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Supplier Diversity Programs Help Close Racial Wealth Gap

Do you know the history of supplier diversity in the United States is firmly rooted in the civil rights movement of the 1950s and 1960s?

In fact, following race riots in Detroit in 1968, General Motors set up what is regarded as one of the first supplier diversity programs, and the American auto industry followed suit.

Early movers in the electronics industry such as IBM established supplier diversity programs around the same time. And shortly after, Public Law 95-507 established a program to encourage government contractors to include minority-owned businesses in their supply chains.

There are organizations that are eager to level the playing field. UPS spends $2.6 billion annually doing business with around 6,000 small and diverse suppliers with a goal to increase that spend amount year over year.

Startups like Unqork and Newsela with 400-500 employees are heavily focused on supplier diversity efforts. Organizations of all sizes should be focused on these efforts.

According to Harvard Business Review “The U.S. Small Business Administration estimates there were 8 million minority-owned companies in the United States as of 2018. The National Minority Supplier Diversity Council reports that certified MBEs generate $400 billion in economic output that lead to the creation or preservation of 2.2 million jobs and those numbers are steadily increasing.”

BUT, What certification does one need to be selected as a diversity supplier?

Small business owners need M/WBE certification!

MWBEs, or Minority Women-owned Business Enterprises, are organizations that have been certified to be at least 51% owned and controlled by a minority principal who is a US citizen or lawful permanent resident. It's a certification issued by the city and state that provides developmental benefits to businesses.

I'm thrilled to share that my Diversity, Equity, Inclusion consulting business, Holistic Inclusion Consulting, is officially MWBE certified!

The process to become a certified Minority Women-owned Business Enterprises (MWBE) was not easy. The documentation and verification requirement process was long and arduous, but undoubtedly WORTH IT!

So, What are the benefits of hiring MWBEs for your organization?

1. Win More Contracts

Government agencies want organizations that meet diversity spending benchmarks due to the significant wealth gaps that exist for minority-owned enterprises. The purpose of those benchmarks is to provide equal opportunity for all businesses and to ensure that government funds are not used directly or indirectly to promote, reinforce, or perpetuate discrimination. To ensure these goals are met, government agencies often have requirements written into their RFPs (Request for Proposals) requesting a set percentage of the revenue be distributed to MWBEs.

2. Gain Tax Incentives

The government offers tax incentives for organizations working with MWBEs and reduced liabilities on federal and state grants or loans for projects that use MWBE suppliers.

3. Customization & Flexibility

Working with a small business provides you with the flexibility to customize and streamline processes to meet your urgent needs.

4. Organically Increase Representation

Supplier diversity programs are a selling point when hiring. According to Harvard Business Review “Fifty-two percent of respondents to a survey conducted for UPS by Hootology, a specialized marketing and consumer insights research firm, said they want to work for a company that has a supplier diversity and inclusion program, according to Oswold.” Candidates want to know about your supplier diversity efforts.

5. Non-Performative Brand Equity & New Customers

A 2019 study found that the individuals who were aware of Coca-Cola’s supplier diversity initiatives were 45% more likely to perceive the brand as valuing diversity, 25% were more likely to think favorably about the brand, and 49% were more likely to use Coca-Cola products. “Hootology estimated that these favorable perceptions would lead to an additional 670,000 consumers using the company’s products more frequently.” Creating a more diverse market is critical to solving for the substantial wealth gap that exists. By promoting your organization's support of MWBEs, you can make your customers aware that you are actively supporting business diversity. You will reach socially conscious consumers and attract new customers.

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