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Corporations seeking an inroad to communities of color and a means to buttress the public's crumbling trust in corporate America, need look no further than their efforts to conduct business with diverse suppliers.

Supplier diversity is the avenue that leads corporations to businesses owned by women and people of color -- vendors who can supply goods and services that range from messenger and janitorial services to legal expertise and technology specialists. Corporations regularly tout their expenditures with businesses owned by women and people of color to show their commitment to inclusion and investment in community, with the highest prize being admittance into the Billion Dollar Roundtable.

The roundtable, which boasts corporate members that include Philip Morris, Ford, General Motors and Verizon Communications Inc. who spend more than $1 billion annually with diverse suppliers. As CEOs boast of their spends with diverse suppliers, to prove their commitment to inclusion and markets of color, their claims are coming under scrutiny as questions arise of the amount of business they exclude from the equation and whether their relationships with diverse suppliers are direct or a few vendors removed, said Ralph G. Moore, president of RGMA, a Chicago-based consultancy that specializes in developing corporate supplier-diversity programs.

"What they spend and how they figure out what they spend is the hottest discussion today, because in reality they shouldn't exclude anything," said Moore, whose company consults with Major League Baseball, Nike, British Petroleum, IBM and Station Casino in Las Vegas, Nev., to name a few.

Many corporations exclude spending in areas where they don't believe businesses owned by women or people of color exist. Expenditures in areas such as utilities, hotels, and rental cars are routinely excluded from corporations' supplier diversity percentages.

"There shouldn't be anything that is excluded," Moore said. "There will always be an asterisk next to the supplier diversity numbers if you start using excludables."

To find businesses owned by women and people of color, supplier diversity executives refer to groups such as the National Minority Supplier Diversity Council (NMSDC), the Women's Business Enterprise National Council or the National Association of Minority and Women Owned Law Firms. Their lists of businesses or firms owned by women and people of color are extensive, but not comprehensive. Xerox Corp., when figuring its spend among diverse suppliers, does not include what it spends on utilities, international payments or manufacturing facilities, inter-company business, major airlines and hotels, said Dan Robinson, manager of global purchasing and market access for Xerox.

"Until there is evidence -- and not the one guy down the street -- but pervasive evidence that minority companies do exist [in a certain area], then that's how we decide and define our exclusions," said Robinson.

Robinson said that around the beginning of the year he asked the NMSDC to produce a list of hotels owned by women or people of color and he was provided a list of small motels without the amenities that Xerox executives require when traveling.

"When thinking about what and how do you measure your performance you measure it on the basis ... of where there is evidence that minority and women-owned businesses exist," said Robinson. "If there is not existence in utilities and some other things, then you don't include those in your numbers because to do so would distort the performance."

Major League Baseball excludes utilities from its calculations of the money it spends with diverse suppliers, said Wendy Lewis, vice president of strategic planning, recruitment and diversity for MLB.

"Anyone accounting to supplier-diversity efforts should benchmark where they do have a choice to spend and where they don't," Lewis said and provided her choices for electricity providers as an example.

Since there is not an electricity provider that is owned by a woman or a person of color, it would be faulty to lump that expenditure in with the amount spent on all suppliers, Lewis said.

"I don't have a choice of a minority-owned or female-owned power company so that should not be accounted in my utilization expenditures because I don't have an option there," Lewis said.

The telecommunications industry traditionally excluded expenditures on telecommunications equipment up until 1997, said Julian Birdsong, director of supplier diversity for Verizon. Moore contends that to exclude is to misrepresent the truth. While there might not be a business in a particular area, such as car rentals that is owned by a woman or person of color today, that doesn't mean that there won't be tomorrow, he said.

"We're just one transaction away from a minority firm buying a company within any area," Moore said. "Companies say they'll exclude their car rental expenses because there is no minority firm that does that but we were looking at a situation recently where a minority group came very close to buying Budget Rent-a-Car."

And, for companies that send executives to Miami, The Crowne Plaza Hotels and Resort franchise partnered with R. Donahue Peebles, an African American and president of Peebles Atlantic Development Corp. to build and own the Royal Palm Crowne Plaza Resort in Miami Beach. The 422-room hotel, which sits on South Beach, is the largest African-American-owned hotel-resort in the nation.

Verizon stopped excluding its expenditures on switching equipment from its spends with diverse suppliers after the industry in 1997 decided to invite diverse suppliers that already worked with the technological aspects of the industry to increase their business by manufacturing that equipment. The industry's largest spend was in switching equipment, which is the computer brains and cabling that allows calls to be processed across the country, Birdsong said.

White-owned vendors manufactured the equipment before but wanted to reduce their costs so they partnered with companies owned by people of color and women The white-owned vendors then sold parts to vendors of color and women. Verizon could then buy the total switching package from diverse suppliers.

"The other approach was where the main vendor or supplier subcontracted the work [to a vendor of color or woman]," Birdsong said. "It was their [the white vendors'] decision on how they went about partnering with minority owned vendors."

The largest percentage of Verizon's supplier-diversity spend comes from the purchase of switching equipment, Birdsong said. Companies can also expect questions about their first-tier and second-tier relationships. Some companies buy goods and services directly from people of color and women -- tier-one suppliers. And some companies insist that their tier-one suppliers make an effort to work with smaller businesses owned by people of color and women.

"Those are going to be very sensitive topics in the next 12 to 18 months as accountability issues continue to hit corporate America," Moore said. "It won't take long for that spotlight on accountability to be focused on supplier diversity."

Dell Computer Corp. has had a tough time finding businesses owned by women and people of color that develop microchips or operating systems for computers, said Stephanie Shipp, senior manager of supplier diversity for Dell.

"For our fiscal year 2002 we spent over a billion dollars with small businesses," Shipp said, which included businesses owned by war veterans, women and people of color, in addition to businesses in Housing and Urban Development districts.

"We drive all of our first-tier suppliers to utilize diverse suppliers within their supply chain in their efforts to support us," Shipp said.

The nation's changing demographics -- among Americans age 70 and up, the ratio of white people to people of color is 5-to-1, while for Americans under 10-years-old, the ratio is 1.5-to-1 -- speak to the fact that to thrive companies will have to understand how to directly tap into communities of color rather than giving it lip service, Moore said.

"The fastest growing customer base is people of color so supplier diversity can't help but be an issue of the future," Moore said. "In this climate of mistrust senior executives can't talk of a number [of expenditures] that can't be defended."

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