In a world constantly seeking innovation and growth, it’s critical to trace the path that led us to our current perspectives. Supplier diversity has become a transformative force in economies around the world, fostering inclusive economic development by encouraging corporations to purchase goods and services from businesses owned by people from historically marginalized groups. To fully appreciate its power, let’s journey back in time and trace its origins and evolution.
The Emergence of Supplier Diversity in the U.S.
Supplier diversity is not a modern-day concept. It has its roots in the Civil Rights Movement of the 1960s, which gave rise to new legislations and economic opportunities for minorities in the United States. It was during this era, against the backdrop of protests, marches, and monumental events like the March on Washington for Jobs and Freedom that a greater emphasis was placed on equality in all sectors of life, including business.
The first significant legislative milestone came in the form of The Civil Rights Act of 1964, which prohibited discrimination on the basis of race, color, religion, sex, or national origin. This opened doors for minority-owned businesses, but the real catalyst was Executive Order 11458, signed by President Nixon in 1969. This created the Office of Minority Business Enterprise (OMBE), an entity dedicated to promoting the growth and competitiveness of minority-owned businesses.
The 1970s: Expansion and Progress
The expansion of the OMBE in 1971 gave rise to the founding of the National Minority Purchasing Council, now known as the National Minority Supplier Development Council (NMSDC), in 1972. Today, the NMSDC has a vast network that supports and facilitates the integration of minority-owned businesses into corporate and public sector supply chains.
The Small Business Act of 1978 further propelled progress, redefining minority firms as socially and economically disadvantaged small businesses. It required federal agencies to establish contracting goals (‘set asides”) for major federal contracts, helping diverse businesses access a larger share of opportunities. The act also established the Office of Small and Disadvantaged Business Utilization, heightening awareness among small and diverse businesses of federal contracting opportunities available within the federal government.
These milestones combined to create a robust framework for supplier diversity, setting the stage for its evolution into a strategic business imperative over the following decades.
Expanding the Circle of Inclusion
Over the years, supplier diversity began to include a broader interpretation of diversity, expanding beyond racial minorities to include women-owned businesses (WBEs), veteran-owned businesses (VBEs), LGBTQIA+-owned businesses, and disabled-owned businesses. Each of these categories is supported by an ecosystem of advocacy organizations and certifications.
From Compliance to Strategic Imperative
The year 2020 served as a global inflection point for the concept of supplier diversity. This was a year marked by an extraordinary confluence of crises – a global pandemic, economic disruptions, and profound social unrest triggered by racial injustices. Each of these events played a part in refocusing the attention on the urgent need for supplier diversity.
The COVID-19 pandemic and related geopolitical events exposed vulnerabilities in global supply chains, revealing the perils of over-dependence on a limited number of suppliers. Businesses across the globe witnessed severe disruptions, driving home the necessity for a resilient, diversified supplier network. Supplier diversity emerged as a robust strategy for businesses seeking to mitigate risk, enhance supply chain resilience, and ensure business continuity in face of unforeseen events.
At the same time, the global calls for racial justice, sparked by the murders of George Floyd and Breonna Taylor in the U.S., prompted a worldwide reckoning on systemic racism and inequality. These events led to a renewed push from consumers for businesses to demonstrate their commitment to racial justice in tangible ways. Supplier diversity presented itself as a powerful tool for this aim.
In essence, the events of 2020 amplified the importance of supplier diversity, not only as a tool for business growth and innovation, but also as a means to advance equity and economic inclusion. This signaled a transformative shift in the supplier diversity landscape, with implications that will continue to shape its trajectory in the years to come.
Supplier Diversity in the Global Context
While supplier diversity began as a uniquely American initiative, the concept has gradually gained traction worldwide as a viable and valuable business strategy. Countries such as Canada, the United Kingdom, South Africa, and Australia have embraced supplier diversity, adapting the model to their unique socio-economic contexts. Advocacy organizations such as Minority Supplier Development U.K. and the Canadian Aboriginal and Minority Supplier Council (CAMSC) play an integral role in supporting diverse businesses in their respective countries.
And of course international corporations, particularly those doing business with companies in the U.S., are integrating supplier diversity into their operations as well. Despite challenges such as locating diverse suppliers and adapting to various country-specific socio-economic categorizations, these international companies are progressively developing their supplier diversity practices.
The Future of Supplier Diversity
Though this is an article about the history of supplier diversity, we think the future bears mentioning as well. With technological advancements, a renewed commitment to social justice, and an increasing emphasis on sustainability, supplier diversity is poised for an evolutionary leap. Developments such as artificial intelligence and machine learning offer opportunities to make the process of identifying and integrating diverse suppliers more efficient and effective. These technologies can provide data-driven insights to inform strategic decisions, ensuring that supplier diversity efforts deliver maximum impact. Check out our articles on the future of supplier diversity and on how A.I. could transform the field.
The history of supplier diversity is a compelling testament to the power of inclusion and innovation. From its origins in the 1960s, through transformative legislation, the broadening of its scope, to its emergence as a global phenomenon, supplier diversity has been on an inspiring journey. The renewed corporate commitments and consumer demands that emerged in 2020 have further solidified its importance in the business landscape. As we stand on the cusp of a future shaped by technological advancements and a commitment to social justice, supplier diversity promises to play a crucial role in building an inclusive, sustainable, and equitable economy.
- Supplier diversity is a transformative force that fosters inclusive economic development by encouraging corporations to purchase goods and services from businesses owned by historically marginalized groups.
- The origins of supplier diversity can be traced back to the Civil Rights Movement of the 1960s, with significant legislative milestones and the establishment of the Office of Minority Business Enterprise (OMBE) in the United States.
- Over the years, supplier diversity has expanded to include women-owned businesses, veteran-owned businesses, LGBTQIA+-owned businesses, and disabled-owned businesses, enriching the supply chain ecosystem with diverse perspectives and capabilities.
- The concept of supplier diversity is gaining traction globally, with international companies integrating it into their procurement and supply chain practices to align with the requirements of the American companies they do business with.
- Supplier diversity is converging with environmental, social, and corporate governance (ESG) initiatives, highlighting its alignment with inclusivity, sustainability, and ethical governance goals.
- The future of supplier diversity lies in technological advancements, such as artificial intelligence and machine learning, which can enhance the efficiency and effectiveness of identifying and integrating diverse suppliers.