In the current economic climate, all companies are under pressure to achieve more with less, in terms of both capital and resources. Moreover, many consumers now demand that companies demonstrate the social value that they or their suppliers provide. Nick Temple, of Social Enterprise UK, sees procurement as a "big opportunity both for social enterprises and the private sector to demonstrate their credentials and achieve positive social impact".
With annual reports and company websites increasingly containing bold claims on social impact and announcing new local partnerships with social enterprises, many companies are talking the talk, but are they walking the walk? For a select few the answer seems to be "yes".
Wates Group building links with social enterprise
Wates Group , one of the UK's largest construction firms, is an example of a sizable company that is actively seeking to procure from social enterprises. Since 2010, Wates has committed to a pioneering policy of ensuring that it engages with at least one social enterprise on each new construction project. To date, Wates has traded with over 30 social enterprises on supply contracts exceeding £3.5m.
Rachel Wooliscroft, Wates' head of corporate responsibility, has explained that for Wates, "working with social enterprises gives us the opportunity to support organisations that share many of our values and goals."
O2 thinking big and influencing others
In February 2012, O2 published its Think Big commitments that the company is aiming to achieve by 2015. One of those commitments was to establish processes to get more SMEs and social enterprises into its supply chain. Keithley Martin, head of supplier development of O2 UK, states that by "working with a social enterprise we have an opportunity to use some of our considerable procurement spend to do social good without impeding our business objectives. So it's a virtuous circle, both a good thing to do and one that makes business sense."
There is now a real focus on removing unnecessary barriers to participation by social enterprises and other SMEs. One option is for purchasers to enable enterprises to participate by offering innovative financial solutions to help them with payment terms additionally there is an increasing amount of opportunity to work with social enterprises and build their capacity to participate in the commercial market place.
O2 has seen an opportunity to use its influence to open up not just its direct supply chain but also its extended supply chain. One challenge for larger companies is whether smaller social enterprises can deliver the goods and services at sufficient quality and quantity. While a contract may be too large or complex for a smaller social enterprise to deliver, it may not be an issue if they work as a sub-contractor to a larger direct supplier.
Martin explains that another key aspect is "working with SMEs and social enterprises to help them develop their ability to comply with our sustainability expectations of suppliers with regards to labour, environment, ethics and H&S standards. This will make them more attractive to us and to others."
Intra-trading amongst social enterprises
When talking about how procurement can help social enterprise, most people think of commercial companies buying from social enterprises. However, as social enterprises and social businesses have grown, they themselves have become buyers, with the power to drive change as both a supplier and a customer.
HCT Group, a social enterprise operating in the transport industry and On Purpose placement host, is working hard to expand both the number and range of social enterprises within its supply chain. Patrick Reyburn, strategic development manager at HCT Group, explains that, "being a good social enterprise isn't only about the outcome. It's about the process as well. Who HCT spends its money with matters as much as who we spend our money on."
No trade-offs on quality
For HCT Group, regardless of an organisation's ethical stance, delivering quality remains key. Reyburn explains, "Our contracts are won on price and quality. We compete against the likes of large multi-nationals and win. We deliver quality, and expect the same with no exceptions. We believe that a social enterprise must be an enterprise first. What we do with our profits after is what differentiates us."
For Reyburn, "there does not need to be a compromise between quality, price and ethics. Our growth and that of other social enterprises proves this. You can successfully trade as an asset-locked social enterprise and still deliver. How you spend your money is a vote for different ways of doing business – by spending in more ethical ways you can inspire customers and other companies alike to seek alternatives to traditional models of business."
Nick Temple agrees and states that "quality, price and delivery are crucial". The challenge for any buyer is to do careful due diligence measuring both the quality of goods and services and the social value it provides.
For social enterprises to increase their impact, they need to be competitive. Buyer due diligence is becoming more sophisticated, and this may help to boost quality and social impact of social enterprise goods and services. Equally, successful social enterprises are emerging themselves as buyers; Social Enterprise UK is currently campaigning for social enterprises to trade more with each other, with so-called "inter-trading" a focal point of its own plans for Social Enterprise Day on 15 November 2012.
For social enterprises to grow, they need to force their way into the supply chains of larger companies. However, this can only happen if there is a continued focus on quality and delivery at competitive prices. A limited number of larger companies have realised the potential for social enterprise to improve their supply chains, encouraging and supporting their growth, but these remain in the minority and, for social enterprise, this will need to change.
Evgenia Sivtsova and Jon Khoo and are 2012 On Purpose associates. Evgenia's background is in marketing, whilst Jon's is in pensions law. On Purpose is a one-year leadership programme for professionals who want to transition into a social enterprise career. It involves two six-month work placements in socially-driven organisations, intensive 1:1 support and a world-class business training programme. On Purpose is currently recruiting the next cohort of associates for its April 2013 intake. To apply visit www.onpurpose.uk.com
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