Every supplier diversity program starts as an idea, a spark of inspiration rooted in the desire to simultaneously nurture the best ideas on the market and create a level playing field of opportunity. Good intentions notwithstanding, no progress will be made, and no benefits will be realized until that idea is communicated to someone else – a lot of ‘someone elses’ in fact.
Although the initial launch of a supplier diversity program holds significant potential, it is also the moment that diversity efforts can break down. Companies often launch programs without having prior experience managing them, and not knowing the terminology specific to the supplier diversity can easily become an impediment to progress.
There are many glossaries devoted to the subject, but in this article, I will review a few of the most commonly used – and often misunderstood – supplier diversity terms, phrases, and acronyms.
What is a Diverse Business?
A diverse business is a company that is at least 51% owned and operated by one or more individuals that belong to a designated list of categories, including:
- WBE: Woman-owned business enterprise
- MBE: Minority-owned business enterprise
- VBE: Veteran-owned business enterprise
- SDVBE: Service-disabled Veteran-owned business enterprise
- LGBTBE: Lesbian Gay Bisexual Transgender-owned business enterprise
- DOBE: Disabled-owned business enterprise
There are additional categories that are based on company size and, often, a combination of size and ownership characteristics. These include:
- SBE: Small business enterprise (as defined by the Small Business Administration)
- SDB: Small disabled-owned business
- WOSB: Woman-owned small business
- VOSB: Veteran-owned small business
- SDVOSB: Service-disabled veteran-owned small business
- DBE: Disadvantaged business enterprise
What Does it Mean to be Certified Diverse?
For reporting and verifiability, companies often ask that their diverse suppliers earn and maintain certifications with third-party agencies, such as:
- NMSDC: National Minority Supplier Diversity Council
- WBENC: Women’s Business Enterprise National Council
- NGLCC: National LGBT Chamber of Commerce
- NaVOBA: National Veteran-owned Business Association
- Disability:IN: The leading nonprofit resource for business disability inclusion worldwide
- Several State and Local Government certification bodies
Note: Each company has to determine whether they will allow their diverse suppliers to self-certify or whether they will require certifications. Regulated industries often have to require certification, while other organizations – including certain public-sector entities – count spend with diverse suppliers whether they are certified or not.
What Does it Mean to Be Socially or Economically Disadvantaged?
A socially or economically disadvantaged business is at least 51% owned by an individual who has been affected by prejudice or bias due to their race, ethnicity, culture, or identity. The economic disadvantage they experience is often described as a diminished ability to compete with other businesses due to a lack of access to funding and/or credit.
What is the Difference Between Race and Ethnicity?
Race-based characteristics are usually observable in someone’s appearance, such as facial features or skin color. Ethnicity reflects someone’s nationality, religion, language, or cultural traditions, things that cannot be externally observed.
What is the 8(a) Business Development Program?
The 8(a) business development program is a U.S. federal program aimed at helping small businesses that are also at least 51% owned by socially or economically disadvantaged individuals. Acceptance into the program provides participants access to mentors, development resources, and technical assistance so that they can compete for federal contracts.
What is a HUBZone?
A HUBZone is an area designated by the U.S. federal government as one that has been historically underutilized. Small businesses (using the SBA definition listed above) in this area can be certified to receive preferential consideration for federal contracts.
What is the FAR?
The Federal Acquisition Regulation is a set of rules governing the contracting activity of the U.S> federal government. Federal agencies are subject to it, as are companies that apply for and/or win federal contracts. It was updated in 2020 to provide more guidance regarding ‘set-asides’ or contracts/spend that should be awarded with preference to small and diverse suppliers.
What are Spend and Supplier Tiers?
A first-tier (or Tier 1) supplier is a supplier that is contracted directly with your business. Second-tier (or Tier 2) suppliers are your company’s supplier’s suppliers. This is relevant in supplier diversity programs because many companies work with their suppliers to ensure they have their diversity and inclusion initiatives, allowing them to increase their impact and report on the diversity of their supply chain – not just their direct supply base.
Hopefully, this review of terms and acronyms has helped you feel more confident about communicating your supplier diversity targets and objectives. Keep in mind, however, that not speaking up about the need to invest in diversity is likely to do far more damage to these suppliers and individuals than your choice of words. Start by expressing your intent to do good, and your objectives for advancing diversity, and you should find that you have a receptive audience – one that is eager to join you on the journey.
If you would like to talk to one of our supplier diversity experts on how to help answer any questions or get advice on starting your program, schedule a time to meet with us.