Editor’s note – This article appeared Wednesday in The Springfield Republican.

By Brooke Thomson and Xiomara Albán DeLobato

Last year, when Associated Industries of Massachusetts (AIM) was looking for a photographer for an event featuring Governor Maura Healey, the association deliberately chose Leonard Underwood Photography of Springfield. This decision wasn’t just about capturing moments; it reflected AIM’s commitment to diversifying its vendor base, a commitment exemplified by Underwood’s participation in the AIM Business Connect supplier diversity initiative.

Similarly, the Western Massachusetts Anchor Collaborative (WMAC), an initiative of the Western Mass Economic Development Council (EDC), is addressing regional challenges faced by women and minority-owned businesses (MWBE) and workforce development issues. For example, Baystate Health collaborated closely with the EDC and Common Capital to pioneer a diverse business mentorship program. The initiative aimed to integrate local vendors into Baystate’s supply chain while fostering their growth.

One notable success story emerged with Friendly Ride Transportation (FRT), which, with EDC support, obtained certification as a minority vendor through the Massachusetts State Supplier Diversity Office. Simultaneously, Common Capital provided technical assistance to FRT, leading to increased utilization of their services by Baystate. This mentorship program serves as a replicable model to enhance contracts with other local, diverse vendors within Baystate and other anchor institutions.

AIM’s connection with Lenny Underwood and the EDC’s work with the Anchor Collaborative   have ushered in new perspectives and talents that the organizations would otherwise have missed.  It’s the essence of supplier diversity – broadening supplier bases, fostering competition, and enhancing supply chain resilience and agility.

Western Massachusetts employers will talk in detail about supplier diversity at an April 25 event co-sponsored by AIM, the EDC, and Verizon.

The event, which will take place from 8:00am-11am at MGM Springfield, will bring minority-owned and women-owned companies together with Western Massachusetts companies seeking to diversify their supply spends. It will also develop strategies to address the persistent digital divide, ensuring equitable internet access for all citizens.

AIM and Verizon are collaborating on a Digital Inclusion Initiative that is empowering BIPOC, women, LGBTQ+, disabled and veteran-owned led businesses to access resources, workforce training, and business-to-business connections to ensure they are digital ready.

The sobering statistics surrounding business ownership and access to capital among underrepresented groups highlight the urgent need to foster supplier diversity, which promises substantial dividends to companies committed to the process.

Black and Latino individuals constitute more than a fifth of the Massachusetts population but own only 3 percent of businesses with employees — less than half the national rate, as revealed by a U.S. Census survey of entrepreneurs. Moreover, business owners of color encounter significant hurdles in accessing capital.

A recent report by The Boston Foundation highlights the widening “capital gap” for Massachusetts businesses of color, which increased by 5 percent between 2019 and 2022. This gap, reflecting the estimated annual unmet demand for financing, ballooned from $574 million to $603 million. Alarmingly, loan denials for businesses of color have surged since 2019, with Black-owned businesses experiencing the highest impact. In 2019, 38 percent of Black-owned businesses faced loan denials, a figure that escalated to 62 percent in 2022. Businesses of color in Massachusetts encounter loan denials at nearly twice the rate of their white-owned counterparts.

Embedded in these challenges, however, lie opportunities for transformative change. An inclusive procurement strategy widens the pool of potential suppliers and promotes competition in the supply base, which can improve product quality and drive down costs. It also helps with recruitment and retention of Gen Y and Gen Z workers who pay close attention to corporate values.

We’ve seen these benefits among the 133 companies participating in the AIM Business Connect initiative and those participating in the Economic Development Council of Western Massachusetts’ Anchor Collaborative. Numerous studies confirm the data.

• McKinsey & Company Study: Companies in the top quartile for racial and ethnic diversity are 35% more likely to exceed national industry medians in financial returns.
• The Hackett Group: Diverse suppliers are 83% more likely to innovate compared to non-diverse suppliers.
• Hackett Group’s Landmark Study: Firms with long-term supplier diversity programs experienced [on average] a 133% greater ROI than those reliant on traditional suppliers, reducing operating costs by 20%.
• Nielsen Research: 66% of consumers are willing to pay more for products and services from socially and environmentally responsible companies.
• USP and Hootology Survey: 52% of respondents want to work for a companies with supplier diversity and inclusion program.

Supplier diversity drives financial returns and also fosters innovation, enhances brand loyalty, and contributes to social and environmental impact.

The process requires commitment from both executive and procurement levels, challenging the status quo to expand supplier bases and support small, minority-owned businesses. Commitment may involve breaking large contracts into smaller ones and providing additional assistance, fostering an environment conducive to diversity and innovation.

Supporting diverse suppliers not only fosters job creation and economic opportunities in historically marginalized communities, but also strengthens social equity and stability.  It’s an essential component of the economic prosperity we collectively strive for as citizens of Massachusetts, ensuring that every individual and community has the opportunity to thrive.

Brooke Thomson is President & CEO of Associated Industries of Massachusetts; Xiomara Albán DeLobato, Vice President of the Western Mass Economic Development Council