Social procurement in practice

On August 16th ECO-Buy hosted the Social Procurement Breakfast Forum – Buying a Better World, which provided an insight into social procurement from five varying perspectives. With a wealth of experience, the speakers and panellists imparted extensive knowledge on the current status of social procurement and its practical implementation.

While environmental considerations have gained currency among organisational purchasers, social considerations of the supply chain are often less well understood. Department of Planning and Community Development, Victoria (DPCD), defines social procurement as “using procurement processes and purchasing power to generate positive social outcomes in addition to the delivery of efficient goods, services and works.” Mark Daniels from Social Traders was careful to distinguish social procurement, which creates value, from simply ‘responsible procurement,’ which should be done by an organisation as a matter of course.

Social enterprises as defined by Social Traders satisfy four criteria:

  • they are led by an economic, social, cultural, or environmental mission;
  • they trade to fulfil this mission;
  • they derive a substantial percentage of their income from their trade; and
  • the majority of their profits/surplus are then reinvested to fulfil their mission.

Mark noted that social procurement is fast moving from the shadows into the mainstream, especially with support from large multinational corporations. Marius Kloppers, CEO of BHP Billiton, recently stated that “Companies should think of every dollar they spend in the supply chain as a potential tool for social good,” which demonstrates the capacity of companies of all sizes to rethink their supply chain.

Amanda Minniti from DPCD highlighted that local governments in Victoria will spend $4billion annually on goods and services. As was noted by many on the panel, there is huge potential in the governmental sector for social procurement to be ‘value-added’ into this budget.  Such an approach is gaining traction and DPCD has created a Social Procurement Toolkit for local governments to assist them in embedding social considerations into their supply chain spend. The toolkit is now available as a resource on the ECO-Buy website here.

As stressed by many on the panel, turning purchasing power into social power does not mean that quality has to be compromised. Social enterprises work hard to offer the same product and service while fulfilling their economic, socio-cultural or environmental mission.

One of the common concerns addressed at the forum was the issue of reporting and the accreditation of social enterprises. This was recognised as a challenge for organisations and the potential for the role of reporting to be increased in some circumstances. It was agreed that at present there is an element of faith being put in suppliers to provide social outcomes. Sarah Law from National Australia Bank discussed the implementation of a quarterly reporting requirement for its suppliers although this is still in its infancy and is yet to be evaluated.

Another challenge raised for larger companies in engaging social enterprises is that their suppliers are generally signed on to contracts at a national level in which small organisations may not be appropriate. In the face of this, NAB has implemented a two-tier procurement process which maintains relationships with larger suppliers and inserts clauses in their contracts that require them to engage with small social enterprises where possible to deliver the service. This highlighted how organisations can approach social procurement differently to fit within their operations.

The forum provided an insight into several inspiring case studies of engaging with social enterprises to achieve improved social outcomes for the community. These ranged from local governments creating jobs for unemployed residents within street cleaning programs and contracting social enterprises through commercial tender processes through to larger companies awarding national tenders to social enterprises.

The examples presented demonstrated how social procurement processes can be easily inserted into the normal tender process. Jacqueline Saultry of Places Victoria discussed one successful project, the $75million Government Services building development in Dandenong, of which $18million was able to be directed into local spend.  It was noted that for successful implementation, the introduction of social provisions should be incorporated into the tender process at the earliest stage.

The morning provided a valuable dialogue on the varied approaches to social procurement across public and private organisations and the opportunities and benefits available for both buyers and suppliers. We expect to see a fast growth in these practical measures as more organisations step up to the plate and get the most out of their procurement spend.

Article provided by Emma Lane, ECO-Buy Research Assistant.