Social procurement is when companies buy from suppliers that create a positive impact on society. Learn how it benefits companies, communities, and the environment.
Banner photo courtesy of EcoEquitable, a social enterprise that helps immigrant women find dignity and community through sewing work.
For the vast majority of people, their eyes glaze over when they hear the term ‘social procurement.’ Or, for those with a surface-level understanding, it’s synonymous with “increased costs.”
In reality, social procurement is when organizations channel their buying power to suppliers that create positive impact on people or the planet. And that does not necessarily cost more money.
Recently, Canadian builder Chandos Construction shared their social procurement journey with me. In this article, I describe how social procurement benefited Chandos as a company – and how it benefits society.
This article is part 1 of a 2-part series. In the second article (coming soon), I use Chandos’ story to explain how to how to get started with social procurement at your own company.
What Is Social Procurement?
Social procurement means sourcing supplies and labour from ‘social value suppliers’ — suppliers whose work makes a positive impact on people or the planet (or both).
There are four types of social value suppliers, according to Buy Social Canada. Those are:
1. Social enterprises: A social enterprise has a social, cultural, or environmental purpose and re-invests most of its profit back into that purpose. As the business grows, so does its impact. For example: Eva’s Printing is a full-service printing company that uses profits to prepare youth experiencing homelessness for careers in graphics and print. Sourcing from a social enterprise, like Eva’s, is likely to have the greatest impact.
2. Local or regional small-medium enterprises: Supporting local businesses brings more jobs to your community. Supporting smaller businesses reallocates financial opportunity from large companies to a wider range of business owners.
3. Businesses owned by under-represented groups: Sourcing from companies owned by under-represented groups creates a more equitable community and improves the distribution of income across groups. These can be companies owned by women, Aboriginals, people of colour, people who are differently abled, or members of the LGBTQ+ community.
4. Businesses using social procurement in their own supply chains: Society also benefits when you source from suppliers that spend their own procurement budget on social value suppliers.
Social Procurement Creates Positive Impact
In the sustainability world, we often talk about ‘levers of change.’ Every person and organization has limited resources, so we look for actions that create a lot of sustainability change per unit of effort.
Social procurement is one such lever, especially when it’s used by large businesses and government bodies.
Take the City of Preston in the United Kingdom, for example. In 2012, Preston was struggling. Municipal and community leaders asked anchor institutions – like hospitals, universities, schools, and public or private organizations likely to stay there – to shift a portion of their procurement spending to locally-owned worker co-ops.
This effort created local jobs, dropping unemployment from 6.5% to 3.1%. It also increased municipal tax income and improved citizen health, work-life balance, and youth skill development. By 2018, Preston was named the most improved city in the UK.
In Canada, government spending accounts for 13% of the country’s GDP. Imagine how different Canada would look if that money was used to support social value companies.
The Business Case for Social Procurement
Social procurement can increase a company’s expenses, but it certainly doesn’t have to.
Compared to offshore, high-volume manufacturers, there is a higher unit cost if you source items from a company that uses sustainable material, manufactures locally, and pays its employees a living wage.
But, it does not cost more to purchase supplies from a minority-owned business, or to hire staff through a social enterprise like Embers, which creates employment opportunities for people living on low incomes.
Either way, companies can reap long-term benefits from pursuing social procurement.
For one, national and regional governments are increasingly adopting social procurement. Canada, the United Kingdom, and Australia are in the lead. Governments agencies may be required to spend a certain portion of their budget on social procurement, or enforce policies like ‘Community Benefit Agreements,’ which require large building projects to use social procurement.
If your company is a government supplier or heavily dependent on government approvals, you may benefit from becoming familiar with, and adopting, social procurement practices.
Social procurement can also benefit relationships with workers, customers, and other stakeholders, as Canadian building company, Chandos Construction, found.
How Chandos Construction Benefited from Social Procurement
Chandos, a 700-employee company, has made social procurement part of its hiring practices for years. Chandos often works with a non-profit temp agency, called Embers, to hire disadvantaged workers in Vancouver for local construction projects.
Chandos President Tim Coldwell knows first-hand how a job opportunity can change lives. After a challenging upbringing, Coldwell was nearly homeless as a teenager. Although Coldwell had little work experience and mediocre grades, Chandos offered him a job when he was 17. As President, Coldwell is still amazed at how that initial opportunity changed his trajectory.
“There are people who just need a little nudge,” reflects Coldwell. “And once they get back up on their feet, they will run circles around everyone else.”
Social procurement has also improved Chandos’ bottom line, he says.
“When you partner with organizations like Embers, our employees feel like they are part of something bigger than themselves. You can see the morale move and the productivity increase,” says Coldwell. “And when productivity increases by 20%, that falls straight to the bottom line.”
Coldwell believes that social procurement has also increased Chandos’ revenue. Last year, the company earned $800 million dollars in sales, and Coldwell believes about $350 million dollars of that – nearly half – was won because they used social procurement.
Why does he believe that?
Tim reviewed all of the Requests for Proposals they responded to and identified which ones included social procurement as part of their criteria. Chandos scored very high on those sections, and Coldwell believes it put them over the top compared to the competitors who lost those bids.
The business case is relatively straightforward.
The moral imperative is just as, if not more, compelling.
Social Procurement is a Moral Imperative
Recent reports from the United Nations Intergovernmental Panel on Climate Change show we must make radical changes in the next 10 years. If we don’t, we’ll see rapid escalation of environmental degradation and human suffering.
The business sector, which accounts for roughly 70 % of global GDP, must be a key part of addressing climate change and the other complex social, economic, and environmental challenges before us. Social procurement is a powerful tool that businesses can use to do their part.
How to Start Doing Social Procurement
Explore Part 2 of this series, which outlines 3 actionable steps for companies that want to get started with social procurement.