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What is Supplier Diversity and why is it important?

Supplier diversity is a business strategy that diversifies the supply chain and removes barriers to entry for marginalized groups.

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At its core, supplier diversity is a business strategy that diversifies the supply chain and removes barriers to entry for marginalized groups. Let’s break down what that means and why supplier diversity has never been more important.

Who are diverse suppliers?

A diverse business—often called a diverse supplier—is an organization that is at least 51 percent owned and controlled by a person from a diverse category, including:

  • Woman-owned business enterprises
  • Minority-owned business enterprises
  • Veteran-owned small businesses
  • Service-disabled veteran-owned small businesses
  • Veteran-disability owned business enterprises
  • Disability-owned business enterprises
  • LGTBQ-owned business enterprises

When we talk about diverse suppliers in the context of a supplier diversity program, we need them to be certified to ensure the accuracy of our data. Certification through appropriate third-party entities is considered best practice, although some organizations allow self-certification.

What are the benefits of supplier diversity?

Now that we know who diverse suppliers are, let’s talk about why partnering with them is important. There are various benefits of supplier diversity, including saving money, gaining a competitive edge, enhancing brand reputation, increasing customer loyalty, and more. 


What if adding new companies to your supply chain could boost your market share? Driven by changing demographics, today’s consumers represent the most diverse group in U.S. history. The University of Georgia’s Selig Center for Economic Growth estimates the buying power for African American, Asian American, and Native American consumers has grown from $458 billion in 1990 to $3 trillion in 2020. Hispanic buying power has also increased over the last 30 years, from $213 billion in 1990 to $1.9 trillion in 2020. 

This combined $4.9 trillion represents about 28 percent of the nation’s total buying power, and those consumers want to see themselves reflected in the products and services they purchase. Partnering with diverse suppliers—and featuring those partnerships in your marketing efforts—gives you access to this customer base. Additionally, diverse suppliers can provide invaluable input about minority groups, translating to an edge in emerging markets. 

Diverse suppliers also bring innovative thinking to the table. New ideas and fresh perspectives lead to better products and services, giving you a competitive edge. You might partner with a diverse supplier to develop a widget that solves a consumer problem, or perhaps they have an ingenious solution to streamline an internal process. 

Economic impact is another benefit of effective supplier diversity programs. An economic impact analysis gives you insight into the number of jobs supported by your purchases from diverse suppliers and the wages earned by those employees. Tracking the ripple effect of your supplier diversity program in the communities in which you do business is a tangible way to measure your success.


The intangible benefits of supplier diversity are, by definition, more difficult to measure. However, they are deeply impactful and should be included in reports and conversations about your supplier diversity program.

Recent years have exposed weaknesses in supply chains around the world. Over-reliance on one or two suppliers meant disruptions and shortages. Large companies struggled to pivot to serve consumers and clients. Diverse suppliers can solve both issues. 

If you view partnering with qualified diverse suppliers as a risk mitigation strategy, you will see an abundance of opportunities to diversify your supply chain and avoid disruptions. In addition, bringing new suppliers into the supply chain naturally promotes competition from potential and existing suppliers. The main activity of your supplier diversity program is to identify qualified diverse suppliers that can inject high-quality goods and services into the supply chain, increasing vendor competition, enhancing the quality of goods and services, and potentially cutting costs.

Diverse suppliers are also generally more agile than their counterparts. Many minority- and women-owned businesses were able to pivot operations by mid-2020 and began producing personal protective equipment (PPE), hand sanitizer, and other products in high demand. Their corporate partners benefitted from their agility, gaining access to desperately needed supplies.

Stakeholders demand diversity. 

We are giving stakeholders the spotlight because consumers, employees, and some company leaders are increasingly demanding the inclusion of diverse suppliers in corporate supply chains. 

In our 2022 State of Supplier Diversity report, 81 percent of respondents (supplier diversity professionals) said corporate social responsibility is a primary driver for their supplier diversity initiatives. In addition, 73 percent of respondents believe engaging with diverse suppliers positively impacts their company internally and externally.

Powered by an increasingly diverse population and collaborative efforts such as the United Nations Sustainable Development Goals, demand for diversity and inclusion at all levels of business is likely to continue to increase in the U.S. 

Don’t be the last to prioritize supplier diversity.

Companies such as Coca-Cola, Pacific Gas & Electric, CVS Health, and hundreds more have embraced supplier diversity as a valuable means to increase their bottom lines and make a social impact. 

Download our 2022 State of Supplier Diversity report to learn more about why your company should prioritize supplier diversity.

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