Supply Nation is part of a global supplier diversity network, with over 15,000 certified minority suppliers in six countries. Each of these countries face their own unique challenges, but also have enormous opportunity.
Supply Nation’s global business network links us with minority supplier councils in the UK, USA, South Africa, China, and Canada. With over 3000 global corporations committed to supplier diversity, these minority supplier councils are taking on the challenge of lifting minority groups out of economic disadvantage.
The concept of supplier diversity grew out of the civil rights movement in the USA, when President Nixon, in 1971, passed legislation requiring federal government agencies to include minority owned enterprises in their supply chains. From there the US supplier diversity movement has grown exponentially, with minority owned businesses contributing over $1trillion to the US economy. The National Minority Supplier Development Council has 460 corporate members and over 12,000 Certified Suppliers – with 24 affiliate regional councils across the US.
Outside the US, the supplier diversity landscape is less developed. This is not to say there aren’t opportunities – in China alone there is around 200 million people who are in an ethnic minority and in South Africa over 90% of the population are Black, Coloured, or Asian.
The population and the purchasing power of minority groups are significant. Yet there is still disparity in the size, capacity, and reputation of minority owned businesses. In each of these countries minority supplier development councils, like Supply Nation, are stepping up to fight for minority businesses so they can reach parity with regard to the amount of business undertaken in their respective countries.
Minority Supplier Development UK (MSDUK) is the United Kingdom’s leading organisation pushing for inclusive procurement of ethic minority owned businesses. To become a certified minority supplier, businesses must be 51% or more minority owned, managed and controlled – with a minority being defined as South Asian, Chinese, Black or mixed heritage. Since 2006, when it was founded, it has established a network of over 40 corporate members and 300 certified minority suppliers who all pay a membership fee that varies depending on their size. Over £40million ($72million) in transactions has taken place between suppliers and members, and this number is expected to rise sharply as the government puts in place policies to boost procurement from small to medium businesses to 25%.
Since the current conservative government came to power in 2010 it has identified utilising the services of small to medium enterprises as a key strategy towards making savings on their procurement budget. It has been recognised that a more competitive and inclusive supply chain can deliver direct benefits to the government’s bank balance. MSDUK’s certified suppliers are well positioned to benefit from these policies.
The South African Supplier Diversity Council (SASDC) is unique amongst our global network, as it is charged with building the majority population’s enterprise sector that are vastly underrepresented in the business community. Black suppliers, those that are over 50% owned by Indian, African, or Coloured people, are eligible for certification. There are currently 268 certified suppliers, who each pay a flat fee, and 27 corporate members, who also pay fees. It is also the youngest in the network, having only been established in 2011. Since then over R74million ($7.5million) of business has been awarded to suppliers by members.
South Africa’s history of apartheid is impossible to ignore when wanting to understand the business landscape. Black owned businesses account for 69% of all businesses in South Africa yet they only own about 9% of the wealth on the country’s largest stock exchange. The proportion of black owned businesses that are micro businesses is far higher than in other countries in our network, with 94% of SASDC’s certified suppliers falling into that category. Supplier diversity represents a significant opportunity to grow black owned businesses, with evidence from the US showing that businesses that get in the supply chain of major organisations usually grow 250%.
Minority Supplier Development China aims to grow the enterprise sector in the 55 different Chinese ethnic minority groups. Established in 2008, MSD China now has 17 corporate members and a large network of minority owned suppliers, craftspeople, and suppliers located in regions where the majority of the population is from a Chinese ethnic minority – all of whom are eligible for certification.
This innovative model, with two extra types of certification, helps minority groups in different ways.
- Traditional craftspeople are given the opportunity to maintain their connection to their culture through their work, while also having corporate markets opened to them.
- Minority groups make up the majority of the population on up to 65% of China’s mainland, yet their employment outcomes are still far below average. Certification of any business placed in these areas, that also has a workforce that is at least 30% from an ethnic minority, is designed to drive investment in regions that are often neglected.
Although it was only established ten years ago, the Canadian Aboriginal and Minority Supplier Council is the second oldest member of our global network. It has a committed group of 70+ corporate members who have done over CAD$1.2billion ($1.18billion) worth of business with certified suppliers. Suppliers that are 51% owned, managed and controlled by Aboriginal or visible minority peoples are eligible for certification.
Although Canada has seen success, its government has not legislated strong supplier diversity policies to drive diverse government procurement. Subsequently, Canada has not seen the same level of success as its neighbour, the US. When comparing the two countries, the power of legislation in diversity policy becomes clear. Both Canada and the US have employee diversity legislation, like Affirmative Action, and both have seen huge increases in the amount of companies with employee diversity policies.
Yet the US has far stronger legislation to promote supplier diversity in government procurement, which could help explain why Canada has a relatively less developed minority enterprise sector.
Minority supplier development councils across the word have adapted according to the situation on the ground. The success of each model shows the resilience of the supplier diversity concept despite the enormous challenges faced. As minority populations and their purchasing power grow, corporations are beginning to realise that supplier diversity policies are the key to tapping into those markets. With the exception of the US, governments have been slow to adopt policies promoting supplier diversity in government procurement. When they do, the international supplier diversity movement will be given the boost it needs to become mainstream business practice.