Working with diverse, minority and/or women-owned business enterprises is proven to be good for business. An increasing number of Fortune 1000 companies are developing Supplier Diversity programs and reaping the rewards of incorporating diverse suppliers into the supply chain.
Currently 21 of the top U.S. companies are members of the Billion Dollar Roundtable, an organization that recognizes corporations that achieved spending of at least $1 billion with minority and woman-owned suppliers, and that number is predicted to increase as Supplier Diversity programs grow and mature. These companies recognize that integrating certified diverse suppliers into the supply chain is a best practice that benefits the bottom line. Here are some supplier diversity best practices for certification.
What is a certified diverse supplier?
A diverse supplier is one that is at least 51% owned, operated and controlled by a person of a diverse background (minority, woman, LGBT, disabled, etc.). If a business meets that requirement then they can be labeled as a classified diverse supplier. However, in order to become certified, they must pursue certification through the appropriate agency – National Minority Supplier Development Council (NMSDC), Women's Business Enterprise National Council (WBENC), National Gay and Lesbian Chamber of Commerce (NGLCC), etc.
Certification is a review process designed to ensure that a small business is actually owned, controlled and operated by the applicants. Certifications are granted for; minority businesses (MBE), LGBT businesses, women-owned businesses (WBE), small disadvantaged businesses (SDB), veteran-owned businesses and underutilized businesses. Third party certification agencies use a rigorous process to ensure that only firms that meet the eligibility criteria of the individual programs are properly certified.
Why should I require a supplier to be certified, rather than classified?
A classified supplier is simply one that is at least 51% owned, operated and controlled by a person of a diverse background. They have not completed the certification process and therefore could be falsely claiming their diversity status. They also may not be able to be included in your supplier diversity program reporting.
A certified supplier is one that has gone through the certification process with a third party certification agency. They are vetted through a series of screenings, interviews and site visits, ensuring that the supplier is, indeed, minority and/or women-owned.
When you incorporate certified minority suppliers into your supply chain, that enables you to bid on state and federal contracts, most of which now mandate that their vendors use certified diverse suppliers. Additionally, whether you issue reports to another organization or as a publicly traded company, measuring certified suppliers gives you the most accurate diverse spend. The integrity of your Supplier Diversity program is protected because certified minority suppliers are vetted and verified by a third party.
How can a supplier become certified?
Supplier development should be a key component of your Supplier Diversity program. Encourage your diverse suppliers to become certified, not just so you can include them in your diverse spend but also for the many, many benefits they will receive. Certifying agencies offer education and training, access to supplier diversity professionals, networking opportunities, mentoring and much more.
The major certification agencies are NMSDC, WBENC and NGLCC. Other agencies include the U.S. Hispanic Chamber of Commerce, the Asian Pacific American Chamber of Commerce, the National Native American Chamber of Commerce, the Vets First Verification Program, and the U.S. Business Leadership Network (disability-owned business enterprises). Suppliers can and may need to be certified through multiple agencies, depending on eligibility.
Once a diverse supplier has researched which agencies are appropriate for them, they will submit their application (found on each agency's website) along with required documentation. A review process follows, usually involving an on-site visit to confirm ownership status, interviews and board approval. Upon approval, the business will be officially certified as a diverse supplier and can be counted as such.
Diverse suppliers bring innovation, cost savings, increased market share and positive economic impact. Integrating certified diverse suppliers into your supply chain benefits your shareholder value and should be included as part of your procurement best practices.