but require significant strategy, resources, and effort. Upon reflection, governments who have had great success with the implementation of their SD programs have undertaken to prioritize supplier diversity through key steps such as:
- Putting in place stringent supplier diversity policies
- Incorporating diverse suppliers in the government supply chain
- Providing dedicated resources, training, and networking opportunities for these diverse suppliers
These steps have all led to the building and maintenance of more effective SD programs. As these programs have matured, there is a need for continuous evaluation, tracking of outcomes, and adjustments to policies and strategies for the long-term success of supplier diversity programs. One critical success factor not to be overlooked is the required collaboration between government agencies, diverse business associations, and corporate partners. This collaboration, if done well, enhances the impact of these initiatives, fostering an inclusive business environment that drives economic growth.
Supplier Diversity in Australia and New Zealand
In looking at the global impact of SD, both the Australian and New Zealand governments have made significant strides in promoting supplier diversity and creating opportunities for Indigenous groups in their respective countries.
In Australia, the Indigenous Procurement Policy, introduced in 2015 to increase government procurement from Indigenous-owned businesses, has been successful in driving economic empowerment and employment outcomes for Indigenous communities. By 2020, over AU$ 3.3 billion worth of contracts were awarded to Indigenous businesses, exceeding the initial target. This program has not only contributed to the growth and sustainability of Indigenous businesses but has also fostered stronger relationships between Indigenous communities and the government.
Similarly, in New Zealand, the government has taken proactive measures to promote supplier diversity through its Māori Procurement Policy. This policy aims to increase Māori economic development by providing targeted support and opportunities for Māori-owned businesses. The New Zealand government has set ambitious goals for increasing procurement from Māori businesses and has implemented initiatives such as the Māori Business Facilitation Service to enhance the capability and capacity of these businesses. These efforts have resulted in significant growth and success for Māori owned enterprises, contributing to a more inclusive and prosperous economy.
“The success of Australia and New Zealand’s supplier diversity programs can be attributed to three key factors: strong government commitment, clear targets, and dedicated resources.”
Both Australia and New Zealand have recognized the importance of supplier diversity in creating social and economic benefits for those underrepresented communities. The success of Australia and New Zealand’s supplier diversity programs can be attributed to three key factors: strong government commitment, clear targets, and dedicated resources. Using focused procurement policies, government funding, and actively engaging with diverse suppliers to provide tailored support, these countries have been able to foster economic empowerment, entrepreneurship, and cultural preservation.
Not content to rest on its successes, and in different places on the continuum, both governments continue to evaluate and refine these programs to ensure their continued effectiveness and the realization of long-term positive outcomes for diverse businesses and communities.
What Canada Must Do to Accelerate Supplier Diversity
As indicated, the Canadian government has taken some key steps to support diverse businesses across Canada. There has been a focus on broadening its inclusion of diverse suppliers in its supply base. However, the results to date indicate that we have seen minimal progress, indicating that the steps taken by the Federal government are not enough.
“Except for the 5% target for Indigenous suppliers, there are no other stated supplier diversity goals or targets.”
If we review those best practices as employed in Australia and New Zealand in the design and implementation of robust supplier diversity programs, the Canadian government should consider several key actions:
1. Establish clear goals and targets for supplier diversity
Canada must have clear goals within its procurement mandate. Except for the 5% target for Indigenous suppliers, there are no other stated supplier diversity goals or targets. These targets should be clearly outlined to identify the desired representation of various underrepresented groups, such as Indigenous-owned businesses, minority-owned businesses, women-owned businesses, and other diverse suppliers. These targets should be ambitious yet realistic, aiming to increase the procurement opportunities for diverse suppliers across government agencies and departments.
2. Have detailed resources on hand
These clear targets must be supported by detailed strategies and resources that assist the staff in delivering on the goals. Part of the strategies would include investment in comprehensive outreach and education campaigns to raise awareness among diverse suppliers about the available opportunities and the benefits of participating in government procurement. This includes actively engaging and working with diverse business advocacy organizations, industry associations, and community groups to foster relationships, provide guidance, and facilitate networking opportunities.
A point to mention is that Procurement Assistance Canada (PAC) has rolled out their program to assist diverse suppliers in understanding how to maneuver throughout the government system. This initiative has garnered some success with diverse suppliers if the focus is on increasing the number of diverse suppliers both enrolled in and winning contracts in the system. Without the ability to validate and track the diverse suppliers in the system, it is difficult to truly measure the outcomes and the overall impact of the work undertaken by PAC in attracting diverse business owners to the Federal government supply chain.
3. Implement Third-Party Certifications
These certifications will help ensure that the government can truly identify and track its work with underrepresented business owners. Certification provides validation that companies are 51% owned and managed by a diverse person or persons from an underrepresented community, which mitigates the government’s risk of awarding a contract to a fraudulent business that from the onset looks diverse, but is not. Given the government is not in the business of certification, working with organizations that undertake the certification processes would allow the government not to replicate a process that is currently being done by reputable certification bodies. Working closely with certifying bodies removes the element of risk and duplication of service that takes time and resources to truly conduct successfully.
“The government should promote supplier diversity through targeted procurement policies, such as setting aside a portion of contracts specifically for diverse suppliers or implementing evaluation criteria that prioritizes supplier diversity.”
4. Have targeted procurement policies for diverse suppliers
Additionally, while not specifically mentioned under setting clear goals and targets, the government should promote supplier diversity through targeted procurement policies, such as setting aside a portion of contracts specifically for diverse suppliers or implementing evaluation criteria that prioritizes supplier diversity. This sends a strong signal to the market and encourages suppliers to proactively engage in diversifying their businesses.
5. Create mentorship and capacity-building programs
Establishing mentorship and capacity-building programs to support diverse suppliers in enhancing their business capabilities, accessing financing, and developing strong relationships with prime contractors ensures that diverse suppliers not only get in the door but continue to thrive as they are better prepared for procurement with both government and corporations. Overall, these initiatives can help bridge the knowledge and resource gaps that often exist for diverse suppliers, enabling them to compete effectively in government procurement.
6. Make use of monitoring and reporting mechanisms
Ongoing monitoring and reporting mechanisms should be put in place to track progress, measure the effectiveness of supplier diversity programs, and identify areas for improvement. Regular internal and external evaluations and feedback loops will ensure transparency, accountability, and the continuous refinement of policies and practices. Through its work with the certifying bodies, the government can truly help move supplier diversity as a viable program for all levels of government and organizations across Canada.
By taking these actions, the Canadian government can lay the foundation for a comprehensive and impactful supplier diversity program that drives economic growth, fosters inclusion, and creates long-term opportunities for diverse suppliers across the country.
The Importance of Third-Party Certification for Supplier Diversity
Before closing, I want to come back to the power and impact of third-party certification. For Australian and New Zealand entities, building supplier diversity into the procurement policy coupled with third-party certification were the principal drivers for their success.
“The independent verification by a reputable third-party certifying organization adds credibility and builds trust, reducing skepticism or doubt about a supplier’s diversity claims.”
Third-party certification is essential for the success of supplier diversity for several reasons:
1. Validates Supplier Diversity Status: Third-party certification confirms that a supplier meets the specific criteria of being diverse-owned, such as being minority-owned, women-owned, veteran-owned, LGBTQ+-owned, or disabled-owned. This verification ensures that the supplier genuinely belongs to an underrepresented group and is eligible for participation in supplier diversity programs.
2. Boosts Credibility and Trust: Corporate members and government agencies can have confidence in the authenticity of certified diverse suppliers. The independent verification by a reputable third-party certifying organization adds credibility and builds trust, reducing skepticism or doubt about a supplier’s diversity claims.
3. Facilitates Compliance: Many supplier diversity initiatives, both in the public and private sectors, require working with certified diverse suppliers to fulfill diversity and inclusion goals. Third-party certification streamlines the process of compliance, making it easier for organizations to meet their supplier diversity goals.
4. Enhances Procurement Opportunities: Being certified as a diverse supplier opens doors to a broader range of procurement opportunities beyond the government. Many corporations – national, international, and global – actively seek to engage with diverse suppliers, and having third-party certification is often a prerequisite for entry into their supplier diversity programs.
5. Supports Supplier Development: Many third-party certifying organizations offer training, mentorship, and resources to help diverse suppliers enhance their business capabilities. These programs foster supplier development, improving the competitiveness and sustainability of diverse businesses.
Supplier diversity, while not new in Canada, is still in the early stages of its success. Whether it be government or corporate entities, if an organization is looking to reap the benefits of a diverse supply base, one must be intentional in designing and implementing a supplier diversity program. Policy, clear goals and targets, third-party certification, and dedicated resources are key to the program’s success. Each element by itself will bring some measure of success but when implemented together, they will help establish a solid foundation for creating an inclusive business ecosystem that drives positive social and economic impact.