Social Procurement Done Right

In recent years, the concept of social procurement has gained significant traction, aligning business practices with social impact.

This progressive approach to procurement goes beyond traditional cost and quality considerations, aiming to create positive outcomes for communities and society at large.

However, the journey towards effective social procurement is not without its challenges.

My First-Hand Experience

Having been on the supplier side of social procurement has given me first-hand knowledge of the challenges faced when buyers operate without a structured framework.

Too often, inexperienced buyers create an uneven playing field. For instance, suppliers with loosely defined impact models and inadequate reporting mechanisms are frequently lumped together with those of us who rigorously adhere to social enterprise standards.

There's also a significant disparity between charity-based and for-profit social enterprises. They are often presented equally when they shouldn’t be, given the fundamental differences in their operational models and impact strategies.

An example that highlights this issue is when certain social enterprises claim to provide employment but pay wages well below the fair living standard. Buyers sometimes fail to probe further, missing critical details about actual income levels. A pertinent case is outlined in this NZ Herald article, which underscores the importance of due diligence in validating social impact claims.

The Importance of Social Procurement

Social procurement is not just a buzzword; it is a strategic approach that holds substantial economic and social significance.

In 2020, the global social procurement market was valued at USD 720 billion, with projections suggesting it could exceed USD 1 trillion by 2025.

In Australia alone, social enterprises contribute approximately AUD 21 billion to the economy annually, employing over 300,000 people.

Investing in social procurement aligns with Environmental, Social, and Governance (ESG) criteria, enhancing shareholder value by mitigating risks, fostering innovation, and improving brand reputation.

Companies that integrate social procurement into their core strategies often see increased loyalty from ethically-conscious consumers and investors. This, in turn, drives sustainable growth and creates a positive feedback loop where businesses thrive alongside the communities they support.

By harnessing the power of social procurement, businesses can unlock market potential, drive inclusive growth, and contribute to a more equitable and sustainable world.

However, the journey towards effective social procurement is not without its challenges. In this article, we'll explore what it takes to get social procurement right and how businesses can harness its potential for meaningful change.

Understanding Social Procurement

At its core, social procurement involves integrating social and environmental considerations into the purchasing process.

Rather than solely focusing on price and specifications, organisations look to support suppliers who demonstrate a commitment to ethical practices, diversity, inclusion, and sustainability.

By leveraging their purchasing power, businesses can drive positive social change, empower marginalised groups, and promote environmental stewardship.

Key Principles for Success:

1. Alignment with Mission and Values: Social procurement should be closely aligned with the organisation's mission and values. By integrating social impact goals into procurement strategies, businesses can ensure consistency and authenticity in their efforts to create positive change.
2. Stakeholder Engagement: Effective social procurement requires collaboration with diverse stakeholders, including suppliers, employees, community groups, and customers. By involving these stakeholders in decision-making processes, businesses can gain valuable insights, foster relationships, and build trust.
3. Transparency and Accountability: Transparency is essential for building trust and credibility in social procurement initiatives. Businesses should openly communicate their goals, criteria, and performance metrics, allowing stakeholders to evaluate the impact of their purchasing decisions.
4. Supplier Diversity and Inclusion: Embracing diversity and inclusion in supplier networks is a cornerstone of successful social procurement. By actively seeking out minority-owned businesses, women-owned enterprises, and social enterprises, organisations can foster economic empowerment and create opportunities for underrepresented groups.
5. Continuous Improvement: Social procurement is an ongoing journey of learning and improvement. Businesses should regularly evaluate their processes, outcomes, and impact, seeking feedback from stakeholders and adapting their strategies accordingly.

Over the past few years, I've assisted organisations in evaluating and refining their social procurement frameworks. My focus is on optimising two critical elements: the Procurement Checklist and Impact Validation processes. Get these two things 80% correct, and the rest will fall into place seamlessly.

Social Procurement Criteria Checklist

1. Ethical Practices: Compliance with local and international labour laws; no use of child labour or forced labour; fair wages and safe working conditions; supplier code of conduct etc.
2. Environmental Sustainability: Implementation of sustainable practices (e.g., waste reduction, energy efficiency); use of eco-friendly materials and products; commitment to reducing carbon footprint etc.
3. Diversity and Inclusion: Active engagement with minority-owned, women-owned, and Indigenous-owned businesses; policies promoting diversity and inclusion within the supplier’s workforce; support for initiatives that promote social equity etc.
4. Community Impact: Contribution to local economic development; support for community projects and social enterprises; engagement in charitable activities and corporate social responsibility (CSR) programs etc.
5. Quality and Performance: Ability to meet product/service specifications and quality standards; demonstrated reliability and consistency in delivery; positive references and track record etc.
6. Innovation: Implementation of innovative solutions that address social or environmental challenges; commitment to continuous improvement and adaptability; collaboration with stakeholders to develop new approaches etc.

Impact Validation Framework

1. Set Clear Objectives: Define specific social and environmental goals you aim to achieve through procurement; align these objectives with broader organisational missions and values etc.
2. Develop Key Performance Indicators (KPIs): Identify measurable indicators to track progress towards your objectives; examples include the number of contracts awarded to diverse suppliers, percentage reduction in carbon emissions, community benefits achieved etc.
3. Baseline Assessment: Conduct an initial assessment to establish baseline data; use this baseline to measure future progress and impact etc.
4. Data Collection and Monitoring: Implement systems for regular data collection from suppliers and other stakeholders; ensure accuracy and reliability of data through regular audits and reviews etc.
5. Stakeholder Feedback: Engage with stakeholders to gather qualitative feedback on the impact of procurement activities; use surveys, interviews, and focus groups to gain diverse perspectives etc.
6. Impact Analysis: Analyse collected data to assess the effectiveness of your social procurement strategy; compare results against baseline data and KPIs.
7. Reporting and Communication: Regularly report on progress and impact to internal and external stakeholders; use transparent and accessible formats, such as annual reports and case studies etc.
8. Continuous Improvement: Use findings from impact analysis to identify areas for improvement; adjust strategies and processes based on lessons learned and stakeholder feedback etc.

Case Studies in Action

Australia Post: Supporting Indigenous Enterprises

Australia Post , a leading postal service provider, has embraced social procurement by prioritising Indigenous suppliers. Through their Indigenous Procurement Policy, Australia Post has established partnerships with Indigenous-owned businesses, providing them with valuable contracts and opportunities for growth. One notable collaboration is with Message Stick Communications , an Indigenous-owned IT and telecommunication services company. This partnership not only supports economic empowerment for Indigenous communities but also promotes cultural awareness and reconciliation within Australia Post. Check out their social procurement and supplier diversity insights report here (PDF).

Unilever: Promoting Fair Trade and Sustainable Sourcing

联合利华 , a global consumer goods company, has long been committed to sustainability and social impact. Their Sustainable Living Plan includes a robust social procurement strategy aimed at enhancing livelihoods and promoting fair trade. Unilever works with suppliers like Fair and Lovely Foundation, which supports women entrepreneurs in India. By sourcing raw materials from smallholder farmers and ensuring fair wages and working conditions, Unilever not only secures high-quality ingredients but also drives positive social and economic outcomes for communities in developing countries.

City of Melbourne: Local Employment Through Social Enterprises

The City of Melbourne has implemented a social procurement framework to address local employment and social inclusion. One standout initiative is their partnership with Yarra View Nursery, a social enterprise that provides employment opportunities for people with disabilities. By procuring plants and horticultural services from Yarra View Nursery, the City of Melbourne supports meaningful employment for disadvantaged individuals while enhancing the city's green spaces. This collaboration demonstrates how local governments can leverage social procurement to drive social and economic benefits within their communities. Check out their procuremnt policy here (PDF).

Start small. Start now.

One of the most frequently asked questions I encounter is, "How can my organisation initiate social procurement?"

My response is that social procurement is not necessarily a new endeavor; rather, it involves integrating impact alignment into your existing procurement framework through three straightforward adjustments: Policy, Supplier Criteria, and Reporting.

Step 1. Develop A Clear Policy:

• Create a social procurement policy that outlines your objectives, criteria, and processes.
• Ensure the policy aligns with your organisation’s mission and values.
• Communicate this policy clearly across the organisation to ensure everyone understands and supports it.

Step 2. Define Supplier Criteria:

• Establish transparent criteria for evaluating suppliers based on their social and environmental impact.
• Focus on ethical practices, sustainability, and diversity and inclusion.
• Research and identify potential social enterprises and diverse suppliers that meet these criteria.

Step 3. Implement and Enhance Reporting:

• Develop systems to collect data and monitor the impact of your social procurement activities.
• Use key performance indicators (KPIs) to track progress and assess the effectiveness of your strategy.
• Regularly report on your social procurement activities and their impact to internal and external stakeholders, using case studies and success stories to highlight benefits and outcomes.

By integrating these three steps into your existing procurement framework, your organisation can start making a meaningful impact right away. Social procurement doesn’t require a complete overhaul of your processes or puts additional cost to your balance sheet — just a focused commitment to aligning your purchasing decisions with positive social and environmental outcomes.

Based on my experience, you can leverage the collaborative nature of social procurement by reaching out to other organisations to gain insights from their journeys.

Organisations engaged in social procurement are typically willing to share their policies and frameworks, as the emphasis is on collective impact and promoting the greater good, rather than maintaining a competitive advantage or safeguarding proprietary information.

Final Thoughts

Social procurement offers a powerful mechanism for businesses to leverage their purchasing power for social good.

By embracing key principles such as alignment with mission and values, stakeholder engagement, transparency, supplier diversity, and continuous improvement, organisations can unlock the full potential of social procurement to create lasting positive impact.

As businesses increasingly recognise the importance of their role in addressing social and environmental challenges, integrating social procurement into core business practices becomes not only a responsibility but also a strategic opportunity for innovation and competitive advantage.

Sources

• Social Procurement: A Comprehensive Guide - Social Traders
• Buy Social Canada - Impact Measurement Guide
• UNEP Sustainable Public Procurement Impact Assessment
• Social Procurement - European Commission
• Social procurement - Yunus Social Business
• Social Procurement Guide - International Labour Organization (PDF)

#EthicalSourcing #SustainableSupplyChain #ResponsibleProcurement #SociallyConsciousBusiness #ImpactProcurement #PurposeOverProfit #EthicalVendors #SocialEnterprise #FairTrade #GreenProcurement #WorkerWellbeing #DiverseSuppliers #SocialProcurement

Dr. Rais Hussin Hj A Mohamed Ariff David Brookes Nicola Nation Paul Graham Alison Leighton Hein Schumacher Muhammad Yunus

About the author

Eric shows up every week to share invaluable insights from his two-decade journey across leadership roles in banking and social entrepreneurship. Based in Ipoh, Malaysia, he passionately promotes mental wellness through his non-profit initiative, My Purpose Today. As a motivational speaker and consultant, Eric guides organisations in developing effective social enterprise strategies and corporate mental wellness programs.