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DiverseCity Counts 6: Supplier Diversity in the GTA - Business Case and Best Practices (2012)

Posted on:
October 24, 2020

This research examines whether, why and how organizations have embraced diversity in their purchasing and supply chain strategies, policies and practices.

The research focused on organizations that buy goods and services from other organizations that are at least 50% owned and operated by visible minorities. It conducted an electronic survey of more than 165 organizations and a web scan of more than 138 in the Greater Toronto Area that together account for over $100 billion of dollars spent in the region, or approximately 33% of the region’s economic activity.

The research found that while most organizations have employee diversity policies, significantly fewer have supplier diversity programs.

Organizations that do have a supplier diversity program credit much of their success to top management commitment and efforts to work closely with current or future suppliers. Some organizations report difficulty finding qualified minority suppliers or determining which organizations are led by visible minorities. Of those organizations with a supplier diversity program, 29% do not track how much they spend on goods and services provided by visible minority owned companies.

Canadian companies lag behind U.S.

Large GTA organizations with operations in the United States are three to seven times more likely to have a supplier diversity program than those with no American link, depending on whether
they have an American parent or have subsidiary operations in the U.S. (see table below). What’s more, when the largest GTA companies are compared to large Chicago headquartered firms,
Chicago companies are three times more likely to have a supplier diversity program – 77.4% versus 23.3%. This difference can be partly explained by U.S. federal and state policies which
encourage companies to make supplier diversity a priority.

However, even without government encouragement, a growing number of businesses recognize the importance of supplier diversity. Including diversity in the supply chain can help organizations access new markets, enhance their reputation, attract and retain the best talent, and improve their bottom line.

Moving up the supplier diversity ladder

The report describes five stages of supplier diversity and encourages organizations to move from having no program to what the author calls full supplier diversity.

  1. Full Supplier Diversity Program – Mentors visible minority owned businesses, conducts community outreach, and tracks dollars spent with diverse businesses.
  2. Partial Supplier Diversity Program – Points in RFP for visible minority owned businesses, and ownership is verified by third party.
  3. Initial Supplier Diversity Program – A formal policy is created and staff training begins.
  4. Equal Opportunity – Explicit rejection of discrimination in procurement.
  5. No Supplier Diversity Program.

What Is Supplier Diversity?

The supply chain includes every organization that is involved in bringing a good or service to the consumer. In this chain, companies purchase raw materials, products and professional services from other, often smaller organizations. Supplier diversity means that small and medium-sized organizations owned or operated by visible minorities have equal access to these opportunities, allowing them to grow their business and providing benefits to our economy.

Benefits of Supplier Diversity

  • Results in better value for money by having more competition for bids
  • Helps companies reach new markets or provide new products
  • Increases investor confidence and access to capital
  • Improves the organization’s reputation with customers and employees resulting in increased sales and staff retention
  • Helps small and medium-sized businesses grow, creating opportunities for the region
  • Builds the capacity and profile of visible minority leaders thereby increasing leadership diversity overall

 

Summary

This research examines whether, why and how organizations have embraced diversity in their purchasing and supply chain strategies, policies and practices.
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