Accepting standards for reporting supplier diversity spending will bring greater transparency and better benchmarks.
Supplier diversity spending is notoriously difficult to compare between companies. Every company has their own definition of what is included in “diverse spending”. Here are just a few examples of the variations we have seen:
- What is a diverse supplier? There isn’t a common standard for the types of suppliers that are considered diverse – some include only MBEs and WBEs, while others include additional categories such as Veteran-owned and LGBT-owned businesses. Some also include small businesses in this definition.
- Do they have to be certified? Some corporations only accept businesses that have been certified through an agency, while others also accept self-certified businesses.
- Which certifications are accepted? Some companies restrict themselves to only NMSDC and WBENC certified suppliers while others accept all agencies.
- Is 2nd Tier included? Some companies that have implemented Tier 2 programs sometimes include these numbers in their totals, while others do not. Of course, companies that have not implemented Tier 2 programs do not include these numbers.
- Is spend double counted across categories? There is a persistent question of how to handle suppliers that fall into multiple categories. Some include suppliers in every they qualify for (our recommended approach). Others count them only in one “primary” category which artificially reduces their spending in other categories.
Accepting a standard approach for reporting numbers will allow supplier diversity departments to collaborate with their peers and develop insights that can help them grow their programs. Some benefits that can be realized are:
- Better and credible benchmarks: Without a common method for counting diverse spending, any benchmark that is created is flawed by design. This frustrates supplier diversity managers trying to measure their program against the industry and understand the potential of in their space.
- Improved learning: The supplier diversity ecosystem is an extremely collaborative one. Understanding how their peers have achieved their numbers can help companies develop better insights on how to enhance their own programs. For example, some industries do not lend themselves to certified suppliers, and it may be better to accept self-certified suppliers. Or, perhaps, better results may be achieved through a stronger Tier 2 strategy.
We propose the following standard for reporting supplier diversity information:
- Diversity Categories: When reporting supplier diversity spending, break results out by categories instead of reporting consolidated numbers. This provides greater transparency.
- Certified vs. Self-Certified: With the number of certification options available to suppliers today and the relative ease of completing these, there is little reason for suppliers to not have some form of certification. Registration on the government’s SAM database is simple and fast. Given this, we recommend that reported numbers should only include certified suppliers.
- Certification agencies: We accept this can be a sensitive topic and do not offer an opinion on which approach is better. However, in the interest standardized reporting, we recommend that companies do not restrict their reporting to only WBENC and NMSDC suppliers. This allows for the inclusion of a much larger set of suppliers and provides a truer reflection of actual spending. This should not be too onerous a standard since most companies have access to this information through their data enrichments.
- Double Counting: We recommend that suppliers be counted in every category that they qualify for. However, when reporting total spend, spend should not be double counted. This is the accepted standard for most government reporting and also provides a more accurate reflection of spending in each category.
- Tier 2 spending: If Tier 2 spending is included in the reported numbers, these should be broken out.
At supplier.io, we are working to bring better tools to supplier diversity managers. We have initiated the Open Supplier Diversity project to provide supplier diversity managers insight about their performance against their peers. Contact us to find out more about how your organization can participate and benefit in this effort.