What Is Supplier Diversity? Benefits and Tips (2027)

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A type of procurement practice, supplier diversity gives businesses owned by underrepresented groups a fair opportunity to compete for contracts. It establishes a process for finding qualified suppliers and monitoring company spending with them.

Government contracting shows the volume of business available when procurement includes smaller vendors, such as businesses owned by diverse groups. The US federal government awarded nearly 28% of its prime contract dollars to small businesses in fiscal 2025. Those contracts totaled $179 billion, according to the US Small Business Administration.

This guide covers how supplier diversity programs work and how to establish measurable goals for your company.

What is supplier diversity?

Supplier diversity involves purchasing goods and services from businesses owned by people from underrepresented groups. Certification programs generally require these businesses to be at least 51% owned, operated, and controlled by qualifying individuals, such as women or members of minority groups, according to NMSDC and WBENC.

What qualifies as a diverse supplier?

A diverse supplier is a business that meets the ownership and control requirements for a recognized supplier category. Categories include minority-owned, women-owned, LGBTQ+-owned, disability-owned, and veteran-owned businesses.

Eligibility typically depends on these factors:

• Ownership. Qualifying individuals generally own at least 51% of the business.
• Control. The qualifying owners have authority over long-term business decisions.
• Management. The qualifying owners manage daily operations.
• Business status. Certain programs require a for-profit business or impose citizenship and location rules.

These criteria appear in the published standards from NMSDC, WBENC, and Disability:IN.

Third-party certification verifies eligibility through business records and ownership documentation. It may also include interviews or a site visit.

Per NMSDC, certification simply confirms that a supplier meets the program’s criteria, but it does not guarantee a contract or influence a buyer’s purchasing decision.

Supplier diversity examples and categories

Supplier categories give businesses a consistent way to identify diverse suppliers. They also provide a structure for verifying eligibility and reporting how much the company spends with each group.

Common diverse supplier categories

Supplier diversity programs commonly recognize:

• Minority-owned businesses. Businesses owned and controlled by members of qualifying minority groups, as certified by the NMSDC.
• Women-owned businesses. Businesses owned and managed by women, which the WBENC provides certification for.
• LGBTQ+-owned businesses. Businesses owned and controlled by LGBTQ+ individuals, certified by the NGLCC.
• Disability-owned businesses. Businesses owned and managed by people with disabilities. Disability:IN certifies these businesses through its DOBE program.
• Veteran-owned businesses. Businesses owned and controlled by veterans or service-disabled veterans. The SBA VetCert program verifies eligibility for federal contracting programs.
• Native-owned businesses. Businesses owned by Native American individuals, tribes, or Alaska Native entities. Verification requirements depend on the purchasing program.

Merchant example: Eighth Generation

Eighth Generation is a Native-owned lifestyle brand founded in 2008 by Louie Gong, a member of the Nooksack Tribe. The Snoqualmie Tribe purchased the company in 2019, making Eighth Generation a tribally owned business.

The company sells home goods and apparel featuring work by Native artists, licensing their artwork rather than purchasing the designs outright. Artists remain involved during product development and retain a financial interest in their work. CEO Colleen Echohawk explains in a Shopify Masters interview that the company wants its artists to feel ownership over what they release.

Benefits of supplier diversity

• Innovation and new product ideas
• Customer loyalty and market reach
• Supply chain resilience
• Social and economic impact

Supplier diversity brings more qualified vendors into the procurement process. The benefits come from the products and market knowledge those suppliers offer. Here are some examples:

Innovation and new product ideas

A larger supplier pool gives buyers more products and capabilities to evaluate. It also introduces vendors with specialized knowledge. For example, a supplier that produces regional spice blends brings ingredients and formulation experience to a food manufacturer starting a product line.

The Census Bureau reported 36.4 million US employer and nonemployer businesses with $50 trillion in receipts in 2023, which included a range of diverse business owners. Women owned 14.2 million businesses with $2.8 trillion in receipts. Hispanic-owned employer firms accounted for 496,000 businesses and $730.3 billion in receipts. Black or African American–owned employer firms accounted for 201,000 businesses and $249 billion in receipts.

Customer loyalty and market reach

Suppliers that already sell to a particular region or customer group know what people buy and what they struggle to find. That experience helps a retailer choose products that fit the market and describe them in terms customers recognize.

Customer loyalty comes from what that relationship produces for shoppers. A grocer that consistently stocks hard-to-find regional staples gives customers a reason to return rather than visit another store to find them.

Supply chain resilience

Adding approved vendors in different regions reduces dependence on one supplier. If a primary vendor faces a delay or capacity limit, procurement teams have another source available.

A larger vendor pool also creates more competition for company contracts. Buyers can compare pricing, lead times, and performance before awarding business.

Social and economic impact

Supplier diversity gives underrepresented business owners access to corporate bidding processes and approved vendor networks.

Winning a contract brings revenue from a new customer and establishes a performance record with a corporate buyer. Suppliers use that record when competing for future work.

This may align with your company’s corporate social responsibility goals and can demonstrate your business’s commitment to creating positive and lasting change.

What is a supplier diversity program?

A supplier diversity program is an ongoing procurement process for finding, verifying, and purchasing from diverse suppliers. It defines which businesses qualify and sets rules for including them in sourcing decisions.

The work continues after a supplier enters the company’s vendor database. Procurement teams consider diverse suppliers when contracts open or come up for renewal. They also check certification status and review how much business the company awards through the program.

Key parts of a supplier diversity program

A supplier diversity program has four parts:

1. Program goals. Defines which supplier categories the company will include and what it intends to achieve. Each goal starts with a baseline and includes a target, an owner, and a review date.
2. Supplier discovery. Creates a pipeline of qualified businesses before contracts come up for bid. Procurement teams build that pipeline by reviewing current vendors and searching recognized certification directories.
3. Eligibility verification. Confirms that each supplier meets the program’s ownership and control requirements. The company records accepted certifications with the vendor profile and monitors their expiration dates.
4. Program measurement. Records which diverse suppliers bid and which win contracts. Spending and renewal data reveal whether those suppliers are receiving sustained business through the program.

Program example: Odd Bunch supplier processes

Odd Bunch founder Divy Ojha began by visiting farms across Ontario and speaking with growers about food waste. He made several visits before discussing a commercial relationship.

Those conversations taught him which products farmers struggled to sell and how supply changed throughout the year. In a Shopify Masters interview, Ojha describes those early weeks as a period of securing supply and confirming that farmers faced the problem he wanted to address.

Odd Bunch later built relationships with more than 80 suppliers. The company found multiple suppliers for each type of produce because individual items went out of season or sold out. It also changed its subscription model so the contents of each weekly box reflect the produce available from suppliers.

That supplier process continued as Odd Bunch grew from 87 customers to more than 100,000 households. The company still works with growers, checks available supply, and adjusts its weekly boxes around what farmers have to sell.

Supplier diversity certification and registration

Supplier registration and supplier certification serve different purposes:

• Registration: Creates a vendor record with a buyer
• Certification: Confirms that an independent organization or government program has reviewed the business against published eligibility rules

Registration is usually buyer-specific. A supplier enters its business and payment details in the buyer’s vendor portal. It may also select an ownership category or upload an existing certificate. Registering with one company does not place the supplier in another company’s system.

Certification is a separate application. Under the NMSDC certification process, applicants submit documents covering ownership, control, and daily operations. Certification specialists review the application and may conduct interviews or site visits. Approved suppliers have to renew their certification each year.

A certified supplier still has to register with each buyer it wants to work with. Neither certification nor registration guarantees an invitation to bid or a contract.

What certification verifies

Certification verifies that a business meets the ownership requirements for a specific category. It also confirms that the qualifying owners exercise control over the company.

Certifiers review:

• Ownership. Formation documents and equity records confirm who owns the business. Financial records establish how the qualifying owners acquired their interest and how they share in profits and losses.
• Control. Bylaws and operating agreements establish who has authority over major decisions. Reviewers also check whether another owner or company holds veto power.
• Management. Job titles and work histories establish who runs the business each day. The qualifying owners hold the authority expected of their ownership position.
• Operations. Licenses, invoices, and tax filings confirm that the company is active. Reviewers may also examine whether it operates independently from another business.

Eligibility rules vary by program and may depend on the owner’s citizenship or residency, the company’s location, and its size.

Certification confirms that a supplier meets the program’s ownership and control standards. Buyers still need to assess product quality and whether the supplier has the capacity to fulfill the contract.

Certification organizations to explore

Certification directories give procurement teams a place to find businesses whose ownership has already been reviewed. Here are some organizations you may want to look into:

United States

US-based organizations include:

• National Minority Supplier Development Council (NMSDC). Certifies eligible minority-owned businesses in the US.
• Women’s Business Enterprise National Council (WBENC). Certifies women-owned businesses in the US.
• National LGBT Chamber of Commerce (NGLCC). Certifies LGBTQ+-owned businesses headquartered in the US.
• Disability:IN. Certifies disability-owned businesses. Its programs also cover veteran disability-owned and service-disabled veteran disability-owned businesses.
• National Veteran Business Development Council (NVBDC). Certifies veteran-owned and service-disabled veteran-owned businesses for corporate supplier programs.
• National Veteran-Owned Business Association (NaVOBA). Offers VBE and SDVBE certifications for veteran-owned businesses.
• US Pan Asian American Chamber of Commerce Education Foundation (USPAACC). Certifies Pan Asian American and other minority-owned businesses.
• US Small Business Administration (SBA). Manages certifications for federal contracting programs, including WOSB, VOSB, SDVOSB, 8(a), and HUBZone.

Canada

Canadian organizations include:

• Canadian Aboriginal and Minority Supplier Council (CAMSC). Certifies Indigenous-owned and minority-owned suppliers in Canada.
• Women Business Enterprises Canada Council (WBE Canada). Certifies Canadian women-owned businesses.

United Kingdom

UK organizations include:

• MSDUK. Certifies ethnic minority-owned businesses based in the UK.

International

International organizations include:

• WEConnect International. Certifies women-owned businesses in 60 countries.

Certification requirements change and buyers set their own acceptance rules. Confirm current criteria with the certification organization and the buyer. This information is general guidance, not legal advice.

Supplier diversity metrics, spend, and reporting

Contracts and payment records show how your program is progressing. Use them to understand which suppliers receive business and the value of those purchases. Comparing the same figures each quarter or year makes changes easier to track.

Metrics to track

Choose metrics based on the company’s size, supplier base, and reporting objectives.

Start with direct spend and active suppliers metrics when the program is small. Add Tier 2 reporting when prime contractors account for a large share of purchasing. Economic impact fits into reports that address jobs or wages.

In Supplier.io’s 2025 State of Supplier Diversity report, 87% of the 225 program leaders surveyed reported continued executive backing for supplier diversity. Two-thirds (67%) of programs expanded their enriched reporting in 2025. Economic impact reporting also continued to rise, with 43% of programs measuring jobs and wages.

Spend reporting examples

Organizations present supplier diversity spend in several ways. These examples illustrate reporting approaches, but they may not be targets for every business:

• Spend by supplier category. PG&E’s 2025 annual report pairs each spending total with its share of overall procurement. The company reported more than $548 million in spending with disabled veteran business enterprises, equal to 4.34% of procurement. It reported $3.4 million with LGBTQ+ business enterprises, equal to 0.03%.
• Economic impact reporting. BD’s 2025 report begins with $762 million in direct purchases from small and inclusive US suppliers. It then uses an input-output model to estimate $1.98 billion in economic output and an employment impact of 7,335 jobs.
• Goal-based scorecards. The SBA small business procurement scorecard reports federal contract spending by agency and supplier category. Each agency receives a grade based on its contracting goals and year-over-year supplier participation.

Supplier diversity best practices checklist

• Secure executive buy-in and support
• Set clear and measurable goals
• Build cross-functional ownership
• Maintain a supplier database or registration path
• Share the program with suppliers

To capitalize on the benefits of supplier diversity, approach it as an ongoing commitment. Use this checklist to build a successful supplier diversity program:

Secure executive buy-in and support

Executive backing gives the program access to a budget, procurement data, and staff time. A senior sponsor also assigns responsibility when purchasing decisions involve several departments.

Present executives with the current supplier baseline and a first-year plan. State who will run the program, which teams must participate, and what tools or funding they require. The sponsor’s role then continues through scheduled progress reviews and decisions about additional resources.

Set clear and measurable goals

When establishing your supplier diversity program, set specific, measurable goals for partnering with diverse suppliers. Consider targets such as:

• Increase spending with certified diverse suppliers by 20% within the next 12 months.
• Expand the number of diverse suppliers in our database by 50% by the end of the fiscal year.
• Have at least 30% of our Tier 1 suppliers be diverse businesses within the next 24 months.
• Initiate supplier outreach with at least 15 women-owned business enterprises during Q3.

Build cross-functional ownership

Supplier diversity touches several parts of the business:

• Procurement. Finds and vets suppliers.
• Finance. Confirms spending.
• Department leads. Assess whether vendors meet their requirements.

One program owner coordinates the work and reports progress.

A small business doesn’t need a formal team. The owner sets the goals and approves new vendors. The person responsible for purchasing keeps supplier records, and the bookkeeper tracks spending. Document each responsibility and assign a named owner.

Maintain a supplier database or registration path

To streamline the procurement process and engage with qualified businesses, create a list of the diverse suppliers you may want to work with and share it with others. Create your own database with key capabilities, certifications, and contact information.

Spirited Away, founded by Douglas Watters, is one of New York City’s innovative booze-free bottle shops. Douglas’s fascination with non-alcoholic beverages inspired him to create Dry Atlas, which functions as a supplier database showcasing diverse alcohol-alternative businesses.

“By creating a directory on Dry Atlas, we hope to normalize and demystify this space for consumers worldwide,” Douglas says on an episode of the Shopify Masters podcast. “The site is a directory of about 1,100 non-alcoholic liquids. It’s most of the world’s non-alcoholic spirits, wines, beers, cocktails, and a lot of content, articles, and interviews that we hope will educate consumers.”

Share the program with suppliers

Actively promote your supplier diversity program through targeted outreach to attract suppliers. Share success stories and case studies detailing how your company benefited from working with diverse suppliers, highlighting their unique capabilities and contributions to your success.

Focus on highlighting the potential of diverse businesses rather than simply promoting your own initiatives. Use social media platforms, industry publications, and diversity-focused media outlets to share these stories and demonstrate your commitment to supplier diversity.

Encourage diverse suppliers to register on your company’s supplier portal, and use this database to identify potential partners for upcoming procurement opportunities.

Supplier diversity software, databases, and portals

For a small base, a spreadsheet and shared document folder are often enough to keep track of your suppliers. The spreadsheet can have supplier details and spend totals, and a separate folder can store certificates, contracts, and related records. Consistent fields, a review schedule, and one person responsible for updates keep this approach workable.

Dedicated tools become helpful as more suppliers, teams, and reporting requirements enter the program. A portal maintains the supplier record and gives suppliers a place to submit documents and update their information.

Program software can add features such as renewal reminders, approval workflows, and reporting dashboards.

What supplier diversity tools can track

The information recorded depends on the platform and how the business configures it. Businesses commonly track:

• Supplier profiles. Legal name, contact details, locations, industry, experience, goods and services, and responses to registration questions.
• Diversity and certification. Ownership category, certification organization, certificate number, data source, expiration date, and whether the status is self-reported or independently verified.
• Sourcing activity. Invitations to bid, proposals received, introductions to purchasing teams, contracts awarded, and contract dates.
• Supplier spend. Purchases by supplier and diversity category, including direct and indirect Tier 2 spend where applicable.
• Performance and compliance. Delivery records, contract requirements, quality issues, corrective actions, certification renewals, and missing documentation.

Keeping these records in a consistent format gives you a reliable basis for spend reports and certification reviews. The data still requires maintenance, though. Certification details need regular updates, and spend records need to match the correct supplier before they are included in a report.

Shopify ecosystem considerations

Shopify’s native tools make retail partnerships and multivendor commerce a priority. Stores still need a separate process for reviewing ownership documentation and reporting supplier diversity spend.

Eligible merchants can use Shopify Collective to discover suppliers and products, import items, and send orders to suppliers for fulfillment. Note that Collective doesn’t verify diverse ownership. Its “Verified tracking” badge simply refers to carrier-verified shipment tracking, not a supplier’s ownership status. Shopify also applies store, location, currency, and payment requirements to Collective participation.

Several Shopify App Store tools handle other parts of supplier and vendor operations:

• Syncee for Suppliers. Lets brands list products in a wholesale and dropshipping marketplace. It also synchronizes product updates, paid orders, and tracking information.
• Mothership Retailer. Imports supplier products, updates inventory and pricing, routes orders, and receives fulfillment details from partner stores.
• Multi Vendor - Puppet Vendors. Provides vendor dashboards, order routing, commission management, payouts, and sales reporting for multi-vendor or consignment stores.

Review current pricing and data access before installing an app, and confirm that it exports the records required for the program’s reports.