In an era marked by constant disruption, complex global interconnectedness, and a growing awareness of social responsibility, corporations have recognized that fostering inclusive business and supplier diversity strategies is both a social imperative and a strategic necessity.
Rooted in the goal of creating more equitable business environments, business and supplier diversity programs are helping companies unlock a suite of critical advantages for navigating the uncertainties of the modern marketplace. By actively cultivating relationships with minority- and women-owned (MWBEs) and other diverse business enterprises, companies are discovering how fostering economic inclusion opens up powerful new fronts for driving innovation, enhancing competitiveness, and building resilience.
But many organizations have yet to fully embrace business diversity. This is particularly true for many companies in some of the most dynamic areas of today’s economy. From finance and legal services to insurance and engineering, the industries that are defining the economic future have often overlooked—or only paid lip service to—traditional supplier diversity programs. While 82 percent of Fortune 200 companies have formal supplier diversity programs, for instance, only 16 percent have made explicit financial commitments to sourcing from diverse suppliers.
More than just limiting opportunities for MWBEs, this also means that companies are missing out on the full range of value that a diverse supplier base can provide. Here’s an overview of the transformative potential of business diversity initiatives and why they are reshaping the contours of success across today’s business landscape.
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Expanding Business Ecosystems
Supplier diversity is a strategic initiative undertaken by organizations to include and empower businesses owned by individuals from diverse, traditionally underrepresented backgrounds within their supply chains. To be classified as diverse, businesses undergo a rigorous certification process to verify that at least 51 percent of the company is owned and operated by members of historically underserved or marginalized groups. Common classifications are women-owned enterprises (WBEs), small business enterprises (SBEs), and minority-owned enterprises (MBEs), with the scope of diversity having expanded over time to include businesses owned by LGBTQ individuals, veterans, and proprietors with disabilities. Today, there are roughly 10,000 businesses with earnings over $10 million a year that are certified as diverse-owned.
Supplier diversity initiatives first took shape during the civil rights era of the 1960s, with a notable early instance occurring in the United States auto industry in the wake of the 1968 Detroit race riots. Such programs were placed on firm ground a year later with the establishment of the Office of Minority Business Enterprise (later renamed the Minority Business Development Agency) and from there quickly expanded to other industries, including consumer goods and telecommunications. The Small Business Act of 1978 played a pivotal role in advancing supplier diversity programs by formalizing and expanding the government’s commitment and providing a framework for greater inclusion of diverse suppliers in federal contracting.
Today, a company like UPS, which started its supplier diversity program in 1992, spends $2.6 billion each year working with roughly 6,000 small and diverse suppliers. To ensure their supplier diversity initiatives are known to their target audiences, the company partners with groups like the National Minority Supplier Development Council (NMSDC), the US Hispanic Chamber of Commerce ( and the Women’s Business Enterprise National Council to run programs, workshops, and conferences that promote the growth and success of diverse suppliers.
What’s more, UPS is hardly alone. Companies like PepsiCo, IBM, Walt Disney, and many more have supplier diversity programs that have been around for decades and allocate billions of dollars annually to supplier diversification and development.
"Business Diversity is an evolution of supplier diversity,” says Ying McGuire, CEO and president of NMSDC, a nonprofit, corporate membership organization that advances business opportunities for its certified Asian, Black, Hispanic and Native American business enterprises and connects them to its corporate members.
"While Integrating minority businesses into the supply chain, maintaining a diverse supply chain remains critically important, especially for our corporate members heavily focused on manufacturing and selling products; the sourcing and procurement team makes the bulk of the decisions," says McGuire. "Business Diversity widens the lens beyond procurement and supply chain to encompass every corporate department, making it a strategic economic imperative that includes the CEO, CFO, CIO, and every leader with budgetary authority.
Business Diversity opens doors for MBEs to compete in high-margin services, such as marketing, legal, technology, and money management, accelerating their growth and wealth creation in communities of color and beyond. For example, Corporate CFOs and Chief Investment Officers who manage billions, and in some cases, even trillions collectively for Corporate America's 401Ks, pensions, and retirement accounts, have not traditionally focused on leveraging diverse investment firms like Ariel Investments to manage these funds,” she adds. "Creating opportunities for these MBEs is what business diversity seeks to accomplish."
Utilizing diverse businesses is not only a social responsibility but has far-reaching economic benefits. Minority Businesses certified by NMSDC grew revenues by 15% in 2023, topping $363 billion.
"Supplier Diversity tracks procurement spend with diverse businesses. Business Diversity tracks downstream economic impact besides procurement spend," McGuire says. "If you look at our latest Minority Business economic impact study, we showed total economic output, indirect and direct job creation, wages and tax revenue, including how many jobs were created in communities of color. I think the measurement changes when you evolve supplier diversity into business diversity,” McGuire says. “The challenge is to get CEOs and all leaders with a budget involved and committed to business diversity. At NMSDC we are working on expanding our reach to CEOs and line of business leaders like CMO, CIOs."
McGuire pointed to a recent conversation with Allstate CEO Tom Wilson who discussed how the insurance powerhouse brought innovation to its diversity initiative by bringing a NMSDC certified MBE, Loop Capital, into the process when it sought to offer bonds.
"When companies issue bonds, they usually turn to well known large firms like Goldman Sachs and JPMorgan Chase, leaving diverse businesses with only potential subcontracting opportunities," says McGuire. "This CEO, however, evaluated and engaged qualified diverse businesses as book runners, shifting the power dynamics significantly."
The National Minority Supplier Diversity Council reports that MBEs generate almost $500 billion in economic output, supporting 1.8 million jobs and $136 billion in annual wages.
Cost Savings and More. The Path Forward.
These efforts by well-known global companies not only generate significant societal benefits and important economic opportunities for underrepresented communities, but they are also critical ways for companies to gain local market knowledge while tapping into thriving areas of today’s economy.
NMSDC reports that MBEs generate over $500 billion in economic output, supporting 2 million jobs and $149.6 billion in annual wages. A McKinsey study shows that MWBEs offer their corporate partners year-over-year cost savings of 8.5 percent—significantly surpassing the 3 to 7 percent typically realized—by enabling access to new demographics, contracts, and geographies. They also forecast that doubling spending from $1 trillion to $2 trillion on certified minority- and women-owned media enterprises (MWMEs) could yield $280 billion in income and create four million jobs for minority populations and women.
It’s worth highlighting as well that supplier diversity programs themselves have been shown to be a selling point when hiring. A recent survey found 52 percent of respondents saying they’d prefer working for a company that has a supplier diversity and inclusion program, which adds to research showing that 64 percent of millennials won’t work for companies that lack strong corporate social responsibility initiatives.
In short, partnering with MWBEs not only demonstrates a commitment to diversity, equity, and inclusion (DEI), but it can also spur flywheel effects whereby a company’s contribution to the economic development of communities builds support and goodwill among local consumers and job seekers who want to support organizations aligned with their values. This can in turn compound and lead to additional reputational benefits.
“Our economy has evolved from a manufacturing, supply chain-focused economy to where wealth is created in the financial services sector, technology and media,” says John W. Rogers Jr., founder and co-CEO of Ariel Investments and a UChicago Trustee.
Rogers says everyone benefits from institutions and organizations shifting their mindsets and processes from supplier diversity methodologies toward more holistic business diversity strategies.
“You have to understand the power of diversity. You get more creative ideas and make better decisions. It helps companies have more diverse perspectives and points of view to make better decisions. All the challenges we face are tied to wealth, and business diversity will help to address the racial wealth gap, which will make our economy and our cities and our country stronger. If all the talented people are able to equally compete for opportunities in the areas where wealth is created, we all benefit,” he says.
As the founder of the first African-American-owned money management and mutual fund firm in the United States, Rogers is a sought-after expert on business diversity and has counseled local and federal leaders on best practices developed at UChicago, including the Mayor of New York City, the U.S. Treasury Department, and the Small Business Administration.
Another advantage stemming from diverse supplier initiatives is the potential to expand a company’s sourcing pool and thereby increase competition for contracts and unlock additional value. By collaborating with small- and medium-sized businesses as they grow and scale, supplier diversity professionals add agility and flexibility to supply chains. Often, these suppliers have expertise in niche areas. They can also be more open to experimentation and new approaches than incumbents, making them valuable partners in innovation and proof-of-concept initiatives. Crucial for responding to today’s strained supply chains, their nimbleness and adaptability can be key differentiators when it comes to bolstering resilience.
In sum, the strong business case for business diversity (professional services opportunities) and supplier diversity(low-margin procurement opportunities) are rooted in how these programs align bottom-line benefits with the reputational advantages that are increasingly vital in today’s socially aware business landscape. So what does it take to drive a successful supplier diversity initiative?
A recent survey found 52 percent of respondents saying they’d prefer working for a company that has a supplier diversity and inclusion program.
Best Practices for Business Diversity
To fully harness the power of business diversity, organizations need to fundamentally shift their mindset and think holistically across the entire business ecosystem. This requires proactively seeking out partnerships with diverse businesses not as peripheral vendors, but as integral contributors to success. By reassessing governance structures, rigorously tracking diversity metrics, and building long-term, mutually beneficial relationships with diverse suppliers across the value chain, companies can position themselves for success in an increasingly competitive and socially conscious market.
“For years, I’ve seen companies only source MWBE’s for their low-margin supplier diversity opportunities, while the high margin professional services opportunities go to the majority owned firms,” says Nadia Quarles, Assistant Vice President for Business Diversity at the University of Chicago.
Quarles says the Business Diversity Program at the University of Chicago uses a holistic approach that goes beyond supply chain opportunities to engage diverse firms within all the institution’s business relationships. “We seek to engage qualified diverse business talent within key professional services sectors that make a strong and lasting contribution to the University and the economic health of Chicago,” she says.
Here are some best practices that organizations can adopt:
1. Holistic approach
View business diversity as part of the overall business strategy rather than a stand-alone initiative. This means integrating diversity goals into procurement processes, business development strategies, and corporate governance, creating opportunities for diverse-owned firms within all parts of the company’s business relationships.
2. Leadership buy-in
Ensure these initiatives are spearheaded by leadership at the highest levels of the organization. Business diversity must be woven into the fabric of corporate strategy, based on clear targets, robust accountability mechanisms, and adequate resources deployed to drive systemic change.
3. Stakeholder engagement
Involve as many stakeholders as possible, including procurement, DEI teams, and senior leadership, to champion business diversity initiatives. Encouraging buy-in from different departments fosters a culture of inclusion and broadens the impact of diversity efforts.
4. Capacity building
Support diverse businesses in overcoming barriers to entry. This can include providing technical assistance, offering training programs, and simplifying procurement processes to make it easier for diverse suppliers to compete, as well as connecting qualified diverse businesses to decision makers.
5. Performance monitoring
Track the spend by the number of firms retained and amount paid to those firms within each industry. Review metrics regularly and identify areas for improvement.
For those looking to develop the skills necessary to lead business diversity initiatives, the University of Chicago Professional Education (UCPE) through the Office of Business Diversity, offers an executive education course on Inclusive Business and Supplier Diversity Strategies.
Designed for professionals working in procurement, business diversity, supplier diversity, and DEI at corporations, nonprofits, foundations, government agencies, and educational institutions, this one-day course provides leaders with the knowledge and tools to diversify their vendor portfolios and create impactful business diversity initiatives. Through expert instruction and real-world case studies, participants will learn how to integrate supplier diversity into their business practices in order to drive growth and innovation. Learn more here.
With contributions by Nadia M. Quarles, Esq.
