The value of social procurement to Corporate Australia

Corporate Social Procurement in Australia
Bonwick, M. and Daniels, M. (2014)
Social Traders and The Faculty

This piece of research is the first report of its kind in Australia and quite possibly in the world that seeks to specifically know more about corporate social procurement including what’s being done, how it’s being done, what the impediments are and how corporate social procurement (CSP) can be supported to grow.

The report is timely in that it has been able to capture social procurement at a time when there are some really good case studies and a growing appetite for CSP as evidenced in the report where participants identified that five were socially procuring in 2012 but by 2014 30 of the 31 participants would be socially procuring. Whilst this report does not claim to represent the views of corporate Australia and many of those who participated in the research were already engaged or undertaking social procurement, it reflects a shift in the corporate landscape towards integrating the creation of positive externalities into their supply chain.

The research identifies that this trend has been supported by the emergence of practice and movements such as Fairtrade – ensuring high labour standards in developing countries, Minority Suppliers – prioritising suppliers run by minority groups, Sustainable Procurement – initially used to advance the environmental agenda it can also be applied to addressing social issues, Social Enterprise – the emergence of this model as a supplier to corporates and Shared Value – the belief that doing good can actually solve business problems and create greater value.

In trying to understand if social procurement creates social value it is important to reflect on the audience. For corporate Australia, the drivers for social procurement are largely business drivers. CSP is a way of building brand capital through community relations and corporate citizenship. Interestingly CSP is also seen as a positive employee engagement tool for procurement staff, a profession with high staff churn.

The areas providing the greatest benefit were in the areas of local economic development, and employment and training for disadvantaged groups but there were many other well supported motivations. The motivations reflected business specific issues as well as the social and community context in which they operated, but also highlight the flexibility of social procurement to deliver different and multiple social impacts in different settings.

Corporates tended to prefer working directly with social benefit suppliers who are set up to deliver goods and services and social impact such as indigenous businesses, social enterprises, fair trade suppliers and women owned business. This is quite distinct from government where they are generally required to run open tender processes even where a social benefit is being sought. Corporates were not as constrained and they made use of social benefit supplier networks. The benefits to corporate branding were seen to be greater by having social benefit suppliers as first or second tier suppliers rather than having mainstream suppliers delivering social benefit directly. In some instances buyers have actually worked with community to develop social benefit suppliers that can meet their business and social needs.

Corporates identified that growth is occurring in this space, but accelerated growth requires social procurement to be more highly valued by society (business customers), easier (better access to social benefit suppliers, information and tools) and endorsed and supported by government so that business is being recognised for the benefits they’re providing.

To the question of social impact. The report profiled five case studies of leading social procurement from companies out of the ASX100. Between them they are socially procuring over $900 million. Many of the organisations are not measuring the social outcome and those that are tends to use methods such as spend with a particular provider or jobs created for a specific target group. Most continue to talk about their impact through stories of lives changed as a result of gaining a job, corporates did not identify measurement as a significant constraint on the growth of social procurement.

The value of CSP to business is quite different to value of social procurement to government, in both cases there is a critical alignment between procurement and the mission of the organisation. Where this isn’t present social procurement is usually not occurring. For corporates, the social impact of CSP is part of the story to staff, customers, communities and shareholders about the values of the company, it is also about the creation of shared value. It is underpinned by an inherent belief that Social Procurement is good, its impactful and it is worth doing procurement differently for. Of the 31 participants in the research, Rio Tinto represented 95% of the CSP occurring despite a procurement budget only three to four times the size of an Australian Bank. This suggests that CSP is still at the margins of most businesses and there is significant scope for growth in numbers and volume.

With the support of the Ian Potter Foundation, Social Traders is developing a Social Enterprise Procurement Exchange which will link corporate Australia to a supplier network of accredited social enterprises. The exchange is designed to scale the growth of social procurement.

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