Diversity Reporting FAQs

Is supplier diversity reporting a mandatory practice?

In the private sector, supplier diversity reporting is not required, but many businesses elect to do so. By voluntarily reporting on supplier diversity efforts and advancement, organizations can show their dedication to diversity and inclusion. Diversity reporting may also be a requirement put forth by clients,  business partners, or government contracts. 

Several states and towns have legislation requiring entities doing business with the government to disclose their efforts to diversify their suppliers. For example, the state of California has a supplier diversity policy that mandates state agencies to make a sincere effort to include minority, female, and veteran-owned businesses with disabilities in its procurement procedures. Because of this, businesses that work with the state of California can be asked to report on their efforts to include diverse suppliers in their supply chains.

Several states in the US encourage or impose on state agencies the use of minority-, women-, and/or veteran-owned businesses in their procurement procedures. These states include:

• California
• Illinois
• Michigan
• New York
• Ohio
• Pennsylvania
• Texas
• Virginia
• Washington

It is important to keep in mind that each state has different requirements for these programs. While other states have more ad hoc objectives or goals, certain states have more formal standards for supplier diversity reporting. It’s also worth noting that certain cities, including Baltimore and New York City, have their own supplier diversity programs for companies that do business with them. These cities include:

• Baltimore, Maryland
• Chicago, Illinois
• Los Angeles, California
• New York, New York
• Philadelphia, Pennsylvania
• Seattle, Washington

How is supplier diversity reporting overseen in the United States?

Although there isn’t a single federal agency that oversees supplier diversity in the United States, a number of government organizations run initiatives to support and encourage it. 

The US Small Business Administration is a regulatory agency that establishes supplier diversity standards for federal agencies. The SBA is in charge of encouraging and regulating supplier diversity in the US federal government’s procurement processes, as well as offering assistance and resources to enhance small and diverse businesses’ ability to compete for government contracts. 

The SBA’s Office of Government Contracting and Business Development provides support and resources for small businesses, including those owned by women, minorities, and veterans, to help them compete for government contracts. 

The private sector is not subject to SBA regulations regarding supplier diversity, however,  companies that do business with government entities may be asked to report on supplier diversity in order to aid with compliance. 

How does the SBA define a diverse supplier?

The following are some definitions of diverse suppliers as set by the US Small Business Administration:

Small Disadvantaged Business

• The firm must be 51% or more owned and controlled by one or more disadvantaged persons
• The disadvantaged person or persons must be socially disadvantaged and economically disadvantaged  
• The firm must be small, according to SBA’s size standards 

HUBZone Small Business

• Be a small business according to SBA size standards
• Be at least 51% owned and controlled by U.S. citizens, a Community Development Corporation, an agricultural cooperative, an Alaska Native corporation, a Native Hawaiian organization, or an Indian tribe
• Have its principal office located in a HUBZone*
• Have at least 35% of its employees living in a HUBZone*

Woman-owned Business

• A business that is not less than 51 percent owned by one or more women
• A business where the management and daily operations are controlled by one or more women

Veteran-owned Small Business

• Have at least 51% Veteran Ownership
• Be registered as a small business with SAM.gov
• Be a small business according to SBA’s size standards
• As of January 1st, 2023, the SBA will now be certifying Veteran-owned small businesses. Read more here.

How do businesses in the private sector define diverse suppliers?

Businesses can set their own definitions for what they consider a diverse supplier. Typically, they build on the definitions above. However, some businesses may find it challenging to create these definitions themselves. At TealBook, we suggest the following definitions for diverse suppliers.

Minority Business Enterprise (MBE)

• A business that is at least 51% owned by, and whose management and daily business operations are controlled by, one or more members of a socially and economically disadvantaged minority group. 
• In the U.S., this is specifically U.S. citizens who are African Americans (Black), Hispanic Americans, Native Americans, Asian-Pacific Americans and Indian Sub-Continent Americans.
• A Minority Business Enterprise is usually certified by a federal, state or local government agency as having met all of the government standards that award eligibility.

Women Owned Business (WBE)

• A business that is at least 51% owned by women
• A business whose management and daily business operations are controlled by women

Small Business Enterprise (SBE)

• Indicates whether the business is small and one which has been certified by a federal, state or local government agency or organization as having met all of the government standards that award eligibility.

Veteran Business Enterprise (VBE)

• A business that is at least 51% owned by and whose management and daily business operations are controlled by veterans.
• In the USA, this specifically requires these veterans be US citizens who have served in the US military, naval or air service. 
• The business cannot be a branch or subsidiary of a foreign corporation, foreign firm or other foreign-based business.

Disabled Veteran Business Enterprise (DVBE)

• A business that is at least 51% owned by and whose management and daily business operations are controlled by veterans with at least a 10% disability.
•  In the USA, this specifically requires these veterans be US citizens who have served in the US military, naval or air service. 
• The business cannot be a branch or subsidiary of a foreign corporation, foreign firm or other foreign-based business.

LGBT Business Enterprise (LGBTBE)

• A business that is at least 51% owned by and whose management and daily business operations are controlled by an LGBT person or persons.
• The business must exercise independence from any non-LGBT business enterprise. 
• In the US, these persons must be U.S. citizens or lawful permanent residents, have its principal place of business (headquarters) in the United States and been formed as a legal entity in the United States.

Certified Aboriginal Business (CAB)

• A business that is at least 51% owned by and whose management and daily business operations are controlled by a person or persons who have aboriginal status in their country of operation. 
• This is a relatively new but growing category, aboriginal businesses sometimes also register as MBEs or DBEs.

HUBZone Certified (HUB)

• A business that is operating in a certified historically under-utilized business zone. 
• There are 7,000 qualified census tracts (HUD) and 900 qualified non-metropolitan counties.

People With Disability (PWD)

• A business that is at least 51% owned by and whose management and daily business operations are controlled by one or more disabled persons.

Women Led Business Enterprise (WLE)

• A business whose management and daily business operations are controlled by one or more women.

Labor Surplus Area (LSA)

• This is a U.S. designation generally defined for a Civil Jurisdiction rather than the entire MSA where the average unemployment number is 20% higher than the average U.S. unemployment rate in the last two calendar years.

How do I prepare a supplier diversity report?

Because reporting standards differ depending on the business, state, or city, there is no national standard reporting template for supplier diversity programs in the US.

While some programs would only need a commitment to supplier diversity, others could need more specific data on the quantity and demographics of diverse suppliers. Companies who participate in supplier diversity programs may generally be required to submit information on their efforts to identify and include diverse suppliers in their supply chains, including the number of diverse suppliers they work with, the proportion of procurement expenditure going to diverse suppliers, and any goals or targets they have established for supplier diversity.

Additionally, as part of their CSR programs, some businesses voluntarily report on their supplier diversity efforts. These reports, which are frequently made public, are intended to show the company’s commitment to promoting diversity and inclusion in its supply chain.

Whether you’re preparing a diversity report for a specific program, or voluntarily publishing one as a demonstration of corporate social responsibility, here is a suggested list of data points to include.

• Introduction: a concise summary of the company’s supplier diversity program’s goals and objectives.

• Information on the demographics of the company’s suppliers, including information on their gender, race, ethnicity, and veteran status.
  • Diversity Categories: the classification of businesses using diverse identifiers like race, ethnicity, gender, and veteran status of the owner(s).
  • Supplier Count: The number of suppliers in each diversity category, and the total number of suppliers.
  • Supplier Breakdown: A breakdown of the percentage of suppliers in each diversity category, compared to the total number of suppliers.
  • Geographical Location: Information on the geographical location of suppliers, including the state, region, and city where they are based.
  • Business Size: Data on the size of suppliers, usually determined by annual revenue or the number of employees.
  • Business Type: Information on the type of business, such as sole proprietorship, partnership, corporation, or limited liability company.
  • Product/Service Category: A breakdown of suppliers by product or service category, such as goods, services, construction, or consulting.

• Data on the amount of money spent on different vendors in the procurement process, split down by category (e.g. goods, services, construction, etc.).
  • Total Procurement Spend: The total amount of procurement spend by the company, including both direct and indirect spend.
  • Spend by Supplier Diversity Category: The amount of procurement spend going to suppliers in each diversity category, as defined in point 2 of the template.
  • Spend by Product/Service Category: The amount of procurement spend going to suppliers by product or service category, as defined in point 2 of the template.
  • Year-over-Year Spend: A comparison of procurement spend in the current reporting period to the same period in the previous year, including any trends or changes in spend.
  • Spend by Geographical Location: The amount of procurement spend going to suppliers in different geographical locations, as defined in point 2 of the template.

• Supplier Outreach and Engagement: Details on the business’s efforts to find, work with, and involve diverse suppliers in its supply chain, including any projects, events, or programs related to supplier diversity. 

• Goals and Targets: Information about the organization’s supplier diversity goals and targets, together with any interim milestones and progress.

• Challenges and Lessons Learned: A description of the difficulties encountered by the business in promoting supplier diversity, together with any lessons learned and suggestions for future development. 

• Summary of the company’s strategies and accomplishments related to supplier diversity.