Supplier diversity is a much talked about yet a less appreciated term in business. Essentially, it’s about creating a planned variation of a company’s vendors to include sidelined groups in the market. In other words, supplier diversity is employed to include more diverse businesses in the value-generating supply chain.

A diverse supplier refers to a company that’s at least 51% owned by diverse groups that are underrepresented within the economy.

As such, adopting a diverse supplier program is an ethical decision taken by companies so that conventionally small businesses and underutilized groups, i.e., small-scale businesses owned by women or veterans, relatively new local businesses, etc., can all find an equal footing in the marketplace.

Impact of Supplier Diversity on the Economy

After the pandemic, countries have faced a lot of hiccups pertaining to their economies. While governments worldwide are trying to stabilize them, supplier diversity programs can play a vital role in the same. They can create an economic stimulus by encouraging small, diverse businesses to flourish and have their voices heard in the marketplace. They can reduce wealth inequality by giving these underutilized groups an equal chance to participate in the supply chain.

At the same time, supplier diversity can bolster medium to large businesses by making them more competitive, enhancing their agility, advocating for untapped market segments, and strengthening their connection with the community. As a matter of fact, the concept of diverse suppliers becomes the need of the hour when social issues are at play, CSR activities are going strong, and uncompromising regulations are being set.

But at the same time, there are challenges associated with supplier diversity, most of which will be discussed next in the context of this article.

3 Major Challenges Faced in the Implementation of Supplier Diversity

1. Limited Resources 

In many cases, supplier diversity initiatives remain feeble because organizations do not invest aptly in new or developing suppliers.

Companies can overcome this challenge by dedicating resources to in-house programs to encourage supplier diversity. Employees dedicated to looking after supplier diversity can review their services to evaluate potential business opportunities. One of the challenges arising from the lack of process or non-committal management focus is that supplier diversity programs become the playground of large players. Smaller companies and other under-represented groups get muscled out of the equation. In essence, the diversity and inclusion process itself becomes subject to bias because of the unfair advantage given to large companies.

2. Lack of Alignment

Often, companies fail to achieve their supplier diversity goals because competing with other companies is a common motivator; this effect even extends to internal competition. Even if employees are dedicated to implementing diversity initiatives, they find themselves burdened with meeting targets for speed and quality. They risk getting a supplier on board, thus, lacking an alignment and sticking with ongoing suppliers.

One can overcome this challenge by streamlining the efforts of personnel involved in supplier diversity initiatives and clarifying how diversity initiatives stack up against competing priorities.

3. Lack of Long-Term Vision

A long-term vision is a must to achieve supplier diversity implementation. The vision, if not beyond tier 1 suppliers, can reduce the scope of implementation. Officials should broaden their search for diverse suppliers to include public sectors that can be a part of supplier diversity based on their policies. Larger companies should have a mandate to improve their diversity and rethink how to track their progress beyond the thought of the amount spent.

How Can We Expand the Scope of Supplier Diversity?

Supplier diversity offers powerful advantages. But companies building an inclusive supplier base also know that it requires the proper foundation for success, which takes time, commitment, and operational change. The leaders must integrate supplier diversity initiatives with a strategy to ensure organizational alignment, adequate resources, and a supply base to establish a sustainable supplier ecosystem.

1. Conscious and Proactive Approach

Following a conscious and proactive approach is key to procurement. Being conscious means to keep looking out as to – Where to procure, Is our supply chain diverse, are an adequate number of small companies represented, etc.

Being proactive means always staying curious, showing interest, and offering help whenever required. So, if companies realize and exhibit these two components, they can implement diversity in suppliers effectively.

2. Equitable and Inclusive Policies

A successful supplier diversity program rests on having equitable and inclusive policies. Getting a better understanding of the underserved markets, aligned with the business strategy, is important.

Companies can achieve this by setting targets for inclusion into supplier diversity programs and looking at their business objectives holistically. There’s invariably a strong need to understand the strategic value of supplier diversity in achieving business goals.

3. Encouragement of Diverse-Owned Businesses

Through supplier diversity, companies enable and encourage entrepreneurship for suppliers who remain underserved. Supplier diversity allows companies to promote entrepreneurship in underserved communities, creating jobs, wealth, and better health in the underrepresented communities.

4. Innovative and Sustainable Support 

For corporations, one of the key objectives is to build sustainable supply chains through innovation. By encouraging the lower tier of suppliers, companies can generate long-term value for clients. Suppliers can stay more focused on enhancing brand value while the core team is at its job of maintaining relations with the client.


In the post-pandemic world, the need for an equitable, inclusive economy has risen strongly to address the growing inequality experienced by diverse and underrepresented groups.

For that reason, organizations are developing ways to launch more robust supplier diversity programs to uplift the underrated sections of the economy.

Click here to learn more about how as a small, diverse supplier, we have helped corporations grow.