What Is ‘Social Procurement’? And 5 Ways To Do It Right.

What Is ‘Social Procurement’? And 5 Ways To Do It Right.

October 21, 2020

Is it possible for a fledgling social business to source to a large corporation? Sounds tough, but we know it can work! Corporations have so much to learn from social businesses about putting people and the planet first - and corporations are a great opportunity for a social business looking to scale. It can be the perfect combination. But it needs work. Here are some of our top learnings for making it happen.

RangSutra, a social business in India, have created a sourcing partnership with IKEA. Their beautiful textiles are providing a stable livelihood for their artisans and a sell-out range for IKEA.

Let's start off with the basics: What is ‘social procurement’, or ‘social sourcing’? By definition, social sourcing leverages purchasing power to achieve broader social impact objectives. It basically means buying goods, materials, or services from companies that have an inclusive workforce and high environmental standards, and integrating them as suppliers into the supply chain. At Yunus Social Business, we would define these as social businesses.

Why should a corporation do this? Well, it’s a straightforward way for a company to improve the social and environmental impact of their activities, as there is no need to build an extra program or department - it all can be done within the existing infrastructure. Corporations need to source goods for their employees and manufacturing value chains. What if all of these goods were sourced from social businesses? Empowering the procurement department, to see their direct positive impact on the supplier selection and relationship management would turn them from procurement officers into purpose officers.

Why now? It is becoming more apparent that corporations are feeling the advantages (and pressures) to become more environmentally and socially sustainable. Just days ago, SAP announced it will be sourcing 5% of its volume through social businesses by 2025. Just imagine if all corporations would do this! It would change the game for social businesses operating on a small scale.

Convinced that social procurement is THE future-proof way to expand your positive impact? Here are 5 things that need to be done right in order to succeed, on both the corporate and the social business side.

1. Find the right partner

Looking for the right social business to source from can be tricky. Some of the most effective businesses can have some pretty basic websites and they may have never dealt with order quantities on a corporate scale before. But don’t write them off straight away!. It requires local know-how and an understanding of how social entrepreneurs tick to contact them in the right way. During the selection process, criteria like ‘scalability’ and ‘flexible mindset’ are important in order to make the set-up and long-term collaboration successful.

2. Develop the right mindset & communicate openly

This is definitely important on both sides. The procurement officers collaborating with the social entrepreneurs may have never been in contact with this type of business before. On the corporate side, it requires delicacy to put yourself into the shoes of the other, lots of explanation and some patience. And forget about the usual price negotiations between supplier and producers. The entrepreneurial side of the bargain needs to be open-minded too. Corporations bring a ‘healthy pressure’ to comply with regulation and politics that sometimes appear illogical to the outside! Open communication to build up trust is the key to overcome these challenges.

3. Adapt processes

A corporation with its standardised 100-page process manual and check-up document in English (if it’s not the local language) will definitely scare the social business partner away. Likewise on the entrepreneurial side, if everything is done in a very hands-on, informal way, there is a need for compromise. Both parties need to be clear on the fact that it will require effort, and have the willingness to adapt internal processes.

4. Manage expectations on both sides

Social businesses can deliver high-quality for the same price and manage a large volume, but it can take some time. As with any new partnership, start with a small volume to test processes and then increase capacity over time. As you start operations, be ready to communicate openly about issues and troubleshoot as you go.  A resilient and pragmatic approach will help you build value in the long run.

5. Monitor progress with both social and business impact indicators

Based on your theory of change, you should aim to track both social and business impact indicators on a regular basis. These can be a combination of qualitative and quantitative KPIs. For example, if working with skilling and employment focussed enterprise, measuring perceived skills improvement and % of people with stable employment). The key, however, is to focus on just a few KPIs, or the tracking will not be operationalised and a clear message can’t be distilled.

What about social businesses?

Not only looking from the corporate perspective, why should social business entrepreneurs engage with corporations? They will certainly professionalize the activities of a smaller business, boosting team-confidence, possibly profit margins, and setting them on a path for growth and future opportunities. If done right it is a win-win for both sides.

We have drawn our learnings by supporting corporations in collaboration with social business entrepreneurs and we’d love to get in touch if you’re willing to engage in social sourcing or to share your learnings about the topic.

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