Social procurement: Using your purchasing power to create a positive social impact

Social procurement, the concept of using your organisational purchasing power to generate positive social outcomes, while not new, is gaining momentum as both governments and businesses increasingly recognise the power that their spend has to create positive social change. In its simplest form, social procurement occurs when organisations select to purchase from a social enterprise in order to create positive social outcomes.

One of the most common social outcomes sought is the creation of additional jobs for disadvantaged people, with estimates suggesting that for every $100,000 spent on social procurement, 1.5 jobs are created for disadvantaged Australians.

While social procurement can take many forms, the Centre for Social Impact (CSI) has categorised the activities into four broad approaches:

  1. Supplier focus: Purchasing directly from social enterprises, such as Indigenous businesses and disability employment enterprises
  2. Contract focus: Purchasing from commercial providers and incorporating social impact clauses and criteria into tender documents and contracts
  3. Policy focus: Implementing social procurement policies and regulatory requirements to ensure basic adherence to social norms and standards
  4. Market development focus: Working in partnership with other organisations to create new innovative services to address complex social issues

Of these four approaches, research suggests that (1) direct engagement with social enterprises or (2) encouraging existing vendors to sub-contract to these suppliers are the most common approaches to implementing social procurement activities.

To see first-hand the positive impact buying goods and services from social enterprises can have, Deloitte’s Social Impact team recently visited Beehive Industries, a social enterprise based in Sydney that supports over 200 seniors, persons with disability and long term unemployed. Beehive Industries provides packaging, assembly and mail-house services to their corporate clients, such as Telstra and NSW Racing, while also providing an environment where seniors, persons with disability and the long term unemployed can engage in meaningful activities. According to Brendan Lonergan, CEO of Beehive Industries, employment for one of these people can be transformational, not only for that person but also for their family by “giving them a sense of purpose and belonging and by making them feel that their contribution is valued in a socially inclusive environment.”

For governments, social procurement acts as a strategic tool that leverages existing public funds to deliver targeted social value, helping them achieve broader government objectives, such employment and social inclusion, without requiring additional funding. The ability to achieve multiple strategic objectives while using a single source of pooled funds means that governments at all levels across Australia, which spend around $141 billion per annum on procured goods and services, are developing strategies aimed at improving and expanding their social procurement activities. For example, the Commonwealth Government has recently committed to place 3% of its procurement contracts with Indigenous suppliers, which is an estimated 1,500 contracts or $135m each year. While this trend is encouraging, there is still a significant amount of untapped potential not only in the government sector, but also in the corporate sector, which spends a further $500 billion per annum.

For corporations, social procurement can serve as an effective way to achieve corporate social responsibility (CSR) objectives and strengthen their social license to operate. In a world where consumers are demanding more from the brands they buy, as well as rewarding those whose services and products are both good for them and good for society, engaging in effective social procurement can create benefits not only for society, but also for the organisation itself. An example of this is NAB Group’s Supplier Sustainability Program (GSSP), which in addition establishing sustainability principles and requirements for its suppliers; it also encourages purchases from indigenous businesses, women-owned businesses, Australian Disability Enterprises (ADE’s) and social enterprises by NAB’s supply chain partners. In its 2017 Cone Communications CSR study, Cone found that that 87% of consumers would purchase a product because a company advocated for an issue they cared about, and 78% want companies to address important social justice issues. In this new world of socially minded consumers, ‘buying social’ can not only strengthen brand capital and improve organisational reputation, but it can also help inspire employees and improve engagement levels.

Despite social procurement being evidently both good for business and good for society, its transformative potential has yet to be realised, particularly in the private sector. The tide, however, appears to be shifting. In recognition of this shift, Social Traders recently announced that it would now focus exclusively on social procurement by connecting mainstream business sector and government with social enterprises. Its goal is to create 1,500 jobs over the next four years by building a community of 95 Social Traders buyer members and 600 Social Traders certified social enterprise suppliers.

We believe that social procurement has immense potential to not only create positive social impact, but also to generate real business value. If you would like to learn more about how Deloitte can help your organisation use its purchasing power create positive social impacts please contact either Tharani Jegatheeswaran, John O’Connor or Vivian Stephens. If you would like to learn more about the great work being done at Beehive Industries please visit them online here, or email Brendan Lonergan directly.

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