Social Procurement and our evolving understanding of ‘value’

What is value? Twenty years ago the answer to that question would have been some composite of quality, service and cost. Ten years ago the criteria used to evaluate quotations and proposals may have added workplace health and safety, and environmental impact.

Avoiding the bad, finding the good

Including health, safety and environmental issues were in part motivated by the desire to avoid doing 'bad' things. Imagine that your workwear was imported at a great price, but the overseas factory was exposed in the press as polluting waterways. The negative publicity might cause reputational damage, and the low price would not represent such great value after all. By including environmental issues in the evaluation of tenders, the definition of value changed from merely meeting the specification to also minimising environmental impact.

Fast forward a few years and the definition of value has broadened still further. For many large businesses, the definition now includes the 'triple bottom line'; people, profit and planet. The public sector has always considered a range of factors when assessing value for money, but the focus on the social impact of spending has never been as great. A key difference between contemporary and traditional approaches to procurement is that organisations are not only trying to avoid doing 'bad' things but also seeking to do ‘good’.

Social procurement has gone mainstream

Let's explore an example. Commonwealth entities and private sector companies with revenue over $100m must comply with Modern Slavery legislation and provide annual reports on the actions they have taken to address related risks in their operations and supply chains. That is an example of avoiding doing bad things. But it is now commonplace for organisations to quarantine some of their total procurement spend and deliberately engage suppliers who create positive outcomes for target groups in society.

A well-known example is the introduction of the Commonwealth’s Indigenous Procurement Policy in 2015 designed to drive Commonwealth contracts towards Indigenous owned and operated businesses. The deliberate use of the spend portfolio to achieve positive outcomes for disadvantaged groups is motivated by the desire to do good, not only to avoid doing bad things.

The label for these programs may be 'social impact procurement', 'social benefit procurement' or simply 'social procurement'. Whatever the label used, the motivation is the same. How can we use some of our spend in order to have a positive impact on society? Social procurement has matured over time and now it is common for large organisations to have policies, processes and job roles focused upon using total spend in new and different ways, in order to deliver positive outcomes for the communities in which they operate.

When good intentions meet the real world

Delivery of social procurement programs typically takes one of two approaches. The first is the direct engagement of social benefit suppliers. This could be as simple as only buying coffee from a Fair Trade certified supplier or stationery from a Certified Indigenous Business. Other initiatives might include engaging a wider range of social benefit suppliers such as social enterprises or disability enterprises.

Organisations like Social Traders help connect social enterprises with customers who want to purposely use their spend to achieve positive outcomes. The suppliers are commercial entities that have a ‘profit for purpose’ mentality built into their DNA. Platforms like VendorPanel help social benefit suppliers by making it easy for clients to add them to the bid list, ensuring that they get a 'fair go'.

The second type of social procurement program is the inclusion of terms and conditions in the market enquiry or contract to drive particular outcomes. The client may specify that they want a proportion of the work to be undertaken locally, or ask suppliers to report on their engagement of disadvantaged groups in their workforce. Some projects may also require a separate report on the local impact of a specific initiative in terms of jobs created or retained, the percentage of content that is sourced locally and the participation of SMEs in the supply chain. In this case, the client may not engage directly with a social benefit supplier, but the firm that wins the work may be required to adopt policies and standards that drive positive outcomes for target groups.

Whether you are planning to include social benefit suppliers on your next RFP or to update your statement of work to include obligations in respect of engaging Indigenous workers, VendorPanel can help by streamlining the process, saving you time and making it easier for suppliers to respond.

You can watch our “Driving Social Value in Procurement" panel discussion with industry experts, Lisa Boothby (Social Traders), Jo Barraket (Centre for Social Impact) and Dominique Gibert (Yarra Valley Water) to learn more on:

1. To what extent social outcomes have made it into procurement KPIs
2. Procurement practices that have measurable impact
3. Tools to help drive social value through procurement spend

Watch panel discussion now.