The practice of ethical sourcing places great importance on diversity, which involves sourcing, qualifying and purchasing from smaller businesses that are economically disadvantaged. This includes supporting groups that often face competitive disadvantages by giving them equal opportunities to bid and win contracts.
Such groups are known as Disadvantaged Business Enterprises (DBEs), which are at least 51% owned or controlled by individuals who are socially and economically disadvantaged. Examples of DBEs include minority-owned, women-owned, service-disabled, and veteran-owned businesses.
In addition to being ethical, there is also a business case for diversity. Using a diverse supplier base widens the applicant pool to possibly better suppliers, and supports the economic welfare of the overall community which stimulates growth, promotes the availability of a larger workforce, uses a greater variety of goods and services, and has the potential for increasing market share within the minority.
Best Practices for a Diversity Initiative
To incorporate diversity and inclusion into the procurement process, it is important to implement the following actions:
- Commitment of senior management and procurement officers regarding diversity
- Providing internal education on the benefits of diversity sourcing
- Maintaining a corporate culture which promotes ideas and techniques for diversity
- Tying diversity sourcing goals to individual performance measures and compensation
- Establishing annual goals for purchases from diversity suppliers
- Including minority suppliers in all RFQ’s
- Including terms in supplier contracts for diversity spend goals and reporting for their supply base
Apart from procuring from various and underrepresented suppliers, there are other ways to offer support like financial aid, coaching, mentorship, and business and technological aid.
Diversity Goals
Having measurable goals for a diversity program is crucial to communicate expectations and track progress. Some examples of such goals are:
- Annual purchase dollars spent with diverse suppliers
- Percent of increase over the previous year’s purchases
- Percent of total purchase value spent with diverse suppliers
- Number of companies in relationships for mentoring, joint venturing, strategic alliances, financial assistance, etc.