Disadvantaged community sourcing

Business Case

Brand reputation

Companies that source from disadvantaged communities strengthen their brand credibility with customers and stakeholders who value social impact.

Informed Decision Making

Disadvantaged community businesses such as indigenous communities bring deep local knowledge, cultural context, environmental stewardship and long-term relationship orientation that strengthens the buyer's understanding of sourcing regions and communities.

Investor confidence

Demonstrating active management of community impact and indigenous rights considerations in procurement strengthens credibility with ESG-focused investors.

Legal and regulatory compliance

Regulations in some jurisdictions include procurement from indigenous and protected communities as a legal obligation, not a voluntary practice. For organizations operating across multiple jurisdictions, non-compliance can entail legal sanctions, not only reputational risk.

Operational continuity

Expanding the supplier base to include diverse communities and supporting businesses owned by disadvantaged communities reduces concentration risk and builds a more diverse network capable of absorbing disruptions.

Stable sourcing communities and sustainable livelihoods

Supplier operations exist within communities that include indigenous peoples, disadvantaged groups and vulnerable populations. Companies that fail to provide fair access and equal opportunity face community opposition and regulatory enforcement that can disrupt operations. Equitable sourcing practices strengthen community trust, stabilize supplier operating environments and demonstrate alignment with indigenous rights frameworks, protecting long-term access to sourcing regions.

Strategy & Planning

Assessment

Initial Action

Define disadvantaged community groups based on the context and analyze the current supplier base to understand the current participation of businesses owned by disadvantaged community groups across key procurement categories, especially those that with multiple disadvantaged characteristics. Identify structural barriers (e.g., language, documentation expectations, cultural norms, digital‑access issues) that make it harder for disadvantaged‑community businesses to participate.

Intermediate Progress

Conduct market analysis to understand the availability of disadvantaged community businesses in relevant procurement categories and regions and identify categories where they are underrepresented relative to community presence and market availability.

Advanced Practice

Conduct qualitative engagement with suppliers and relevant stakeholder organizations to understand.

  • whether procurement processes are perceived as neutral, transparent and accessible
  • procedural or informational barriers related to protected characteristics
  • alignment between stated procurement policies and lived supplier experience

Policy

Initial Action

Include the following:

  • definition of protected characteristics in your supply chain based on international standards, such as Indigenous groups, ethnic minorities, persons with disabilities or other underserved communities
  • commitment to non-discrimination, equal access and fair competition in procurement processes so that supplier selection and engagement processes are fair regardless of ownership or community affiliation
  • determination of which groups are covered under the policy based on the buyer's sourcing regions, community context and legal permissions within the buyer's jurisdiction and if certification would be required under the definition and by which entities.
  • grievance policy and access to an effective non-judicial remedy for affected parties, so supplier have a formal, accessible and non-retaliatory channel to report barriers encountered in procurement processes.
  • where procurement activities involve sourcing from or near indigenous territories, verify that Free, Prior and Informed Consent (FPIC) processes have been conducted with relevant communities prior to engaging those suppliers or supply chains.
Intermediate Progress

In alignment with local laws on procurement or fair competition, require disadvantaged supplier inclusion into category strategies for relevant spend areas based on market underrepresentation.

Advanced Practice

In alignment with local laws on procurement or fair competition, require strategic suppliers to adopt their own disadvantaged community sourcing policies and apply them to their own sourcing decisions.

Targets

Initial Action

Set targets for the percentage of spend with disadvantaged community businesses across the procurement portfolio, with category-specific requirements reflecting their availability within key procurement categories.

Intermediate Progress

Set targets for closing participation gaps between indigenous and disadvantaged suppliers and market availability, with category specific requirements for spend with disadvantaged groups reflecting the availability within key procurement categories.

Advanced Practice

Set targets for the percentage of strategic suppliers with their own active disadvantaged community business engagement programs or spend commitments within their supply chains.

Supplier Selection

Screening

Initial Action

In the screening process, consider whether disproportionate qualification requirements exist that are likely to disadvantage certain businesses. Add questions to RFPs to identify suppliers representing underrepresented or disadvantaged communities:

  • business location and ownership
  • company size and characteristics (revenue, employees)
  • community affiliation
  • relevant certification to verify community identity, such as national jurisdiction-specific verification, third-party certification, notarised declaration or recognition by a representative community organisation
Intermediate Progress

Request information from suppliers on their own disadvantaged community sourcing practices.

Advanced Practice

In alignment with local laws on procurement or fair competition, require suppliers to provide verified evidence of existing spend with or active procurement programs for disadvantaged community businesses as a condition of eligibility to respond to RFPs in relevant categories.

Selection

Initial Action

Establish evaluation criteria to ensure fair evaluation which does not disadvantage indigenous, ethnic and underrepresented communities.

Intermediate Progress

In alignment with local laws on procurement or fair competition, allocate points in selection criteria for suppliers that demonstrate active engagement with disadvantaged community businesses.

Advanced Practice

In alignment with local laws on procurement or fair competition, allocate points in selection criteria for the depth and maturity of suppliers' own disadvantaged community sourcing programs.

Contracts

Initial Action

Review contract terms with key disadvantaged community groups to ensure contract terms are supportive of business models and are reflective of cultural considerations.

Intermediate Progress

Include contract clauses that require suppliers to track and report their engagement with disadvantaged community suppliers, where relevant and proportionate to the category.

Advanced Practice

Include contract clause that requires engagement of disadvantaged suppliers appropriate for market availability. Where operations involve supply chains touching indigenous territories, include contractual clause requiring counterparty compliance with Free, Prior and Informed Consent obligations.

Supplier Engagement

Goal Setting

Initial Action

Communicate the buyer's commitment to disadvantaged community sourcing to all suppliers and set goals together to identify and engage disadvantaged community businesses in suppliers' own sourcing.

Intermediate Progress

Establish joint disadvantaged community sourcing improvement plans with strategic suppliers, including targets for increasing spend with indigenous and community-owned businesses in their own supply chains and timelines for achieving them.

Advanced Practice

Co-develop multi-year disadvantaged community sourcing roadmaps with strategic suppliers, including measurable targets for growing spend with community-owned businesses and expanding community business participation in their own supply chains.

Capacity Building

Initial Action

Provide suppliers with introductory guidance on disadvantaged community sourcing, covering how to identify disadvantaged community-owned businesses, relevant certification and recognition programs and how to begin engaging them in their own procurement.

Intermediate Progress

Provide deeper training to suppliers on implementing disadvantaged community sourcing practices, including how to identify and certify protected community-owned businesses, how to set inclusion targets and how to remove barriers to participation.

Advanced Practice

Host training for tier 2 and 3 suppliers, equipping them to identify, qualify and prioritize indigenous and community-owned businesses in their own sourcing decisions.

Data

Initial Action

Request baseline information from existing suppliers on whether they qualify as a protected or disadvantaged community-owned businesses or whether they currently engage these businesses in their own supply chains.

Intermediate Progress

Establish regular reporting from suppliers on their disadvantaged community sourcing practices in their own supply chains and expand data collection to tier 2 and 3 suppliers.

Advanced Practice

Require verification of supplier disadvantaged community sourcing practices and community-owned business spend claims across supply chain tiers.

Advisory

Initial Action

Provide guidance to suppliers on the buyer's definition of indigenous and disadvantaged community businesses and the steps required to identify and qualify them as part of their own supplier base.

Intermediate Progress

Provide technical guidance to suppliers on developing their own disadvantaged community sourcing policies, including supplier qualification criteria, spend tracking mechanisms and community engagement approaches.

Advanced Practice

Support strategic suppliers in embedding disadvantaged community sourcing into their own procurement governance, including category strategies, supplier selection criteria and spend reporting on community-owned businesses.

Financial Support

Initial Action

Connect protected and disadvantaged community businesses with financing options and business development resources.

Intermediate Progress

Offer preferential payment terms or early payment options for suppliers demonstrating active progress on disadvantaged community procurement commitments.

Advanced Practice

Link incentives such as contract extensions, volume increases, preferred supplier status, multi-year agreements or pricing adjustments to verified achievement of disadvantaged community business spend commitments across the supply chain.

Project Partnerships & Innovation

Initial Action

Create dedicated opportunities for indigenous and disadvantaged community businesses to propose sustainability project partnerships and innovative approaches to sustainable product development.

Intermediate Progress

Ensure disadvantaged community business inclusion in innovation challenges or pilot programs and create dedicated opportunities for them to participate in joint product or service development initiatives.

Advanced Practice

Partner with industry peers, community business networks, international organizations and civil service organizations to build systemic disadvantaged community sourcing infrastructure across shared supply chains or engage in disadvantage community support projects.

Continuous Improvement

Metrics

Initial Action

Track the percentage of suppliers in the active base that are protected or disadvantaged community-owned businesses and monitor progress against the baseline participation target set in Strategy, including reducing disparities between participation and award rates for disadvantaged communities where suppliers demonstrate comparable capabilities.

Intermediate Progress

Track progress against spend targets for disadvantaged community suppliers by category and monitor whether participation rates are improving over time.

Advanced Practice

Require all suppliers to provide metrics on disadvantaged community suppliers participation in supplier development programs and include in progress reporting.

Scorecards

Initial Action

Include completion of disadvantaged community sourcing baseline data requests as an indicator in supplier performance reviews.

Intermediate Progress

Include the share of suppliers' own procurement spend with disadvantaged community suppliers as an indicator in supplier performance reviews.

Advanced Practice

Weigh disadvantaged community procurement performance in strategic supplier scorecards, with top performers receiving preferential weighting in tenders and bottom performers required to submit improvement plans.

Impact Verification

Initial Action

Gather feedback from suppliers on effectiveness of supplier engagement programs on disadvantaged community procurement.

Intermediate Progress

Assess whether supplier engagement and capacity building initiatives are improving disadvantaged community procurement practices among strategic suppliers.

Advanced Practice

Measure the economic impact of disadvantaged community sourcing spend, including business growth, employment and income generation attributable to the buyer's procurement relationship.

Sources consulted

SME Enablement Gender responsive procurement