Social procurement is the practice of corporations using their corporate buying power to scale social businesses that have a social and/or environmental benefit. It is an effective strategy to create social impact outcomes through collaboration between corporations and social businesses – and there are inspiring case studies currently unfolding in different parts of the world.
In 2022, Yunus Social Business (YSB) and Audi embarked on a journey of social procurement together with the intention to learn, innovate, and take the lead on using business as a force for good. Now at the start of the 2nd year on this journey together, YSB speaks with Lukas Petersik of Audi to hear about his experience as a corporate intrapreneur striving to turn value chains into a force for good.
“As individuals, most people already have their own ambitions in sustainability and positive impact – Me, as a father of two, for example, I am interested in buying long-lasting and safe products for my children that do not harm the environment. Social procurement has the potential to become a way to connect our individual ambition with the roles that we carry in an organisation.”
Lukas Petersik, Supply Chain Sustainability, AUDI AG
How did you get started on sustainability and social procurement? What was the catalyst?
To us, sustainability is about responsibility. Audi's supply chains are widely branched. We as a company work together with more than 14,000 direct suppliers in over 60 countries. As you can imagine, these numbers come with a huge responsibility – and that goes far beyond our own factory gates. A responsible management of the supply chain offers an enormous opportunity on the path to a more sustainable company. In this, we are trying to create a positive impact.
The possibilities and starting points for acting more responsibly in the supply chain are as multi-layered as the supplier structure. The foundation of any business collaboration is the contract Audi enters with a supplier. Any company that wishes to work with us must comply with the Code of Conduct for Business Partners of the Volkswagen Group. This Code of Conduct sets out clear requirements regarding compliance, environment and social aspects. Furthermore, it forms the basis for our Sustainability Rating (S-Rating), introduced in 2019. A positive rating is a mandatory criterion for entering in a business relationship with us. From a strategic perspective within our “Supply Chain Sustainability” department we have identified three important fields of action for us: people, environment and innovation. Through each of these areas we strive to create positive change in our global supply chains and with our partners. Within our Responsible Supply Chain Strategy, we’ve started to implement and further develop dedicated projects and measures including decarbonization, circular economy projects, human rights due diligence and new technologies for harnessing a more sustainable supply chain – to name a few examples.
We as a team always ask ourselves what’s next? How could we actually create positive impact using our supply chain? This is when the supplier diversity and inclusion initiative began, and within that initiative our social procurement efforts got started. Audi is regularly buying goods and services for various events, projects and other occasions. When we establish suitable relationships with social businesses and minority-owned businesses, we not only get the materials, products, and services we need anyway, but also the impact that these companies generate on top.
Can you talk about some of the social procurement activities you’ve done last year with YSB?
A major milestone for us was organizing the Social Procurement Certificate with YSB for a dedicated group of employees. This really helped us to lay down the foundation and establish a common understanding of what social procurement is and what the positive opportunities it can bring are. Our goal here was not only to educate people about social procurement, but to get them excited and talking about it. We involved a diverse group of people throughout the Audi ecosystem including employees in procurement, design, marketing and sales. We also went beyond our own walls and invited some of our suppliers to learn more about the chances and possibilities of social procurement in a tailored webinar. Our overarching ambition is to generate a shared understanding of how to create impact in a meaningful way.
Then from a project-based approach, we began scouting for social businesses in Audi’s indirect spend categories. We also organized several pitch days where our internal departments who were interested in purchasing for potential projects got to meet with pre-identified social businesses.
As of now, we already have some successful examples of social businesses working with Audi. For example there is Hey Ho, a granola manufacturer who employs people with disadvantaged backgrounds (for example, those who were previously incarcerated or struggle with mental illness) under the belief that all people deserve a second chance and fair employment. They follow the logic that “We don’t hire people to roast oats, we roast oats to hire people.”
Another example is Community Kitchen who tackles the problem of food waste by rescuing edible food that would otherwise end up in landfills and turning them into delicious meals via catering.
Establishing supplier diversity is a long-term endeavor but, when done properly, it can also offer long-term advantages. We know, that we are still at the beginning. But we are committed to face the challenges that will face us along the way. From an organizational perspective it needs specific trainings and research. And you have to involve all stakeholders, from the management level to the purchasers.
For us it's important to have an experienced partner such as YSB who has not only raised awareness about what social procurement is, but acts as a mediator and bridge-builder between these two worlds of social businesses and corporations.
What are some of the effects that you’ve observed in the people who have taken part in this social procurement journey so far?
For most colleagues, the concept of social procurement was a completely new approach and required some explanation at the beginning. Once understood, it was not difficult to find further connecting points. From a peer-to-peer perspective, it was great to get in contact with colleagues from the whole Audi ecosystem. As it turned out, most corporate employees welcomed this approach. The social aspect is already a strong value in the hearts of most of my colleagues, and social procurement holds the potential to become a way for them to create a positive impact through their corporate day-to-day. As individuals, most people already have their own ambitions in sustainability and positive impact – Me, as a father of two, for example I am interested in buying long-lasting and safe products for my children that do not harm the environment. Social procurement has the potential to become a way to connect our individual ambition with the roles that we carry in an organisation. And by doing it with our peers and colleagues, we are able to create something special together as social procurement ambassadors.
What is your biggest learning so far?
In more than 10 years as a sustainability enthusiast at Audi I learned that sustainability is not about saving the planet by yourself, it’s about collaboration and creating impact with others in a meaningful way. Complex problems and challenges cannot be solved alone, which is why you need innovative partnerships, and social procurement can be one way for social businesses and corporations to effectively partner and create positive impact.
While it is true that social businesses need to be ready for working with corporations, corporations also have to be ready for working with social businesses - the need goes both ways! There are some challenges that need to be met and both sides have to be open-minded and prepare themselves.
Lastly, I learned that you have to find the right people within your corporation to talk with. You have to create an internal network. Start with a small step but already think big! Think, “where can I showcase the potential of this kind of collaboration from a broader perspective?” You need little success and hero stories and once you have them, share them internally. Make others aware of what you are doing and that you were already able to create a social impact project - don't be shy and know that you can turn your doubters into fans!
What can we expect from Audi in 2023?
We are quite happy with what we have seen in our social procurement work so far, and are motivated to take the next steps to create a more diverse supplier base. For example, we are currently preparing further searches for potentially interesting social businesses in other countries like Hungary, Mexico, Belgium, Italy and several others. Step-by-step, we want to ramp up from a global perspective and do our part for a positive social foot print in turning these “unusual partnerships” between corporations and social businesses into solid examples of strong, sustainable, and value-driven business partnerships in the future!
YSB is committed to social procurement as a crucial element for business as a force for good: It allows corporations to partner with social businesses in a business-integrated way.
Corporations are able to meet their purchasing requirements in a meaningful and social value-adding way through buying the products, services and materials they need anyways from social businesses. Corporate employees have the opportunity to interact with and learn from social entrepreneurs and integrate impact directly into their work.
For social entrepreneurs, stable commercial relationships with corporations can greatly support and scale their business and impact.
Thus, social procurement enables both parties to leverage on their strengths while meeting each other’s needs. With more than 60 percent of an average company’s ESG footprint within its value chain, social procurement is a great opportunity to go beyond compliance, risk-mitigation and “pure” CSR to create tangible social impact.
To learn more about social procurement, you can read YSB’s Social Procurement Manual here.
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