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Procuring Social Impact

Governments around the world, especially in economies such as Australia, Canada, South Korea and the United Kingdom, are discovering how buying from a social enterprise is one of the easiest and most effective ways of generating social value that can help break the cycle of poverty and improve social cohesion. Through the powerful economic force of public procurement, goods and services are bought from social enterprises with strong track record of delivering added social value. The procurement process is becoming in this way a vehicle to address social, environmental, or economic objectives including local economic development, provision of basic services, addressing long-term unemployment, and helping people with disabilities.

This type of procurement involves governments strategically choosing to purchase a social outcome when buying a good or a service. The social requirement in a procurement can be delivered by private companies that are able to incorporate delivery of these outcomes into their normal processes, or be subcontracted out to or directly delivered by organisations such as social enterprises that have expertise in delivering the required social benefit.

How does it work in practice?

Social procurement integrates social outcomes in the requirement of a contract, alongside the goods or services to be delivered. In practice, it usually works as follows:

procurement_graph

Who benefits from procurement?

Government social procurement is gaining interest from institutional buyers because it provides an opportunity to leverage procurement spending to generate greater value through the procurement process. Greater value is created among all interested parties:

  • For government, the added value is created through the delivery of social benefits beyond the benefits conferred by the products and services being purchased, allowing governments to get a better deal for taxpayers and public-service users and finding solutions to untacked problems with positive externalities. Moreover, governments can play a catalytic role by using their financial power to create new markets that benefit both the economy and society.
  • For social enterprises, this new type of procurement creates a level playing field to bid for contracts and scale their business models. It also helps to grow and attract money from investors and others thanks to the awarding of longer term government contracts.
  • For corporations, the added value is created in a range of areas including brand development through the integration of corporate social responsibility into the procurement process and rewarding companies who offer measurable social benefits as part of their activities.
  • For society, social procurement aligns with the increasing focus on a more sophisticated and multi-stakeholder understanding of the solutions available to government to address demanding social problems. It also aligns with an increasing demand from consumers and taxpayers for socially responsible products and service delivery chains.

Looking at all these evident positive benefits, the question is: Why is it that social procurement remains a rarity? What has to happen for government to become socially responsible buyers and supporters of social enterprises? Existing data on the impact and benefits of social procurement is still very limited and certainly this is an area to invest in in the years to come. However, there is a great opportunity to inform governments about these approaches and encourage to them to experiment with the selection of providers that goes beyond the lowest cost bid general practice.

This blog is part of the October 2016 series on Exploring the social enterprise landscape, in partnership with the World Bank Group and endeva. Read the whole series for insight and opinion on policy, business models and definitions from social entrepreneurs, policy makers and facilitators around the world.