As supplier diversity becomes an important part of business strategy, accurately measuring its economic impact is essential to demonstrating the program’s value.
During the final session of our Supplier Diversity Masterclass Series, Measuring the Economic Impact of Your Supplier Diversity Program, experts Dr. Candi Clouse from IMPLAN and Marj Ramos-Cintron from Supplier.io guided attendees through the robust methodology and calculations behind Economic Impact Analysis (EIA). They shared valuable insights into how organizations can quantify and communicate the economic impact of their spend with small and diverse suppliers.
One striking trend highlighted during the session was the increase in number of organizations reporting economic impact as part of their supplier diversity metrics. In just one year, this figure has grown significantly, from 10% to 37%, according to Supplier.io’s 2024 State of Supplier Diversity Report.
This increase underscores how businesses are moving beyond traditional metrics like spend to demonstrate the tangible contributions of their supplier diversity programs. As Ramos-Cintron noted, “Economic Impact Analysis gives organizations the tools they need to go beyond spend and show how their initiatives create jobs, generate income, and strengthen communities.”
Understanding economic impact analysis
Methodology and data
Economic Impact Analysis (EIA) relies on input-output modeling, a Nobel Prize-winning methodology developed by economist Wassily Leontief. This approach maps the flow of money through an economy, quantifying the relationships between key entities such as industries, suppliers, households, and government institutions. By capturing these interconnections, input-output modeling provides a detailed picture of how spending with suppliers drives broader economic activity.
IMPLAN, a leader in this methodology, leverages over 90 data sources annually to produce detailed regional and national economic data in the US. Key steps in the methodology include:
- Input-Output and Social Accounting Matrix Tables: These account for transactions between industries, labor income payments, household spending, and government expenditures.
- Benchmark Data: Every five years, the Bureau of Economic Analysis (BEA) publishes detailed input-output tables, which IMPLAN uses as a foundation.
- Multipliers: These estimate the “ripple effect,” measuring how each dollar spent creates additional economic activity.
“For every dollar spent directly with a diverse supplier, you may see an additional $1 to $2 in indirect and induced effects, depending on the industry and region,” Dr. Clouse explained.
Supplier.io partners with IMPLAN to provide suppler diversity economic impact analysis and reports.
Economic metrics that matter
The economic impact of supplier diversity programs is measured using standard indicators:
- Jobs Supported: The number of jobs created or sustained by program spending.
- Labor Income: Wages and salaries generated by diverse supplier activity.
- Tax Revenue: Contributions to local, state, and federal taxes.
- Production Value: The total value of goods and services produced.
The ripple effects of supplier diversity spend
Economic Impact Analysis measures how spending influences broader economic activity. It tracks the ripple effects of this spending, starting with direct transactions with suppliers, expanding to the business-to-business interactions within supply chains, and ultimately including the spending of employees supported by those transactions. These are categorized as direct, indirect, and induced impacts.
- Direct Impact: Direct spending, including contracts, purchases, and payments.
- Indirect Impact: The downstream business-to-business transactions that suppliers make within their own supply chains to fulfill contracts.
- Induced Impact: The economic activity generated when employees supported by these transactions spend their earnings in their local communities.
“EIA allows organizations to connect their supplier diversity spending to outcomes that matter—job creation, income growth, and community contributions,” explained Marjorie Ramos-Cintron. This comprehensive approach offers supplier diversity leaders a powerful way to communicate the significance of their programs to internal and external stakeholders.
Data trends shaping supplier diversity economic impact
Accurately measuring the economic impact of supplier diversity is crucial for organizations to fully realize its benefits and adapt to evolving economic conditions. Economic trends, such as changes in GDP growth, household spending patterns, and industry performance, directly influence the ripple effects of supplier diversity spending. Regular analysis ensures organizations can maximize the positive impact of their programs and remain aligned with current economic realities.
For example, in the past year U.S. GDP growth has amplified the effects of supplier diversity initiatives in states experiencing rapid economic expansion, such as Nevada and Florida. Similarly, shifts in household spending patterns—like changes in spending by different income households—impact induced effects, reflecting how supplier diversity investments support communities in real-time.
Industries also play a key role, with sectors like manufacturing generating significantly higher economic multipliers due to their extensive supply chain needs compared to services. “These variations underscore the need for customized analyses that align with an organization’s specific supplier diversity spend and regional focus,” explained Dr. Clouse.
Supplier.io simplifies the process to report economic impact
Supplier.io’s turnkey solution makes Economic Impact Analysis accessible for any organization. Whether you’re just starting to explore impact metrics or looking to refine your reporting, the process involves gathering supplier data, enriching it with small and diverse classifications, and applying IMPLAN’s modeling to calculate the economic impacts.
Supplier.io offers reporting options including a digital, interactive format with user-friendly charts and visualizations as well as a comprehensive company-branded PDF with detailed narratives, perfect for sharing with stakeholders and publishing as part of corporate sustainability reports.
The reports are designed to provide actionable insights that align supplier diversity efforts with broader organizational goals, making it easier to secure buy-in and demonstrate impact. Ramos-Cintron reassured attendees, “It’s a straightforward approach that delivers actionable results in just a few weeks.”
Transforming supplier diversity spend into impactful narratives
The webinar made it clear that Economic Impact Analysis isn’t just about crunching numbers—it’s about telling a story that highlights the transformative power of supplier diversity. By showing how these programs create jobs, drive income, and support communities, supplier diversity leaders can build stronger internal and external support.
“Economic Impact Analysis allows you to demonstrate how your program isn’t just meeting goals—it’s exceeding expectations and driving meaningful change,” Ramos-Cintron said.
If you’re ready to elevate your supplier diversity program and communicate its value effectively, Supplier.io’s Economic Impact Analysis solution provides the tools and insights you need.
Visit Supplier.io to learn more.