In our 2017 State of Supplier Diversity Report — Diverse Suppliers, one particular finding stood out: Ninety percent of minority-owned businesses (MBEs) and 90 percent of woman-owned businesses (WBEs) that responded to the survey are certified as such by appropriate certification agencies.
In one respect, the result isn’t so surprising. A diverse supplier survey naturally will attract participants committed to the idea of supplier diversity and therefore, more inclined to value the importance of certification. On the other hand, 90 percent for both MBEs and WBEs (as well as higher percentages for diverse categories in which there weren’t as many respondents) is a bit astounding. The finding confirms something many people have suspected all along: Diversity certification matters.
Yet, diverse suppliers without certification comprise a larger percentage of the marketplace than our survey respondents. With this in mind, the question supplier diversity programs might ask themselves is: Should we work with suppliers without diversity certifications? The answer isn’t as clear-cut as you might think.
The Importance of Certification
Diversity certification has its advantages for the supplier, of course, but also for the company contracting that supplier. Certified diverse suppliers have been carefully vetted by their respective certification organizations. The process is thorough to confirm the applicant’s credentials, and it takes time to complete. This diligence ensures that the supplier not only fulfills the requirements to be designated as diverse, but also lives up to the high standards of membership and success set forth by the organization. In this way, certified suppliers are at an advantage over non-certified ones, thus making the former a preferable choice over the latter.
A supplier with a diversity certification is part of a significant network of other diverse businesses, usually across a wide range of industries. The opportunities for supplier diversity programs to tap into this network increase when they focus on contracting certified vendors. For the suppliers themselves, certification opens avenues to success that might have been closed without certification.
The Numbers Game
Supplier diversity isn’t just a philosophy for companies. It’s a concrete goal complete with dollar amounts to reach, percentages to aspire to, and timetables to keep. Confirming and measuring diverse spend is easier with certified suppliers because you aren’t scrambling to determine whether a contractor is diverse or not—the certification agency has done all the work for you. This advantage also applies to Tier 2 spend, as your vendors’ vendors that are certified are also more easily tracked.
Proceed with Caution
So far in this post, the best practice would seem to be working exclusively with certified suppliers. But the decision is not always this simple. Plenty of reasons exist for choosing a non-certified diverse supplier. The business might be new or local, or it could be offering a unique product or service that isn’t available from a certified supplier. And although certifications make your life easier, there are plenty of qualified suppliers who haven’t gotten around to being certified or are in the middle of the formal process.
If you are considering a non-certified supplier, proceed with caution and do your homework. You’ll be doing the vetting instead of an agency, so be sure to ask plenty of questions, including:
- How many years have you been in business?
- What percentage of your ownership is diverse?
- What percentage of your management and employees are diverse?
- Are you designated as a diverse supplier by another client(s)?
- What is your outlook for growth in the coming years?
- Do you plan on applying for certification in the near future?
These are basic questions and obviously just a start, but you get the idea. Hopefully, the answers will be to your liking, but if they aren’t, be ready to consider alternate suppliers.
Though not ideal, going with a supplier that hasn’t received a diversification certification is possible and potentially beneficial for both parties. It does require greater attention from the supplier diversity program hiring the contract, which leads to a perfect scenario for supplier development. You want your new partner to be successful—someone you can build a long-term relationship with. And you want the supplier to eventually earn its certification, because its continued success and improved reputation makes it a better partner. In this case, supplier development is a win-win. Instead of eliminating a non-certified supplier from consideration, you take steps to help it grow and contribute to the overall state of supplier diversity.
Do you tend to gravitate toward suppliers that have earned their diversity certification?