Employers around the country have varying definitions of what it means to be a diverse company. For the restaurant chain Denny's, it includes a special focus on supplier diversity.

Business supplier diversity programs ensure that potential vendors have fair and equal chances to compete for business, and can also provide a way to support local economies, according to experts. And while such efforts would seemingly fall to procurement teams, sources say diversity and inclusion professionals may be in a good position to provide additional insight.

'Looking at the supply chain with a different lens'

"Supplier diversity professionals provide opportunities for diverse companies to succeed," Leonard Greenhalgh, professor of management emeritus and director of diversity business programs, Tuck School of Business at Dartmouth, told HR Dive. "When they succeed, they enhance the local economy by creating local wealth, positive role models, career trajectories and hope." As a result, diverse suppliers attract and develop a good workforce, Greenhalgh said. "But, more importantly, they gain a reputation in their industry as being a dependable supplier — which leads to referrals as well as repeat business."

Amid the COVID-19 pandemic, supplier diversity is increasingly seen as a way to assist diverse, small businesses in need of economic assistance. Several banks in a CEO-led initiative for diversity and inclusion, for example, have "added their D&I executive to their supplier diversity team," Anita Ward, the chief development officer at Salary Finance, told HR Dive in a recent interview. "A D&I professional can be looking at the supply chain with a different lens than your purchasing executive." A diversity scorecard created by the program's financial group includes a measure of supplier diversity, she said. Denny's President and CEO John Miller joined the organization in 2017, noting the national restaurant chain's commitment to supplier diversity.

Denny's workers have seen corporate furloughs, staff reductions and franchise closures during the pandemic. But as same-store sales improved, Denny's announced in July plans to hire 10,000 restaurant-level employees by the end of 2020, Restaurant Dive reported. And Denny's supplier diversity program remains "robust," according to Director of Supplier Diversity Michelle Hunt. 

"The restaurant industry is one of the most negatively impacted due to the pandemic, but the good news is that we have not lost any diverse suppliers due to COVID-19," Hunt told HR Dive in an email. "While we don't have COVID-19-specific enhancements related to the supplier diversity program, we are examining where the needs and opportunities exist as our restaurants are opening back up," Hunt said. The company is also "conducting wellness checks" on suppliers, she said. 

Supplier diversity and Denny's focus on DEI

A "minority business supply chain initiative" developed as a result of the civil rights movement, which then turned into an economic rights movement, Greenhalgh said. President Richard Nixon signed an executive order creating in 1969 an office now known as the Minority Business Development Agency, he said. The agency, part of the U.S. Department of Commerce, "fostered the establishment of the private sector National Minority Supplier Development Council [NMSDC]," Greenhalgh said. "Minorities own almost 30% of America's businesses, which employ 7.2 million Americans and generate over $1 trillion a year in revenue," according to the U.S. Census Bureau.

At Denny's, "the supplier diversity program is one pillar of our larger commitment to diversity, equality and inclusion, [DEI]" Hunt said. There was a tipping point in the restaurant chain's history, which led to a corporate enhanced focus on DEI. In 1994, the U.S. Department of Justice and Denny's reached a $54.4 million settlement as a result of a class-action discrimination lawsuit filed by more than 1,000 Black customers who said they were refused service at Denny's locations across the country and subjected to a discriminatory corporate culture, according to the Los Angeles Times. 

"The class-action lawsuit in the early 1990s was a shameful moment in our history," Hunt said. "It was also a moment of awakening for the entire business. From that point on, we have been determined to not only address issues of diversity, equality and inclusion, but to actively incorporate these values into our operations and every level of our business strategy."

Denny's embarked on a corporate transformation, Hunt said. "We're proud of the strides we've taken over the past 25 years to reshape our entire corporate culture and business operations, but we know that we're not done with this work," she said. "There is always more progress to be made."

Denny’s has spent more than "$2 billion with diverse and disadvantaged suppliers since the supplier diversity program was launched" in 1993, Hunt said. Eligibility for the program is first based on a company's identification "as a for-profit enterprise located in the U.S. (or its trust territories and operates as an independent business entity)," she said. The business must be at least 51% owned, operated and controlled by U.S. citizens who are members of one or more of the following groups: women, veterans, LGBTQ+ individuals, individuals with disabilities, or those who are "African American, Hispanic, Asian Pacific American, Native American or Asian Indian American," according to the program's website. Businesses must also provide proof of certification from organizations such as the NMSDC, for example. "We also have a Supplier Code of Conduct, which details how we expect our partners to conduct business internally, with Denny's, and with their customers," she said. 

In 2019, "diverse and disadvantaged businesses represented 14% of Denny's purchases," Hunt said. "The majority of these businesses are tier 1 suppliers," she added — those that provide services directly to a company.

But there are instances in which companies may have to rely on "tier 2" suppliers if there are relatively few diverse suppliers in an industry, according to Greenhalgh. "A good example is a defense contractor supplying classified products to the government," he said. "There are relatively few diverse suppliers in this space, so it's hard to meet the defense contractor's inclusion goals at tier 1, but the corporation has a lot of clout and expertise to ensure diverse inclusion further down its supply chain."

Denny's spend with diverse suppliers has been at "10% or more for over 10 years," Hunt said. "Once you become a diverse supplier to Denny's, our goal is to keep and grow your role as a supplier inside and outside of our organization," she explained. "We continue to identify and successfully source new diverse suppliers and look forward to identifying more areas of opportunity as our organization expands."